CHAPTER 2
The Recording Process
ASSIGNMENT CLASSIFICATION TABLE
Learning Objectives
Questions
Brief
Exercises
Do It!
Exercises
A
Problems
1. Indicate how accounts,
debits, and credits are used
to record business
transactions.
1, 2, 3, 4, 5,
6, 7, 8, 9, 19,
21
1, 2, 5
1
1, 2, 4, 6, 7,
14
1A, 2A, 3A,
5A
ASSIGNMENT CHARACTERISTICS TABLE
Problem
Number
Description
Difficulty
Level
Time Allotted
(min.)
1A
Journalize a series of transactions.
Simple
20–30
2A
Journalize transactions, post, and prepare a trial balance.
Simple
30–40
3A
Journalize transactions, post, and prepare a trial balance.
40–50
4A
Prepare a correct trial balance.
30–40
5A
Journalize transactions, post, and prepare a trial balance.
40–50
WEYGANDT ACCOUNTING PRINCIPLES 12E
CHAPTER 2
THE RECORDING PROCESS
Number
LO
BT
Difficulty
Time (min.)
BE1
1
C
Simple
6–8
BE2
1
C
Simple
4–6
BE3
2
AP
Simple
4–6
BE4
2
C
Moderate
4–6
BE5
1
C
Simple
6–8
BE6
2
AP
Simple
4–6
BE7
3
AP
Simple
4–6
BE8
3
AP
Simple
4–6
BE9
4
AP
4–6
BE10
4
AN
Moderate
6–8
DI1
1
C
Simple
3–5
DI2
2
AP
Simple
3–5
DI3
3
AP
Simple
2–4
DI4
4
AP
Simple
6–8
EX1
1
K
Simple
2–4
EX2
1
C
Simple
10–15
EX3
2
AP
Simple
8–10
EX4
1
C
Simple
6–8
EX5
2
AP
Simple
6–8
EX6
1, 2
AP
Simple
6–8
EX7
1, 2
AP
Simple
8–10
EX8
3
K
Simple
2–4
EX9
AP
Simple
EX10
AP
EX11
AP
Moderate
12–15
EX12
AP
EX13
4
AN
6–8
EX14
AP
Simple
8–10
THE RECORDING PROCESS (Continued)
Number
LO
BT
Difficulty
Time (min.)
P1A
1, 2
AP
Simple
20–30
P2A
1, 2, 3, 4
AP
Simple
30–40
P3A
AP
40–50
P4A
4
AN
30–40
P5A
1, 2, 3, 4
AP
40–50
BYP1
1
C
Simple
8–10
BYP2
1, 2
AN
Simple
8–10
BYP3
BYP4
—
—
AP
AP, S
Simple
Simple
15–20
15–20
BYP5
3, 4
20–30
10–15
15–20
BYP10
E
20–30
BLOOM’ S TAXONOMY TABLE
Correlation Chart between Bloom’s Taxonomy, Learning Objectives and End-of–Chapter Exercises and Problems
Learning Objective
Knowledge
Comprehension
Application
Analysis
Synthesis
Evaluation
1. Describe how accounts,
debits, and credits are used to
record business transactions.
Q2-1
Q2–21
E2-1
Q2-2
Q2-3
Q2-4
Q2-5
Q2-6
Q2-7
Q2-8
Q2-9
Q2–19
BE2-1
BE2-2
BE2-5
DI2-1
E2-2
E2-4
E2-6
E2-7
E2–14
P2–1A
P2-2A
P2–3A
P2–5A
2. Indicate how a journal is used
Q2–10
Q2–11
Q2–16
E2-5
E2–12
3. Explain how a ledger and
posting help in the recording
process.
