Financial and Managerial Accounting Study Set 1

Business

Quiz 2 :
Analyzing Transactions

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Quiz 2 :
Analyzing Transactions

Comment the ethical behivour of the G: No, Behavior of Gil is not professional. If the trial balance totals are not equal then it means an error has occurred. Inc. such a case it is necessary to find out the error and correct them. Adjusting the difference to miscellaneous account is unethical and un professional as -: 1. It would result in misstatement of financials; 2. It would overstate the expenses; 3. It would report incorrect profits/ Losses of the businesses.

2. Journal Entry: • Journal entry is an accounting entry which is used to record a business transaction. • It consists of debit and credit items. • The total of debit must equal total of credit. • It includes description of reason for the entry. Recording Journal entries: • Issuing common stock increases asset and stockholder's equity. To common stock issued in the journal Cash is debited and common stock is credited by $5,000. img • Rent paid decreases asset and increases expense. To record rent paid in the journal office rent expense is debited and cash is credited by $1,750. img • Annual Insurance premium paid increases and decreases asset. To record Annual insurance premium paid in the journal Prepaid insurance is debited cash is credited by $2,700. img • Cash received from customers increases asset. To record cash received from customers in the journal Cash is debited and accounts receivable is credited by $1,000. img • Cash received in advance from customers increases asset and liability. To record Cash received in advance from customers in the journal Cash is debited and unearned revenue is credited by $7,200. img • Creditors on account paid decreases asset and liability. To record Creditors on account paid in the journal accounts payable is debited and cash is credited by $250. img Journal Page1 Date Description Post. Ref. Debit Credit   3 Accounts Payable 21 $250       Cash 11   $250       Paid creditors on account.       • Miscellaneous expense paid decreases asset and increases expense. To record miscellaneous expense paid in the journal miscellaneous expense is debited and cash is credited by $900. img • Office equipment purchased on account increases liability and increases asset. To record Office equipment purchased on account in the journal office equipment is debited and accounts payable is credited by $7,500. img • Advertising expense paid decreases asset and increases expense. To record Advertising expense paid in the journal Advertising expense is debited and cash is credited by $200. img • Fees earned increases asset and increases revenue. To record Fees earned in the journal cash is debited and Fees earned is credited by $1,000. img • Equipment rent paid decreases asset and increases expense. To record Equipment rent paid in the journal Equipment rent expense is debited and cash is credited by $700. img • Wages paid decreases asset and increases expense. To record Wages expense paid in the journal Wages expense is debited and cash is credited by $1,200. img • Fees earned increases asset and increases revenue. To record Fees earned in the journal cash is debited and Fees earned is credited by $2,000. img • Supplies purchased on account increases liability and increases asset. To record Supplies purchased on account in the journal supplies is debited and accounts payable is credited by $850. img • Music expense paid decreases asset and increases expense. To record Music expense paid in the journal Music expense is debited and cash is credited by $620. img • Advertising expense paid decreases asset and increases expense. To record Advertising expense paid in the journal Advertising expense is debited and cash is credited by $800 img • Fees earned partly in cash and partly receivable from customer increases asset and revenue. To record Fees earned partly in cash and partly receivable from customer in the journal Cash is debited by $750, accounts receivable by $1,750 and fees earned is credited by $2,500. img • Utilities expense paid decreases asset and increases expense. To record Utilities expense paid in the journal Utilities expense is debited and cash is credited by $915. img • Wages paid decreases asset and increases expense. To record Wages expense paid in the journal Wages expense is debited and cash is credited by $1,200. img Journal Page2 Date Description Post. Ref. Debit Credit   28 Wages expense 50 $1,200       Cash 11   $1,200       Wages paid       • Miscellaneous expense paid decreases asset and increases expense. To record miscellaneous expense paid in the journal miscellaneous expense is debited and cash is credited by $540 img • Fees earned partly in cash and partly receivable from customer increases asset and revenue. To record Fees earned partly in cash and partly receivable from customer in the journal Cash is debited by $500, accounts receivable by $1,000 and fees earned is credited by $1,500. img • Fees earned increases asset and revenue. To record cash Fees earned in the journal Cash is debited and fees earned is credited by $3,000. img • Music expense paid decreases asset and increases expense. To record Music expense paid in the journal Music expense is debited and cash is credited by $1400. img • Dividends paid decreases asset and increases expense. To record dividends paid in the journal Dividend is debited and cash is credited by $1,250. img 1 3 Ledger: • Ledger account records financial transactions of the company. • It stores the information which is required to prepare financial statements. • It includes accounts of assets, liabilities, stockholder's equity, revenue and expenses. • In the ledger journal entries are posted by way of double entry accounting. Hence 1 ledger is debited and other ledger is credited. • After posting journal entries in the ledger accounts, balance of ledger accounts are posted to unadjusted trial balance. Prepare Ledger accounts: img img img img img img img img img img img img img img img img img img Account Miscellaneous expense   Account No. 59 Balance Date Item PR Debit Credit Debit Credit 2016July.1 Balance ?     $415   4 Cash 1 $900   $1,315   29 Cash 2 $540   $1,855   4. Unadjusted trial balance: • Unadjusted trial balance lists all the ledger accounts which will appear on the financial statements before passing the year end adjusting journal entries. Hence it is called as unadjusted trial balance. • Unadjusted trial balance is prepared after posting all the journal entries to ledger accounts. Following steps are involved in preparation of unadjusted trial balance: • Pass journal entries. • Post the journal entries to relevant ledger accounts. • Determine closing balances of all ledger accounts. • Transfer account balances from ledger accounts to the trial balance. • All the debit balances accounts are listed on the left side column. • All the credit balances accounts are listed on the right side column. • On account of double entry accounting, debit and credit columns will equal. Prepare unadjusted trial balance: img

________________________________________________________________________ An account is part of an entity's accounting system in which increases and decreases are recorded to keep track of each change in the accounting equation. A ledger is a group of accounts for a business entity in which all the accounts are listed as they would show on the company's financial statements.

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