SELF-TEST QUESTIONS

5. The expanded accounting equation is:

a) Assets + Liabilities = Share Capital + Retained Earnings + Dividends +
Revenues + Expenses
b) Assets = Liabilities + Share Capital + Retained Earnings + Dividends +
Revenues – Expenses
c) Assets = Liabilities - Share Capital – Retained Earnings - Dividends
-Revenues – Expenses
d) Assets = Liabilities + Share Capital + Retained Earnings – Dividends +
Revenues - Expenses
6. Which of the following is not part of the recording process?
a) Analyzing transactions.
b) Preparing a trial balance.
c) Entering transactions in a journal.
d) Posting transactions.
7. Which of the following statements about a journal is false?
a) It is not a book of original entry.
b) It provides a chronological record of transactions.
c) It helps to locate errors because the debit and credit amounts for each
entry can be readily compared.
d) It discloses in one place the complete effect of a transaction.
8. The purchase of supplies on account should result in:
a) a debit to Supplies Expense and a credit to Cash.
b) a debit to Supplies Expense and a credit to Supplies.
c) a debit to Supplies and a credit to Accounts Payable.
d) a debit to Supplies and a credit to Accounts Receivable.
QUESTION
4. Sandra Browne, a beginning accounting student, believes debit balances
are favorable and credit balances are unfavorable. Is Sandra correct?
Discuss.

 Sandra Brown’s statement 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. State the rules of debit and credit as applied to (a) asset accounts, (b)
liability accounts, and (c) equity accounts (revenue, expenses, dividends,
share capital—ordinary, and retained earnings).

a. Asset account
Increase (+) = Debit
Decrease (-) = Kredit

b. Liability accounts
Increase (+) = Kredit
Decrease (-) = Debit

c. Equity accounts

 Revenue
Increase (+) = Kredit
Decrease (-) = Debit

 Expenses
Increase (+) = Debit
Decrease (-) = Kredit

 Dividends
Increase (+) = Debit
Decrease (-) = Kredit

 Share capital ordinary

Increase (+) = Kredit
 Decrease (-) = Debit

 Retained earnings
Increase (+) = Kredit
Decrease (-) = Debit

6. What is the normal balance for each of the following accounts? (a)
Accounts Receivable. (b) Cash. (c) Dividends. (d) Accounts Payable. (e)
Service Revenue. (f) Salaries and Wages Expense. (g) Share Capital—
Ordinary.

a. Asset account
Normal balance = Debit

b. Liability accounts
Normal balance = Kredit

c. Equity accounts
 Revenue
Normal balance = Kredit

 Expenses
Normal balance = Debit

 Dividends
Normal balance = Debit

 Share capital ordinary

Normal balance = Kredit

 Retained earnings
Normal balance = Kredit
BRIEF EXERCISES
BE2-4 Tim Weber, a fellow student, is unclear about the basic steps in the
recording process. Identify and briefl y explain the steps in the order in which
they occur.
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.
3. Transfer journal information to ledger accounts. This step is
called posting. Posting makes it possible to accumulate the
effects of journalized transactions on individual accounts.
BE2-5 J.A. Motzek Inc. has the following transactions during August of the
current year. Indicate (a) the effect on the accounting equation and (b) the debit-
credit analysis illustrated on pages 63–68 of the text.
Aug.
1. Opens an offi ce as a fi nancial advisor, investing R$5,000 in cash in
exchange forordinary shares.
4. Pays insurance in advance for 6 months, R$1,800 cash.
16. Receives R$1,100 from clients for services provided.
27. Pays secretary R$1,000 salary.

