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Horngren'S Financial And Managerial Accounting
Found in: Page 118

Short Answer

In 35 words or fewer, explain the difference between a debit and a credit, and explain what the normal balance of the six account types is.

The debit is the left side of the t-accounts, and the credit is the right side of the t-accounts. The normal balance of assets, expenses, and dividends is debit, while the normal balance of liabilities, revenue, and common stock is credit.

See the step by step solution

Step by Step Solution

Step 1: Difference between the debit and credit

The major difference between debit and credit is that the debit is the left side of the t-accounts and the credit is the right side of the t-accounts of the business.

Step 2: Normal balance of various accounts

S No.

Account Type

Normal Balance

1

Assets

Debit

2

Expenses

Debit

3

Dividends

Debit

4

Liabilities

Credit

5

Revenues

Credit

6

Common Stock

Credit

Most popular questions for Business-studies Textbooks

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

Theodore McMahon opened a law office on April 1, 2018. During the first month of operations, the business completed the following transactions:

Apr. 1 McMahon contributed $70,000 cash to the business, Theodore McMahon, Attorney. The business issued common stock to McMahon.

3 Purchased office supplies, $1,100, and furniture, $1,300, on account.

4 Performed legal services for a client and received $2,000 cash.

7 Purchased a building with a market value of $150,000, and land with a market value of $30,000. The business paid $40,000 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 semi monthly salary, $1,200.

16 Paid for the office supplies purchased on April 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 $1,700.

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

28 Received cash on account, $1,100.

29 Paid $3,600 cash for a 12-month insurance policy starting on May 1.

29 Paid assistant’s semi monthly salary, $1,200.

30 Paid monthly rent expense, $2,100.

30 Paid cash dividends of $3,200.

Requirements 3. Post the journal entries to four-column accounts in the ledger, using dates, account numbers, journal references, and posting references. Assume the journal entries were recorded on page 1 of the journal.

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

Consider the following transactional data for the first month of operations for Crystal Clear Cleaning.

Nov. 1 Stockholders contributed $15,000 and a truck, with a market value of $3,000, to the business in exchange for common stock.

2 The business paid $4,000 to Pleasant Properties for November through February rent. (Debit Prepaid Rent)

3 Paid $4,800 for a business insurance policy for the term November 1, 2018 through October 31, 2019. (Debit Prepaid Insurance)

4 Purchased cleaning supplies on account, $320.

5 Purchased on account an industrial vacuum cleaner costing $1,500. The invoice is payable November 25.

7 Paid $3,900 for a computer and printer.

9 Performed cleaning services on account in the amount of $4,700.

10 Received $200 for services rendered on November 9. 15 Paid employees, $400.

16 Received $15,000 for a 1-year contract beginning November

16 for cleaning services to be provided. Contract begins November 16, 2018, and ends November 15, 2019. (Credit Unearned Revenue)

17 Provided cleaning services and received $400 cash.

18 Received a utility bill for $175 with a due date of December 4, 2018. (Use Accounts Payable)

20 Borrowed $36,000 from bank with interest rate of 6% per year.

21 Received $500 on account for services performed on November 9.

25 Paid $750 on account for vacuum cleaner purchased on November 5.

29 Paid $200 for advertising.

30 Cash dividends of $1,400 were paid to stockholders

Requirements 1. Journalize the transactions, using the following accounts: Cash; Accounts Receivable; Cleaning Supplies; Prepaid Rent; Prepaid Insurance; Equipment; Truck; Accounts Payable; Unearned Revenue; Notes Payable; Common Stock; Dividends; Service Revenue; Salaries Expense; Advertising Expense; and Utilities Expense. Explanations are not required.

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