E2-8
Q2–15
Q2–17
BE2-7
BE2-8
DI2-3
E2-9
E2–12
P2–2A
P2–3A
P2–5A
4. Prepare a trial balance.
Q2–18
Q2–20
BE2-9
DI2-4
E2-9
E2–10
E2–11
E2–14
P2–2A
P2-3A
P2–5A
BE2-10
E2–13
P2–4A
Broadening Your Perspective
Financial Reporting
Real-World Focus
ANSWERS TO QUESTIONS
1. A T account has the following parts: (a) the title, (b) the left or debit side, and (c) the right or credit side.
2. Disagree. The terms debit and credit mean left and right respectively.
3. Heath is incorrect. The double-entry system merely records the dual effect of a transaction on the
accounting equation. A transaction is not recorded twice; it is recorded once, with a dual effect.
4. Erica is incorrect. A debit balance only means that debit amounts exceed credit amounts in an
account. Conversely, a credit balance only means that credit amounts are greater than debit
amounts in an account. Thus, a debit or credit balance is neither favorable nor unfavorable.
5. (a) Asset accounts are increased by debits and decreased by credits.
(b) Liability accounts are decreased by debits and increased by credits.
6. (a) Accounts Receivable—debit balance.
(b) Cash—debit balance.
(c) Owner’s Drawings—debit balance.
(d) Accounts Payable—credit balance.
7. (a) Accounts Receivable—asset—debit balance.
(b) Accounts Payable—liability—credit balance
(c) Equipment—asset—debit balance.
8. (a) Debit Supplies and credit Accounts Payable.
(b) Debit Cash and credit Notes Payable.
(c) Debit Salaries and Wages Expense and credit Cash.
9. (1) Cash—both debit and credit entries.
(2) Accounts Receivable—both debit and credit entries.
10. The basic steps in the recording process are:
(1) Analyze each transaction for its effect on the accounts.
Questions Chapter 2 (Continued)
11. The advantages of using the journal in the recording process are:
(1) It discloses in one place the complete effects of a transaction.
12. (a) The debit should be entered first.
(b) The credit should be indented.
13. When three or more accounts are required in one journal entry, the entry is referred to as a
compound entry. An example of a compound entry is the purchase of equipment, part of which is
paid for with cash and the remainder is on account.
14. (a) No, debits and credits should not be recorded directly in the ledger.
(b) The advantages of using the journal are:
15. The advantage of the last step in the posting process is to indicate that the item has been posted.
16. (a) Cash ……………………………………………………………………………….. 9,000
Owner’s Capital …………………………………………………………. 9,000
(Invested cash in the business)
(b) Prepaid Insurance …………………………..…………………………………. 800
Cash ……………………………………………………………………….. 800
(Paid one-year insurance policy)
17. (a) The entire group of accounts maintained by a company, including all the asset, liability, and
owner’s equity accounts, is referred to collectively as the ledger.
Questions Chapter 2 (Continued)
18. A trial balance is a list of accounts and their balances at a given time. The primary purpose of a
trial balance is to prove (check) that the debits equal the credits after posting. A trial balance also
facilitates the discovery of errors in journalizing and posting. In addition, it is useful in preparing
financial statements.
19. No, Victor is not correct. The proper sequence is as follows:
(b) Business transaction occurs.
20. (a) The trial balance would balance.
(b) The trial balance would not balance.
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 2-1
(a)
Debit
Effect
(b)
Credit
Effect
(c)
Normal
Balance
1.
Accounts Payable
Decrease
Increase
Credit
2.
Advertising Expense
Increase
Decrease
Debit
3.
Service Revenue
Decrease
Credit
4.
Accounts Receivable
Increase
Decrease
Debit
6.
Increase
Debit
BRIEF EXERCISE 2-2
Account Debited
Account Credited
June 1
Cash
Owner’s Capital
2
Equipment
Accounts Payable
3
Rent Expense
Cash
Accounts Receivable
Service Revenue
BRIEF EXERCISE 2-3
June 1 Cash …………………………………………………………… 5,000
Owner’s Capital ……………………………………. 5,000
2 Equipment ………………………………………………….. 2,400
Accounts Payable …………………………………. 2,400
BRIEF EXERCISE 2-4
The basic steps in the recording process are:
1. Analyze each transaction. In this step, business documents are examined
to determine the effects of the transaction on the accounts.