Answer :
a) The effect on the accounting equation

Aug.
1. The asset Cash is increased; the owner’s equity account Owner’s
Capital is increased.
4. The asset Prepaid Insurance is increased; the asset Cash is decreased.
16. The asset Cash is increased; the revenue Service Revenue is
increased.
27.The expense Salaries and Wages Expense is increased; the asset Cash
is decreased.

b) The debit-credit analysis

 Aug.
1. Debits increase assets: debit Cash $8,000. Credits increase owner’s
equity: credit Owner’s Capital $8,000.
4. Debits increase assets: debit Prepaid Insurance $1,800. Credits
decrease assets: credit Cash $1,800.
16. Debits increase assets: debit Cash $3,400. Credits increase revenues:
credit Service Revenue $3,400.
27. Debits increase expenses: debit Salaries and Wages Expense $1,000.
Credits decrease assets:

BE2-6 Using the data in BE2-5, journalize the transactions. (You may omit
explanations.)
J.A. Motzek Inc.
General Journal
August 2020

Tanggal Keterangan Ref Debit Kredit

Aug. 1 Cash 8,000
Owner’s Capital 8,000
4 Prepaid Insurance 1,800
Cash 1,800
16 Cash 3,400
Service Revenue 3,400
27 Salaries and Wages Expense 1,000
Cash 1,000
 EXERCISES
E2-2 Selected transactions for B. Madar, an interior decorating fi rm, in its fi rst
month of business, are shown below.
Jan.
2 Invested $15,000 cash in the business in exchange for ordinary shares.
3 Purchased used car for $7,000 cash for use in the business.
9 Purchased supplies on account for $500.
11 Billed customers $1,800 for services performed.
16 Paid $200 cash for advertising.
20 Received $700 cash from customers billed on January 11.
23 Paid creditor $300 cash on balance owed.
28 Declared and paid a $1,000 cash dividend.
Instructions
For each transaction indicate the following.
(a) The basic type of account debited and credited (asset, liability, equity).
(b) The specific account debited and credited (cash, rent expense, service
revenue, etc.).
(c) Whether the specific account is increased or decreased.
(d) The normal balance of the specific account.

Answer :
Account Debited Account Credited
Transaction (a) (b) (c) (d) (a) (b) (c) (d)
Basic Specific Effect Normal Basic Specific Effect Normal
Type Account Balance Type Account Balance
Jan. 2 Asset Cash Increase Debit Equity Share Increase Credit
Capital
3 Asset Equipment Increase Debit Asset Cash Decrease Debit
9 Asset Supplies Increase Debit Liabili Account Increase Credit
ty Payable
11 Asset Account Increase Debit Equity Service Increase Credit
Receivable Revenue
16 Equity Adeversiting Increase Debit Asset Cash Decrease Debit
Expense
20 Asset Cash Increase Debit Asset Account Decrease Debit
Receivab
le
23 Liabili Account Decrease Kredit Asset Cash Decrease Debit
ty Payable
28 Equity Devidens Increase Debit Asset Cash Decrease Debit
PROBLEMS: SET A
P2-2A Kara Shin is a licensed accountant. During the first month of operations
of her business, Kara Shin, Inc., the following events and transactions occurred.
May
1 Shareholders invested €20,000 cash in exchange for ordinary shares.
2 Hired a secretary-receptionist at a salary of €2,000 per month.
3 Purchased €1,500 of supplies on account from Hartig Supply Company.
7 Paid office rent of €900 cash for the month.
11 Completed a tax assignment and billed client €2,800 for services provided.
12 Received €3,500 advance on a management consulting engagement.
17 Received cash of €1,200 for services completed for Lucille Co.
31 Paid secretary-receptionist €2,000 salary for the month.
31 Paid 40% of balance due Hartig Supply Company.
Kara uses the following chart of accounts: No. 101 Cash, No. 112 Accounts
Receivable, No. 126 Supplies, No. 201 Accounts Payable, No. 209 Unearned
Service Revenue, No. 311 Share Capital—Ordinary, No. 400 Service Revenue,
No. 726 Salaries and Wages Expense, and No. 729 Rent Expense.
Instructions
(a) Journalize the transactions.
(b) Post to the ledger accounts.
(c) Prepare a trial balance on May 31, 2014.
Answer :
a)
Kara Shin, Inc.
General Journal
May 2014

