Select your language

Suggested languages for you:
Log In Start studying!
Answers without the blur. Sign up and see all textbooks for free! Illustration

2RQ

Expert-verified
Horngren'S Financial And Managerial Accounting
Found in: Page 90

Answers without the blur.

Just sign up for free and you're in.

Illustration

Short Answer

What is the purpose of the chart of accounts? Explain the numbering typically associated with the accounts.

The companies organize accounts by using the chart of accounts and numbering helps in providing order in accounts.

See the step by step solution

Step by Step Solution

Purpose of the chart of accounts

The main purpose of the chart of accounts for a business is to present the accounts in an organized way.

Explanation of numbering

The accounts starting with the 1 are usually assets, Number 2 represents liabilities, 3 for equity, 4 for the revenues, and 5 for the expenses of the business. The second and third digits in the account number represent where the account fits in the category.

Most popular questions for Business-studies Textbooks

Journalizing transactions, posting journal entries to four-column accounts, and preparing a trial balance

Terrence Murphy opened a law office on January 1, 2018. During the first month of operations, the business completed the following transactions:

Jan. 1 Murphy contributed $78,000 cash to the business, Terrence Murphy, Attorney. The business issued common stock to Murphy.

3 Purchased office supplies, $600, and furniture, $1,700, on account.

4 Performed legal services for a client and received $1,000 cash.

7 Purchased a building with a market value of $130,000, and land with a market value of $25,000. The business paid $25,000 cash and signed a note payable to the bank for the remaining amount.

11 Prepared legal documents for a client on account, $400.

15 Paid assistant’s semimonthly salary, $1,120.

16 Paid for the office supplies purchased on January 3 on account.

18 Received $2,700 cash for helping a client sell real estate.

19 Defended a client in court and billed the client for $1,800.

25 Received a bill for utilities, $600. The bill will be paid next month.

29 Received cash on account, $1,500.

30 Paid $1,200 cash for a 12-month insurance policy starting on February 1.

30 Paid assistant’s semimonthly salary, $1,120.

31 Paid monthly rent expense, $1,800.

31 Paid cash dividends of $2,200.

Requirements

  1. Record each transaction in the journal, using the following account titles: Cash; Accounts Receivable; Office Supplies; Prepaid Insurance; Land; Building; Furniture; Accounts Payable; Utilities Payable; Notes Payable; Common Stock; Dividends; Service Revenue; Salaries Expense; Rent Expense; and Utilities Expense. Explanations are not required.

Journalizing transactions, posting journal entries to four-column accounts, and preparing a trial balance

The trial balance of Shawn Merry, CPA, is dated March 31, 2018: During April, the business completed the following transactions:

Cash 17,000

Office Supplies 1,200

Accounts Receivable 10,500

Land 29,000

Furniture 0

Automobile 0

Accounts Payable 3,800

Unearned Revenue 0

Common Stock 46,200

Dividends 0

Rent Expense 1,000

Salaries Expense 2,500

Service Revenue 11,200

Total Balance $ 61,200 61,200

During April, the business completed the following transactions:

Apr. 4 Collected $6,000 cash from a client on account.

8 Performed tax services for a client on account, $5,500.

13 Paid $3,300 on account.

14 Purchased furniture on account, $4,000.

15 Menning contributed his personal automobile to the business in exchange for common stock. The automobile had a market value of $11,500.

18 Purchased office supplies on account, $1,600.

19 Received $2,750 for tax services performed on April 8.

20 Paid cash dividends of $7,500.

21 Received $4,900 cash for consulting work completed.

24 Received $2,500 cash for accounting services to be completed next month.

27 Paid office rent, $900.

28 Paid employee salary, $1,200.

Requirements 2. Open the four-column ledger accounts listed in the trial balance, together with their balances as of March 31. Use the following account numbers: Cash, 11; Accounts Receivable, 12; Office Supplies, 13; Land, 14; Furniture, 15; Automobile, 16; Accounts Payable, 21; Unearned Revenue, 22; Common Stock, 31; Dividends, 33; Service Revenue, 41; Salaries Expense, 51; and Rent Expense, 52.

Journalizing transactions, posting journal entries to T-accounts, and preparing a trial balance

Beth Stewart started her practice as a design consultant on November 1, 2018. During the first month of operations, the business completed the following transactions:

Nov. 1 Received $41,000 cash and issued common stock to Stewart.

4 Purchased office supplies, $1,200, and furniture, $2,300, on account.

6 Performed services for a law firm and received $2,100 cash.

7 Paid $27,000 cash to acquire land to be used in operations.

10 Performed services for a hotel and received its promise to pay the $800 within one week.

14 Paid for the furniture purchased on November 4 on account.

15 Paid assistant’s semimonthly salary, $1,470.

17 Received cash on account, $500.

20 Prepared a design for a school on account, $680.

25 Received $1,900 cash for design services to be performed in December.

28 Received $3,100 cash for consulting with Plummer & Gordon.

29 Paid $840 cash for a 12-month insurance policy starting on December 1.

30 Paid assistant’s semimonthly salary, $1,470. 30 Paid monthly rent expense, $650.

30 Received a bill for utilities, $650. The bill will be paid next month.

30 Paid cash dividends of $2,800.

Requirements 1. Record each transaction in the journal using the following account titles: Cash; Accounts Receivable; Office Supplies; Prepaid Insurance; Land; Furniture; Accounts Payable; Utilities Payable; Unearned Revenue; Common Stock; Dividends; Service Revenue; Salaries Expense; Rent Expense; and Utilities Expense. Explanations are not required.

Icon

Want to see more solutions like these?

Sign up for free to discover our expert answers
Get Started - It’s free

Recommended explanations on Business-studies Textbooks

94% of StudySmarter users get better grades.

Sign up for free
94% of StudySmarter users get better grades.