2
Debits and Credits:
Analyzing and Recording
Business Transactions
ANSWERS TO DISCUSSION QUESTIONS AND
CRITICAL THINKING/ETHICAL CASE
1. A ledger is a group of accounts that records in monetary value the data from
6. Which accounts are affected? In which categories do the accounts belong? Are the
accounts increasing or decreasing? What do the rules of debit and credit say? What
9. The financial statements are prepared from the ending balances of the accounts
10. It is easier to prepare the reports from the trial balance rather than the expanded
11. The question in this case is whether Joshua should be allowed to put fictitious
figures into the trial balance. I would not support this type of behavior. His behavior
SOLUTIONS TO CONCEPT CHECKS
1. The ending balance in Cash is $19,500(debit balance). The ending balance in C.
Rice, Capital is $18,000(credit balance).
Cash 110
6/24 8,000
6/28 12,000
500 6/26
2.
Category
Incr.
Decr.
Normal Bal.
A. Liability
Cr.
Dr.
Cr.
B. Revenue
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
E. Withdrawal
Dr.
Cr.
Dr.
Dr.
Cr.
Dr.
Dr.
Cr.
Dr.
3.
Category
Increase/Decrease
Dr. or Cr.
T Accounts
Cash
600
4. Cash
Accounts Receivable
Office Equipment
5. A.BS
B.BS
C.BS
SOLUTIONS TO SET A EXERCISES
2A-1. Balance Sheet Accounts
Assets
111 Cash
112 Accounts Receivable
2A–2.
1.
Accounts Affected
2.
Category
3.
↑↓
4.
Rules
5.
T-Account Update
Asset
Cr.
Cr.
Asset
↑
Dr.
Computer Equipment
EXERCISES (CONTINUED)
2A-3.
ACCOUNT
CATEGORY
↑
↓
FINANCIAL STATEMENT
Dr.
Cr.
2A-4.
Dr.
Cr.
A.
8
1
B.
6
1
EXERCISES (CONTINUED)
2A-5.
(1)
HELM’S CLEANERS
INCOME STATEMENT
FOR MONTH ENDED MARCH 31, 201X
Revenue:
$
Operating Expenses:
$
$
(2)
HELM’S CLEANERS
STATEMENT OF OWNER’S EQUITY
FOR MONTH ENDED MARCH 31, 201X
$
7
2
Net Income for March
$
Less: Withdrawals for March
Increase in Capital
1
2
(3)
HELM’S CLEANERS
BALANCE SHEET
MARCH 31, 201X
ASSETS
LIABILITIES AND OWNER’S EQUITY
Cash
$
7
5
0
Liabilities
Equipment
5
0
0
0
0
5
0
Total Liabilities and
Total Assets
2
5
0
$1
5
0
SOLUTIONS TO SET B EXERCISES
2B-1. Balance Sheet Accounts
Assets
111 Cash
112 Accounts Receivable
2B–2.
1.
Accounts Affected
2.
Category
3.
↑↓
4.
Rules
5.
T-Account Update
EXERCISES (CONTINUED)
2B-3.
ACCOUNT
CATEGORY
↑
↓
FINANCIAL STATEMENT
Office Supplies
Asset
Dr.
Cr.
Balance Sheet
Rental Fees Earned
Cr.
Dr.
Income Statement
Wage Expense
Dr.
Cr.
Income Statement
2B-4.
Dr.
Cr.
A.
8
1
B.
6
1
EXERCISES (CONTINUED)
2B–5.
(1)
HILTON‘S CLEANERS
INCOME STATEMENT
FOR MONTH ENDED JANUARY 31, 201X
Revenue:
Cleaning Fees
$
4
6
0
Operating Expenses:
Salaries Expense
$
1
Utilities Expense
7
2
8
1
Net Income
$
1
7
9
(2)
HILTON’S CLEANERS
STATEMENT OF OWNER’S EQUITY
FOR MONTH ENDED JANUARY 31, 201X
J. Hilton, Capital, January 1, 201X
$
8
6
6
Net Income for January
$
7
9
Less: Withdrawals for January
(2
5
Decrease in Capital
(3)
HILTON‘S CLEANERS
BALANCE SHEET
JANUARY 31, 201X
ASSETS
LIABILITIES AND OWNER’S EQUITY
Cash
$
7
5
0
Liabilities
Equipment
5
0
0
$
4
5
5
Owner’s Equity
7
9
5
Total Liabilities and
Total Assets
2
5
0
2
5
0
SOLUTIONS TO SET A PROBLEMS
PROBLEM 2A-1
Accounts Affected
Category
Inc.
↑
Dec.
↓
Rules
T-Account update
A. Cash
Asset
↑
Dr.
Cash
Brent Omara, Capital
Brent Omara, Capital
Capital*
↑
Cr.
(A) 45,000
45,000 (A)
B. Delivery Trucks
Asset
↑
Dr.
Delivery Trucks
Accounts Payable
Accounts Payable
↑
Cr.
C. Rent Expense
↑
Dr.
Accounts Payable
Accounts Payable
↑
Cr.
↑
Cash
Delivery Fees Earned
Delivery Fees Earned
↑
Cr.
E. Accounts Receivable
Asset
Dr.
PROBLEM 2A-2
Cash 111
(A) 34,000
80 (D)
Bud Peters, Withdrawals 312
PROBLEM 2A-3
(a)
Cash 111
(A) 17,000
600 (D)
Accounts Receivable 112
Office Equipment 121
Accounts Payable 211
(D) 600
1,400 (C)
Brian Jett, Capital 311
Brian Jett, Withdrawals 312
Cleaning
Fees Earned 411
Rent Expense 511
Utilities Expense 512
(b)
BRIAN’S CLEANING SERVICE
TRIAL BALANCE
OCTOBER 31, 201X
Dr.
Cr.
Cash
21
0
4
0
Accounts Receivable
5
5
0
0
Office Equipment
1
7
4
0
28
8
0
0
28
8
0
0
PROBLEM 2A-4
(a)
GABRIELLA LEITZ, ATTORNEY AT LAW
INCOME STATEMENT
FOR MONTH ENDED JANUARY 31, 201X
Revenue:
Revenue from Legal Fees
$1
6
0
0
Operating Expenses:
Rent Expense
3
5
0
Salaries Expense
1
5
0
Net Income
(b)
GABRIELLA LEITZ, ATTORNEY AT LAW
STATEMENT OF OWNER’S EQUITY
FOR MONTH ENDED JANUARY 31, 201X
G. Leitz, Capital, January 1, 201X
$4
6
0
0
Less: Withdrawals for January
0
(c)
GABRIELLA LEITZ, ATTORNEY AT LAW
BALANCE SHEET
JANUARY 31, 201X
ASSETS
LIABILITIES AND OWNER’S EQUITY
Cash
$7
0
0
0
Liabilities
$8