Tanggal Keterangan Ref Debit Kredit

May 1 Cash 101 20,000
Share Capital 311 20,000
 3 Supplies 126 1,500
Accounts Payable 112 1,500

7 Rent Expense 729 900

Cash 101 900

11 Accounts Receivable 112 2,800

Service Revenue 400 2,800

12 Cash 101 3,500

Unearned Service Revenue 209 3,500

17 Cash 101 1,200

Service Revenue 400 1,200

31 Salaries and Wages Expense 726 2,000

Cash 101 2,000

31 Account Payable 201 600

Cash 101 600

b)
Kara Shin, Inc.
Ledger
May 2014
Cash 101
Date Explanation Ref. Debit Credit Balance
2014
May 1 20,000 20,000
7 900 19,100
12 3,500 22,600
17 1,200 21,800
31 2,000 19,800
31 600 19,200

Accounts Receivable 112

Date Explanation Ref. Debit Credit Balance
2014
May 11 2,800 2,800

Supplies 126
Date Explanation Ref. Debit Credit Balance
2014
May 3 1,500 1,500
 Accounts Payable 201
Date Explanation Ref. Debit Credit Balance
2014
May 3 1,500 1,500
31 600 900

Unearned Service Reve. 209

Date Explanation Ref. Debit Credit Balance
2014
May 12 3,500 3,500

Share Capital 311

Date Explanation Ref. Debit Credit Balance
2014
May 1 20,000 20,000

Service Revenue 400

Date Explanation Ref. Debit Credit Balance
2014
May 11 2,800 2,800
17 1,200 4,000

Salaries and Wages Expe. 726

Date Explanation Ref. Debit Credit Balance
2014
May 31 2,000 2,000

Rent Expenses 729

Date Explanation Ref. Debit Credit Balance
2014
May 7 900 900

Kara Shin, Inc.

Ledger
May 2014

Debit Kredit
Cash € 19,200
Accounts Receivable 2,800
Supplies 1,500
Account Payable € 900
Unearned Service Revenue 3,500
Share Capital 20,000
Service Revenue 4,000
Salaries and Wages Expense
Rent Expense 2,000
900
26,400
 FINANCIAL STATEMENTS

Agen travel Toba Lake memiliki 10 transaksi di bulan April 2015, bulan pertama operasi.
Transaksi dicatat dalam akun-T berikut ini:

Kas Peralatan Penarikan–Oka

(1) 75.000 (2) 4.000 (3) 25.000 (9) 5.000
(7) 11.000 (3) 3.000
(4) 2.700
(6) 9.000
(9) 5.000

Piutang Usaha Hutang Usaha Pendapatan Jasa

(5) 19.500 (7) 11.000 (6) 9.000 (3) 22.000 (5) 19.500
(10) 500

Perlengkapan Modal–Oka Beban Operasi

(2) 4.000 (8) 2.000 (1) 75.000 (4) 2.700
(8) 2.000
(10) 500

1. Income Statement

Travel Agent Toba Lake

Income Statement
For the Month Ended April 30, 2015

Revenues
Service revenue 19.500
Expenses
Operational expenseRent expense 5.200
Total expenses 5.200
Net income 14.300

2. Retained Earnings Statement

Travel Agent Toba Lake

Retained Earnings Statement
For the Month Ended April 30, 2015
 Retained earnings, April 1 0
Add: Net income 14.300
14.300
Less: Dividends 5.000
Retained earnings, April 30 9.300

3. Statement of Financial Position

Travel Agent Toba Lake

Statement of Financial Position
April 30, 2015

Assets
Equipment 25.000
Supplies 2.000
Accounts receivable 8.500
Cash 62.300
Total assets 97.800
Equity and Liabilities
Equity
Share capital—ordinary 75.000
Retained earnings 9.300 84.300
Liabilities
Accounts payable 13.500
Total equity and liabilities 97.800