2. Enter each transaction in a journal. This step is called journalizing and
it results in making a chronological record of the transactions.
BRIEF EXERCISE 2-5
(a)
Effect on Accounting Equation
(b)
Debit-Credit Analysis
Aug. 1
The asset Cash is increased; the
owner’s equity account
Owner’s Capital is increased.
Debits increase assets:
debit Cash $8,000.
Credits increase owner’s equity:
credit Owner’s Capital $8,000.
4
The asset Prepaid Insurance is
increased; the asset Cash is
decreased.
Debits increase assets:
debit Prepaid Insurance $1,800.
Credits decrease assets:
credit Cash $1,800.
16
The asset Cash is increased; the
revenue Service Revenue is
increased.
Debits increase assets:
debit Cash $3,600.
Credits increase revenues:
credit Service Revenue $3,600.
BRIEF EXERCISE 2-6
Aug. 1 Cash ……………………………………………………………. 8,000
Owner’s Capital …………………………………….. 8,000
BRIEF EXERCISE 2-7
Cash
Service Revenue
5/12 2,400
5/5 4,400
5/15 3,000
5/15 3,000
Ending Bal. 5,400
Ending Bal. 7,400
5/5 4,400
5/12 2,400
Ending Bal. 2,000
BRIEF EXERCISE 2-8
Cash
Date
Explanation
Ref.
Debit
Credit
Balance
May 12
J1
2,400
2,400
BRIEF EXERCISE 2-8 (Continued)
Accounts Receivable
Date
Explanation
Ref.
Debit
Credit
Balance
May 5
J1
4,400
4,400
12
J1
2,400
2,000
Date
Explanation
Ref.
Debit
Credit
Balance
May 5
4,400
15
BRIEF EXERCISE 2-9
AMARO COMPANY
Trial Balance
June 30, 2017
Debit Credit
Cash ………………………………………………………………… $ 5,800
Accounts Receivable ………………………………………… 3,000
Equipment ………………………………………………………… 17,000
Accounts Payable……………………………………………… $ 8,100
BRIEF EXERCISE 2-10
CAPPSHAW COMPANY
Trial Balance
December 31, 2017
Debit Credit
Cash …………………………………………………………………. $10,800
Prepaid Insurance ……………………………………………… 3,500
Accounts Payable …………………………..…………………. $ 3,000
Unearned Service Revenue ………………………………… 2,200
Owner’s Capital …………………………………………………. 9,000
SOLUTIONS FOR DO IT! REVIEW EXERCISES
DO IT! 2-1
Tom would likely need the following accounts in which to record the
transactions necessary to ready his photography studio for opening day:
Cash (debit balance) Equipment (debit balance)
DO IT! 2-2
Each transaction that is recorded is entered in the general journal. The
three activities would be recorded as follows:
1.
Cash ……………………………………………………..
6,300
Owner’s Capital ……………………………..
6,300
2.
Supplies ……………………………………………….
1,100
Cash …………………………..…………………
Accounts Payable ………………………….
DO IT! 2-3
Cash
4/1 1,600
4/16 700
DO IT! 2-4
CARLAND COMPANY
Trial Balance
December 31, 2017
Debit Credit
Cash ………………………………………………………………… $ 6,000
Accounts Receivable ………………………………………… 8,000
Supplies …………………………………………………………… 6,000
Equipment ………………………………………………………… 80,000
Notes Payable …………………………………………………… $ 20,000
Accounts Payable……………………………………………… 11,000
SOLUTIONS TO EXERCISES
EXERCISE 2-1
1. False. An account is an accounting record of a specific asset, liability,
or owner’s equity item.
