Copyright 2013 Pearson Australia a division of Pearson Australia Group Pty Ltd

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/Accounting/7 th edition 1

Chapter 2

Recording Business Transactions

Quick Check

Answers:

• a
• b
• b
• c
• b
• d
• b
• a
• a
• c

Accounting 7th Edition Horngren Solutions Manual Visit TestBankDeal.com to get complete for all chapters

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/A ccounting/7 th edition 2 Starters

(10 min.) S2-1 Req. 1

1. G

2. C

3. E

4. D

5. A

6. I

7. F

8. B

9. H

10. J

(5 min.) S2-2 Req. 1

Debits are increases for the following types of accounts:

 Assets  Owners’ drawings  Expenses (because these accounts are on the debit side of the accounting equation)

Debits are decreases for these types of accounts:

 Liabilities  Owners’ capital  Revenues (because these accounts are on the credit side of the accounting equation)

Req. 2

Credits are increases for these types of accounts:

 Liabilities  Owners’ capital  Revenues (because these accounts are on the credit side of the accounting equation)

Credits are decreases for these types of accounts:

 Assets  Owners’ drawings  Expenses (because these accounts are on the debit side of the accounting equation)

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/A ccounting/7 th edition 3 (5 min.) S2-3 Req. 1

Normal Balance Debit or Credit Assets Debit Liabilities Credit Owners’ equity overall Credit Capital Credit Drawings Debit Revenues Credit Expenses Debit

(5 min.) S2-4 Req. 1

Step 1: Identify each account affected and its type.

Step 2: Determine whether each account is increased or decreased.

Step 3: Record the transaction in the journal.

Account Type Increase/ Decrease

• Accounts receivable Asset Increase

Service revenue Owners’ equity Increase 28 Cash Asset Increase Accounts receivable Asset Decrease

(continued) S2-4 Req. 1

Journal

DATE ACCOUNTS AND EXPLANATIONS

POST.

REF. DEBIT CREDIT

Jan 5 Accounts receivable 1 000 Service revenue 1 000 Performed service on account.

28 Cash 600 Accounts receivable 600 Received cash on account.

Copyright © 2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442551923/Horngren/A ccounting/7 th edition 4 (10 min.) S2-5 Req. 1

Journal

DATE ACCOUNTS AND EXPLANATIONS

POST.

REF. DEBIT CREDIT

Jan 1 Cash 29 000 Brown, capital 29 000 Owner investment

• Medical supplies 14 000

Accounts payable 14 000 Purchased supplies on account.

• Rent expense 2 600

Cash 2 600 Paid office rent.

• Accounts receivable 8 000

Service revenue 8 000 Performed service on account.