ACCT 121 Lecture Notes - Lecture 2: Mf Global, Accounting Equation, Historical Cost

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9 May 2020

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Document Summary

Every positive item in the tabular summary represents a receipt of cash. Every negative amount represents a payment of cash. The account balance, a debit of ,050, indicates that softbyte had ,050 more increases than decreases in cash. In other words, softbyte started with a balance of zero and now has ,050 in its cash account. The equality of debits and credits provides the basis for the double-entry system of recording transactions. International note: rules for accounting for specific events sometimes differ across countries. European companies rely less on historical cost and more on fair value than u. s. companies. Despite the differences, the double-entry accounting system is the basis of accounting systems worldwide: under the double-entry system, the dual (two-sided) effect of each transaction is recorded in appropriate accounts. This system provides a logical method for recording transactions.

Related Questions

The trial balance of Dominic Company shown below does notbalance.

DOMINIC COMPANY Trial Balance May 31, 2015
	Debit	Credit
Cash	$5,840
Accounts Receivable		$2,730
Prepaid Insurance	810
Equipment	13,990
Accounts Payable		6,490
Unearned Service Revenue	670
Common Stock		13,690
Service Revenue	8,670
Salaries and Wages Expense	4,310
Advertising Expense		990
Utilities Expense	800
	$35,090	$23,900

Your review of the ledger reveals that each account has a normalbalance. You also discover the following errors.

1.		The totals of the debit sides of Prepaid Insurance, AccountsPayable, and Utilities Expense were each understated $100.
2.		Transposition errors were made in Accounts Receivable andService Revenue. Based on postings made, the correct balances were$2,370 and $8,760, respectively.
3.		A debit posting to Salaries and Wages Expense of $200 wasomitted.
4.		A $1,100 cash dividend was debited to Common Stock for $1,100and credited to Cash for $1,100.
5.		A $460 purchase of supplies on account was debited to Equipmentfor $460 and credited to Cash for $460.
6.		A cash payment of $490 for advertising was debited toAdvertising Expense for $49 and credited to Cash for $49.
7.		A collection from a customer for $460 was debited to Cash for$460 and credited to Accounts Payable for $460.

Prepare a correct trial balance. (Hint: It helps toprepare the correct journal entry for the transaction described andcompare it to the mistake made.)

turquoisescorpion399

The trial balance of the Mukhtar Company shown below does not balance.

Mukhtar Company

Trial Balance

September 30, 2019

Debit Credit

Cash $ 3,850

Accounts Receivable $ 2,750

Prepaid Insurance 700

Equipment 12,000

Accounts Payable 4,500

Unearned Service Revenue 560

Common Stock 11,700

Service Revenue 8,690

Salaries and Wages Expense 4,200

Advertising Expense 1,100

Utilities Expense 800

$30,800 $20,050

Your review of the ledger reveals that each account has a normal balance. You also discover the following errors.

The totals of the debit sides of Prepaid Insurance, Accounts Payable, and Utilities Expense were each understated $100.
Transposition errors were made in Accounts Receivable and Service Revenue. Based on postings made, the correct balances were $2,570 and $8,960, respectively.
A debit posting to Salaries and Wages Expense of $200 was omitted.
A $1,000 cash dividend was debited to Common Stock for $1,000 and credited to Cash for $1,000.
A $520 purchase of supplies on account was debited to Equipment for $520 and credited to Cash for $520.
A cash payment of $450 for advertising was debited to Advertising Expense for $45 and credited to Cash for $45.
A collection from a customer for $420 was debited to Cash for $420 and credited to Accounts Payable for $420.

Instructions

Prepare a correct trial balance. Note that the chart of accounts includes the following:

Dividends and Supplies.

Make T accounts and post the corrections in these accounts to reach the corrected trial balance

pinkantelope626

1. Total each column of the special journals. Show that thetotal debits equal the total credits in each special journal.

2. Balance or reconcile the amounts receivable subsidiary ledgerand accounts receivable in the general ledger. Do the same for theaccounts payabel subsidiary ledger and accounts payable in thegeneral ledger.

