Andrea Pafko, a fellow student, contends that the double-entry system means that each transaction must be recorded twice. Is Andrea correct? Explain.
No, Andrea Pafko is not right. This is because double entry does not mean that the transaction has to be entered twice. According to the rule of double-entry system, every transaction has a double effect, i.e., debit entry must be followed by credit entry and vice versa.
A transaction is regarded as the economic activity that impacts the businesses financial position and financial statements.
By the term double-entry system, it means that every transaction has two aspects, a debit, and a credit. Every transaction will have an effect on the balance sheet in two ways, that is, it will either increase or decrease both the assets and liabilities at the same time and with an equal amount. Here, debit and credit must be equal and this doesn’t mean that the transaction should be recorded twice.
BE3-9 (L03) Prepare the following adjusting entries at August 31 for Walgreens. (a) Interest on notes payable of $300 is accrued. (b) Services performed but unbilled total $1,400. (c) Salaries and wages earned by employees of $700 have not been recorded. (d) Bad debt expense for year is $900. Use the following account titles: Service Revenue, Accounts Receivable, Interest Expense, Interest Payable, Salaries and Wages Expense, Salaries and Wages Payable, Allowance for Doubtful Accounts, and Bad Debt Expense.
BE3-12 (L07) Kelly Company had cash receipts from customers in 2017 of $142,000. Cash payments for operating expenses were $97,000. Kelly has determined that at January 1, accounts receivable was $13,000, and prepaid expenses were $17,500. At December 31, accounts receivable was $18,600, and prepaid expenses were $23,200. Compute (a) service revenue and (b) operating expenses.
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