Question

What is a business-like activity? Give an example, and show the journal entries to account for this type of activity.>

Answer 1

Business activities are the activities for the purpose of running the day to day operations of the Business. The rules and approaches of the accounting drives the Business activities. Business activites are very important for running the Business.Many activities is being performed in the Business.

And for this their are two approaches for doing the journal entry

1. Golden rules of accounting

There are two major type of accounts:- personal and impersonal accounts

And in impersonal of is classified into real and nominal account

For Personal account

1.Debit the receiver credit the giver

For imporsonal account

2.Real account Debit what comes in credit what goes out

3.nominal account Debit all expenses and losses credit all incomes and gains

2. Second rule of accounting is modern approach of accounting

And in this Debit the asset when increases and credit the asset when it is decreases

Debit the liability when it is decreases and credit the liabilities when it is increases.

Debit the expenses when it is increases and credit the expenses when it is decreases

Debit the capital when it is decreases and credit when it is increases.

Debit the revenue when it is decreases and credit when it is increases.

Example :- suppose you have a business

1.You invested $ 40000 cash in a business

Journal entry :- Cash A/c ......Dr. $40000

To common stock. $40000

2.Purchased $5500 of equipment with cash

Equipment A/c .......Dr. $5500

To cash $ 5500

3.purchased an asset with cash $ 5000

Asset A/c ........Dr. $5000

To cash. $ 5000

4 .purchased $ 500 In supplies on account

Supplies A/c ........Dr. $ 500

To account payable. $ 500

5. Paid $ 250 for supplies previously purchased

Accounts payable A/c..........Dr. $ 250

To cash. $250

6.paid rent in advance $1800

Prepaid rent A/C.........Dr. $1800

To cash. $ 1800

7.Performed work for customers and received $ 50000

Cash A/C. ......Dr. $ 50000

To sales revenue. $ 50000

8. Performed work for customers and billed them $ 15000

Account receivable A/c .....Dr. $ 15000

To sales revenue. $ 15000

9. Received $5000 from customers from work previously billed

Cash A/c. .......Dr. $ 5000

To Account receivable. $5000

10. Paid office salaries $ 10000

Salaries expenses A/c....Dr. $10000

To Cash A/c. $10000

11. Paid utility bill $ 1000

Utility expenses A/c. ......Dr. $1000

To Cash. $1000