SalesJournal PAGE 7
DATE		INVOICE NO.	ACCOUNTS DEBITED	POST. REF.	ACCOUNTS RECEIVABLE DR. SALES REVENUE CR.	COST OF GOODS SOLD DR. INVENTORY CR.
July	2	913	Ishikawa Corp		24600	10800
July	9	914	Bell Ltd		33300	13860
July	15	915	M.O.Brown		3990	1440
July	18	916	Ishikawa Corp		2142	762
July	29	917	Bell Ltd		2976	1320

Cash ReceiptsJournal PAGE 5
		DEBITS		CREDITS					COST OF GOODS SOLD DR. INVENTORY CR.
						OTHER ACCOUNTS
DATE		CASH	SALES DISCOUNTS	ACCOUNTS RECEIVABLE	SALES REVENUE	ACCOUNT TITLE	POST. REF.	AMOUNT
July	5	6462			6462	Cash sales			2880
July	8	6650				Interest revenue		6650
July	9	32967	333	33300		Bell Ltd
July	12	24354	246	24600		Ishikawa Corp
July	31	2142		2142		Ishikawa Corp

Req.

PurchasesJournal PAGE 10

CREDITS

DEBITS

OTHER ACCOUNTS

DATE

ACCOUNT CREDITED

INVOICE DATE

TERMS

POST REF.

ACCOUNTS PAYABLE

INVENTORY

SUPPLIES

ACCOUNT TITLE

POST. REF.

AMOUNT

July

Nakkach

14802

July

Burgess

12282

July

Manley

8050

Cash PaymentsJournal PAGE 8
					DEBITS		CREDITS
DATE		CHQ. NO.	ACCOUNTS DEBITED	POST REF.	OTHER ACCOUNTS	ACCOUNTS PAYABLE	INVENTORY	CASH
July	5		Furniture					13110
July	10		Purchases					6858
July	13		Nakkach			14802		14358
July	22		Prepaid insurance					6000
July	25		Utilities					6718
July	30		Manley Inc			8050		7889
July	31		Salaries					14082

Accounts Receivable SubsidiaryLedger

ACCOUNT BELLLTD.
DATE		ITEM	JRNL. REF.	DEBIT	CREDIT	BALANCE
July	9	Bell Ltd	6	33300		33300
July	19	Bell Ltd	13	32967		32967
July	19	Bell Ltd Discount	13		333	333
July	29	Bell Ltd	21	2976		2976

ACCOUNT M.O.BROWN
DATE		ITEM	JRNL. REF.	DEBIT	CREDIT	BALANCE
July	15	M.O.Brown (credit sale)	11	3990		3990
July	15	M.O.Brown (Sold to)	11		1440	1440

ACCOUNT ISHIKAWAINC.
DATE		ITEM	JRNL. REF.	DEBIT	CREDIT	BALANCE
July	2	Ishikawa Inc (credit sale)	1	24600		24600
July	10	Ishikawa Inc (discount)	8	246		246
July	10	Ishikawa Inc	8		24354	-24354
July	18	Ishikawa Inc (credit sale)	13		2142	-2142

Accounts Payable SubsidiaryLedger

ACCOUNT BURGESSDISTRIBUTINGLTD.
DATE		ITEM	JRNL. REF.	DEBIT	CREDIT	BALANCE
July	15	Burgess Distribution Ltd (Purchases)	15		$12,282	-$12,282

ACCOUNT NAKKACHCORP.
DATE		ITEM	JRNL. REF.	DEBIT	CREDIT	BALANCE
July	3	Nakkach Corp (purchase of inventory)	2		$14,802	-$14,802
July	13	Nakkach Corp (Discount)	9	$444.06		$444.06
July	22	Nakkach Corp (Furniture Purchase)	16		$3870	-$3870

ACCOUNT MANLEY,INC.
DATE		ITEM	JRNL. REF.	DEBIT	CREDIT	BALANCE
July	13	Manley Inc (Purchase of supplies)	10		$8646	-$8646
July	28	Manley Inc	19		$805	-$805
July	29	Manley Inc (Return)	20	$4050		$4050

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ACCT 121 Lecture Notes - Lecture 2: Mf Global, Accounting Equation, Historical Cost

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