HANDOUT 2–2, continued
Spreadsheet
Assets
=
Liabilities
+
Stockholders’
Equity
Ref.
Cash
+
Supplies
+
Equipment
=
+
Notes
Payable
+
Common Stock
(a)
+10,000
=
+10,000
(b)
+15,000
=
+15,000
(c)
–20,000
+20,000
=
(d)
+300
=
(f)
(g)
(h)
(i)
HANDOUT 2–2 SOLUTION
ANALYZING TRANSACTIONS
Analyze the following transactions as set forth below. Use the spreadsheet on the next page to keep track
of the amount in each account:
(f) Pays $300 to the supplier in (d).
1.
Does a transaction exist?
Yes—paid cash to reduce accounts payable.
2.
Examine it for accounts affected.
Cash and Accounts Payable
3.
Classify each account affected.
Cash is an Asset (A) and Accounts Payable is a Liability
(L)
4.
Identify direction and amount.
Cash (A) – $300 = Liabilities (L) – $300
5.
Ensure the equation still balances.
Yes—see below.
(g) Purchases and pays for $600 of supplies.
1.
Does a transaction exist?
Yes—paid cash to purchase supplies.
2.
Examine it for accounts affected.
Cash and Supplies
3.
Classify each account affected.
Cash is an Asset (A) and Supplies is an Asset
4.
Identify direction and amount.
Cash (A) – $600 and Supplies (A) – $600.
5.
Ensure the equation still balances.
Yes—see below.
(h) Purchases and pays for equipment costing $1,000.
1.
Does a transaction exist?
Yes—paid cash to purchase equipment
2.
Examine it for accounts affected.
Cash and Equipment
3.
Classify each account affected.
Cash is an Asset (A) and Equipment is an Asset (A)
4.
Identify direction and amount.
Cash (A) – $1,000 and Equipment (A) – $1,000
5.
Ensure the equation still balances.
Yes—see below.
(i) Orders a $900 computer, to be delivered next month.
1.
Does a transaction exist?
No.
2.
Examine it for accounts affected.
3.
Classify each account affected.
4.
Identify direction and amount.
5.
Ensure the equation still balances.
HANDOUT 2–2 SOLUTION, continued
Spreadsheet
Assets
=
Liabilities
+
Stockholders’
Equity
Ref.
Cash
+
Supplies
+
Equipment
=
Accounts
Payable
+
Notes
Payable
+
Common Stock
(a)
+10,000
=
+10,000
(b)
+15,000
=
+15,000
(c)
–20,000
+20,000
=
(d)
+300
=
+300
(f)
–300
–300
(g)
–600
+600
(h)
–1,000
–1,000
(i)
HANDOUT 2–3
THE DEBIT/CREDIT FRAMEWORK
The following activities occurred during January 2016. Prepare a journal entry for ensure that the basic
accounting equation balances for each transaction.
(a) Stockholder invests $10,000 into the business in exchange for common stock.
Debit and credit the accounts affected
Ensure the equation still balances and debits = credits
Assets
=
Liabilities
+
Stockholders’ Equity
(b) Company borrows $15,000 signing a note payable to the bank that is due in three months.
Debit and credit the accounts affected
Ensure the equation still balances and debits = credits
Assets
=
Liabilities
+
Stockholders’ Equity
(c) Receives and pays for a $15,000 truck and $5,000 of equipment.
Debit and credit the accounts affected
Ensure the equation still balances and debits = credits
Assets
=
Liabilities
+
Stockholders’ Equity
HANDOUT 2–3, continued
(d) Purchases $300 of supplies on account.
Debit and credit the accounts affected
Ensure the equation still balances and debits = credits
Assets
=
Liabilities
+
Stockholders’ Equity
(e) Signs contract for first website design for $10,000.
Debit and credit the accounts affected
Ensure the equation still balances and debits = credits
Assets
=
Liabilities
+
Stockholders’ Equity
HANDOUT 2–3 SOLUTION
THE DEBIT/CREDIT FRAMEWORK
The following activities occurred during January 2016. Prepare a journal entry for ensure that the basic
accounting equation balances for each transaction.
(a) Stockholder invests $10,000 into the business.
Debit and credit the accounts affected
(a)
Cash (+A)
10,000
Common Stock (+SE)
10,000
Ensure the equation still balances and debits = credits
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
+10,000
Common
Stock
+10,000
(b) Company borrows $15,000 signing a note payable to the bank that is due in three months.
Debit and credit the accounts affected
(b)
Cash (+A)
15,000
Note Payable (+L)
15,000
Ensure the equation still balances and debits = credits
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
+15,000
Note
Payable
+15,000
(c) Receives and pays for a $15,000 truck and $5,000 of equipment.
Debit and credit the accounts affected
(c)
Equipment (+A)
20,000
Cash (–A)
20,000
Ensure the equation still balances and debits = credits
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
Equipment
–20,000
+20,000
HANDOUT 2–3 SOLUTION, continued
(d) Purchases $300 of supplies on account.
Debit and credit the accounts affected
(d)
Supplies (+A)
300
Accounts Payable (+A)
300
Ensure the equation still balances and debits = credits
Assets
=
Liabilities
+
Stockholders’ Equity
Supplies
+300
Accounts
Payable
+300
(e) Signs contract for first website design for $10,000.
No entry—this is not a transaction
HANDOUT 2–4
THE DEBIT/CREDIT FRAMEWORK
(f) Pays $300 to the supplier in (d).
Debit and credit the accounts affected
Ensure the equation still balances and debits = credits
Assets
=
Liabilities
+
Stockholders’ Equity
(g) Purchases and pays for $600 of supplies.
Debit and credit the accounts affected
Ensure the equation still balances and debits = credits
Assets
=
Liabilities
+
Stockholders’ Equity
(h) Purchases and pays for equipment costing $1,000.
Debit and credit the accounts affected
Ensure the equation still balances and debits = credits
Assets
=
Liabilities
+
Stockholders’ Equity