Question

1.

For each of the following accounts, indicate the effects of (a) a debit and (b) the normal account balance.

            1.         Notes Payable

            2.         Prepaid Insurance

            3.         Salaries and Wages Expense

            4.         Service Revenue

            5.         Equipment

            6.         Share Capital-Ordinary

2.

Journalize the following business transactions in general journal form. Identify each transaction by number. You may omit explanations of the transactions.

   1.   The company issues ordinary shares in exchange for ₤25,000 cash.

   2.   Purchased ₤400 of supplies on credit.

   3.   Purchased equipment for ₤10,000, paying ₤3,000 in cash and signed a 30-day, ₤7,000, note payable.

   4.   Real estate commissions billed to clients amount to ₤4,000.

   5.   Paid ₤700 in cash for the current month's rent.

   6.   Paid ₤200 cash on account for supplies purchased in transaction 2.

   7.   Received a bill for ₤600 for advertising for the current month.

   8.   Paid ₤2,200 cash for salaries.

   9.   The company paid dividends of ₤1,200.

10.   Received a check for ₤3,000 from a client in payment on account for commissions billed in transaction 4.

3.

Post the following transactions to T-accounts and determine each account's ending balance.

1.   Supplies.............................................................................................          2,000

               Accounts Payable.....................................................................                    2,000

2.   Accounts Receivable.........................................................................          4,000

               Service Revenue.......................................................................                    4,000

3.         Cash                            3,500

                        Accounts Receivable                          3,500

4.         Accounts Payable                   1,000

                        Cash                            1,000

Answer 1

S.No	Head	Balance	Explanation as per Accounting Standards
1	Note Payable	Cr	It is a Liability Account and Liability have Credit Balance
2	Prepaid Insurance	Dr	It is a Asset Account (amount paid in advance for insurnace) and Asset have Debit Balance
3	Salaries & Wages	Dr	Expense Account, And these are debited to P&L and have Debit Balance
4	Service Revenue	Cr	Revenue Account, And these are Credited to P&L and have Credit Balance
5	Equipment	Dr	It is a Asset Account (amount paid to acquire fixed asset) and Asset have Debit Balance
6	Share Capital	Cr	It is a Liability Account (amount invested by Shareholders in Co) and Liability have Credit Balance
	Please raise separate question for balance problems