Question

Option #1: The Four Steps in the Accounting Process

You own an independent CPA firm. One client had the following transactions in January 20x7.

Issued share capital for $5,000 cash

Purchased $3,000 of equipment on credit

Paid $600 cash for this month’s rent

Purchased on credit $3,000 of supplies to be used next month

Billed $3,500 to customers for repairs made to date

Paid cash for one-half of the amount owing in Transaction 4

Collected $400 cash of the amount billed in Transaction 5

Sold one-half of the equipment purchased in Transaction 2 for $1,200 in cash.

Required:

Use the four steps in the accounting process to analyze business transactions, a) Identifying transactions and source documents, b) Analyzing transactions using the accounting equation, c) Recording the journal entry and d) Posting the entry to the ledger to complete the following:

Prepare journal entries for each of the above transactions.

Post the journal entries to T–accounts and total the accounts.

From the T–accounts, prepare an unadjusted trial balance. List expenses in alphabetical order.

Use the following chart of accounts names and the template:

Cash, Capital Stock, Equipment, Accounts Payable, Rent Expense, Supplies, Accounts Receivable, Revenue.

ACT300 Principles of Accounting I

Module 2: Critical Thinking Template Option #1

Journal Entries

Date

Account Name

T-Accounts

January

Debit

Credit

1

Shared Capital Issued

Cash

Capital Stock

Cash

2

3

Balance

Balance

4

Accounts Receivable

Accounts Payable

5

Balance

Balance

6

Equipment

7

Balance

Supplies

8

Balance

Revenue

Balance

Rent Expense

Balance

Unadjusted Trial Balance

Account Name

Debit

Credit

Cash

-

Accounts receivable

-

Equipment

-

Supplies

-

Accounts payable

-

Capital stock

-

Revenue

-

Rent expense

-

Total

-

-

Answer 1

Journal Entries:

Date	Account Name
January		Debit	Credit
1	Cash A/C   DR	$5000
	TO Share Capital		$5000
	(Being share capital issued for cash)
2	Equipment A/c    DR	$3000
	To Creditor		$3000
	( Being good purchased for credit)
3	Rent A/C         DR	$600
	To Cash A/C		$600
	(Being rent paid)
4	Purchased A/C   DR	$3000
	To Supplier A/C		$3000
	(Being goods purchased on credit)
5	Debtor A/C DR	$3500
	To Repairs A/C		$3500
	(being repairs billed)
6	Supplier A/C   DR	$1500
	To Cash A/c		$1500
	(being cash dues paid)
7	Cash A/C	$400
	To Creditor		$400
	(being casg received)
8	Cash A/C	$1200
	Loss on sale of equipment A/C	$300
	To Equipment A/C		$1500
	(being equipment sold)

Part 2:

T-Accounts
					Cash A/C
	DR		CR
To Share capital	$5000	By Rent	$600
To Creditors	$400	By Supplier	$1500
To Equipment	$1200	By balance B/D	$4500
	$6600		$6600
	Account Receivable A/C
	DR		CR
To repairs A/C	$3500	By Cash A/C	$400
		By balance B/D	$3100
	$3500		$3500
	Equipment A/C
	DR		CR
To Creditor A/C	$3000	By cash A/C	$1200
		By loss on sale of equipment	$300
		By balance B/D	$1500
	$3000		$3000
	Suppliers A/C
	DR		CR
To Purchased A/C	$3000	By Cash A/C	$1500
		By Balance b/d	$1500
	$3000		$3000
	Rent Expense A/C
	DR		CR
To Cash A/C	$600	By revenue	$600
	$600		$600
	Revenue A/C
	DR		CR
To Purcahse	$3000	By repairs	$3500
To Rent	$600	By Closing Stock	$3000
To loss on sale of equipment	$300
To Net revenue	$2600
	$6500		$6500

Part 3 :

	Unadjusted Trial Balance
	Account Name			Debit	Credit
	Cash			$4500
	Accounts receivable			$3100
	Equipment			$1500
	Supplies			$3000
	Accounts payable				$4500
	Capital stock				$5000
	Revenue				$2600
	Rent expense			-
	Total			$12100	$12100