Question

The Following transactions in this Question pertain to Nishat Electronic Repair Services, our imaginary small sole proprietorship business.
1. January 1, 2019, Mr. Ali Nishat started Nishat Electronic Repair Services by investing $10,000.
2. January 5, Nishat Electronic Repair Services paid registration and licensing fees for the business, $370.
3. January 6, the company acquired tables, chairs, shelves, and other fixtures for a total of $3,000. The entire amount was paid in cash.
4. January 7, the company acquired service equipment for $16,000. The company paid a 50% down payment and the balance will be paid after 60 days.
5. Also January 7, Nishat Electronic Repair Services purchased service supplies on account amounting to $1,500.
6. January 9, the company received $1,900 for services rendered. We will then record an increase in cash (debit the cash account) and increase in income (credit the income account).
7. January 12, the company rendered services on account, $4,250.00. As per agreement with the customer, the amount is to be collected after 10 days. Under the accrual basis of accounting, income is recorded when earned.
8. January 14, Mr. Nishat invested an additional $3,200.00 into the business. The entry would be similar to what we did in transaction #1.
9. January Rendered services to a big corporation on December 15. As per agreement, the $3,400 amount due will be collected after 30 days.
10. January On December 22, the company collected from the customer in transaction #7.
Required:
1. Prepare Journal entries in the books of Mr. Ali.
2. Prepare ledger

Answer 1

Solution.

1. Preparation of Journal Entires:

Date	Account Title	Debit	Credit
2019	Cash	$    10,000
Jan. 01	Ali Nishat, Capital		$    10,000
	To record commencement of business
Jan. 05	Taxes and Licenses	$         370
	Cash		$        370
	To record taxes and licenses fees paid
Jan. 06	Furniture and Fixtures	$    30,000
	Cash		$    30,000
	To record purchase of furniture
Jan. 07	Service Equipment	$    16,000
	Cash		$      8,000
	Account Payable		$      8,000
	To record purchase of equipment
Jan. 07	Service Supplies	$      1,500
	Account Payable		$      1,500
	To record purchase of supplies on account
Jan. 09	Cash	$      1,900
	Service Revenue		$      1,900
	To record service income
Jan. 12	Account Receivable	$ 425,000
	Service Revenue		$ 425,000
	To record service provided on credit
Jan. 14	Cash	$      3,200
	Ali Nishat, Capital		$      3,200
	To record additional investment
Jan. 15	Account Receivable	$      3,400
	Service Revenue		$      3,400
	To record service provided on credit
Jan. 22	Cash	$ 425,000
	Account Receivable		$ 425,000
	To record cash collected from customers

2. Preparation of Ledger

Cash Account
Account Title	Debit	Credit	Balance
Ali Nishat, Capital	$    10,000		$    10,000
Taxes and Licenses		$         370	$     9,630
Furniture and Fixtures		$    30,000	$ -20,370
Service Equipment		$      8,000	$ -28,370
Service Revenue	$      1,900		$ -26,470
Ali Nishat, Capital	$      3,400		$ -23,070
Account Receivable	$ 425,000		$ 401,930
Ending Bal.			$ 401,930
Ali Nishat, Capital
Account Title	Debit	Credit	Balance
Cash		$    10,000	$    10,000
Cash		$      3,400	$    13,400
Ending Bal.			$    13,400
Taxes and Licenses
Account Title	Debit	Credit	Balance
Cash	$        370		$        370
Ending Bal.			$        370
Furniture and Fixtures
Account Title	Debit	Credit	Balance
Cash	$    30,000		$    30,000
Ending Bal.			$    30,000
Service Equipment
Account Title	Debit	Credit	Balance
Cash	$      8,000		$     8,000
Account Payable	$      8,000		$    16,000
Ending Bal.			$    16,000
Account Payable
Account Title	Debit	Credit	Balance
Service Equipment		$      8,000	$     8,000
Service Supplies		$      1,500	$     9,500
Ending Bal.			$     9,500
Service Supplies
Account Title	Debit	Credit	Balance
Account Payable	$      1,500		$     1,500
Ending Bal.			$     1,500
Service Revenue
Account Title	Debit	Credit	Balance
Cash		$      1,900	$     1,900
Account Receivable		$ 425,000	$ 426,900
Account Receivable		$      3,400	$ 430,300
Ending Bal.			$ 430,300
Account Receivable
Account Title	Debit	Credit	Balance
Service Revenue	$ 425,000		$ 425,000
Service Revenue	$      3,400		$ 428,400
Cash		$ 425,000	$     3,400
Ending Bal.			$     3,400