EXERCISE 2-2
Account Debited
Account Credited
Transaction
(a)
Basic
Type
(b)
Specific
Account
(c)
Effect
(d)
Normal
Balance
(a)
Basic
Type
(b)
Specific
Account
(c)
Effect
(d)
Normal
Balance
Jan. 2
Asset
Cash
Increase
Debit
Owner’s
Equity
Owner’s
Capital
Increase
Credit
16
Owner’s
Equity
Advertising
Expense
Increase
Debit
Asset
Cash
Decrease
Debit
20
Asset
Cash
Increase
Debit
Asset
Accounts
Receivable
Decrease
Debit
23
Liability
Decrease
Credit
Asset
Cash
Decrease
Debit
28
Owner’s
Equity
Increase
Debit
Asset
Cash
Decrease
Debit
Asset
Decrease
Asset
Supplies
Increase
Debit
Liability
Accounts
Increase
11
Asset
Increase
Debit
Service
Increase
EXERCISE 2-3
General Journal J1
Date
Account Titles and Explanation
Ref.
Debit
Credit
Jan. 2
Cash ……………………………………………
10,000
Owner’s Capital …………………….
10,000
3
Equipment …………………………………..
3,000
Cash …………………………………….
3,000
9
Supplies ………………………………………
500
Accounts Payable …………………
500
11
Accounts Receivable ……………………
Service Revenue ……………………
16
Advertising Expense …………………….
350
Cash …………………………………….
350
20
Cash ……………………………………………
700
Accounts Receivable …………….
700
23
Accounts Payable ………………………..
300
Cash …………………………………….
300
28
1,000
Cash …………………………………….
1,000
EXERCISE 2-4
Oct. 1 Debits increase assets: debit Cash $15,000.
Credits increase owner’s equity: credit Owner’s Capital $15,000.
2 No transaction.
3 Debits increase assets: debit Equipment $1,900.
EXERCISE 2-4 (Continued)
Oct. 6 Debits increase assets: debit Accounts Receivable $3,800.
Credits increase revenues: credit Service Revenue $3,800.
27 Debits decrease liabilities: debit Accounts Payable $1,100.
Credits decrease assets: credit Cash $1,100.
EXERCISE 2-5
General Journal
Date
Account Titles and Explanation
Ref.
Debits
Credit
Oct. 1
Cash …………………………………………..
15,000
Owner’s Capital …………………..
15,000
2
No entry.
3
Equipment ………………………………….
1,900
Accounts Payable ……………….
1,900
6
Accounts Receivable …………………..
Service Revenue………………….
3,800
Accounts Payable ……………………….
Cash …………………………………..
Salaries and Wages Expense ……….
2,500
Cash …………………………………..
2,500
EXERCISE 2-6
(a) 1. Increase the asset Cash, increase the liability Notes Payable.
2. Increase the asset Equipment, decrease the asset Cash.
3. Increase the asset Supplies, increase the liability Accounts Payable.
(b) 1. Cash ……………………………………………………….. 5,000
Notes Payable ……………………………………. 5,000
EXERCISE 2-7
(a) Assets = Liabilities + Owner’s Equity
1. + + (Investment)
2. – – (Expense)
(b) 1. Cash ……………………………………………………….. 4,000
Owner’s Capital …………………………………. 4,000
2. Rent Expense ………………………………………….. 840
EXERCISE 2-8
1. False. The general ledger contains all the asset, liability, and owner’s
equity accounts.
2. True.
3. False. The accounts in the general ledger are arranged in financial
statement order: first the assets, then the liabilities, owner’s capital,
EXERCISE 2-9
(a)
Cash
Aug. 1 5,000
Aug. 12 2,300
10 2,600
31 900
Bal. 6,200
Aug. 25 1,700
Aug. 31 900
Bal. 800
Aug. 12 5,000
Aug. 1 5,000
Aug. 10 2,600
Bal. 4,300
Notes Payable
Aug. 12 2,700
Owner’s Capital
(b) JUNE FELDMAN, INVESTMENT BROKER
Trial Balance
August 31, 2017
Debit Credit
Cash ……………………………………………………………… $ 6,200
Accounts Receivable ……………………………………… 800