Chapter two: Analyzing transactions
Chart of Accounts for Net solutions
1. Chris Clark’s first transaction, was to deposit $25,000 in a bank account in the name
of Net Solutions. November 1.
2. On November 5. Net Solutions bought land for $20,000, paying cash.
3. On November 10. Net Solutions purchased supplies on account for $1,350.
.
4. On November 18. Net Solutions received fees of $7,500 from customers for services
provided.
5. On November 30. Net Solutions paid creditors on account, $950.
6.
7. Net Solutions incurred the following expenses: wages, $2,125; rent, $800;utilities,
$450; and miscellaneous, $275, and payment of these expenses is recorded on
November 30 (transaction
8. On November 30, Net Solutions recorded the amount of 800 suppl i es used in the
operations duringthe month (transaction g).
9. payment of these expenses is recorded on November 30 (transaction
10. In transaction (h), Chris Clark withdrew $2,000 in cash from Net Solutions for
personal use.
we will use the December transactions of Net Solutions.
The first transaction in December occurred on December 1.
Dec. 1. Net Solutions paid a premium of $2,400 for a comprehensive insurance policy
covering liability, theft, and fire. The policy covers a two-year period.
Dec. 1. Net Solutions paid rent for December, $800. The company from which Net-
Solutions is renting its store space now requires the payment of rent on the 1st of each
month, rather than at the end of the month.
Dec. 1. Net Solutions received an offer from a local retailer to rent the land purchased
on November 5. The retailer plans to use the land as a parking lot for its employees and
customers. Net Solutions agreed to rent the land to the retailer for three months, with
the rent payable in advance. Net Solutions received $360 for three months’ rent
beginning December 1.
Dec. 4. Net Solutions purchased office equipment on account from Executive Supply Co.
for
$1,800.
Dec. 6. Net Solutions paid $180 for a newspaper advertisement.
Dec. 11. Net Solutions paid creditors $400.
Dec. 13. Net Solutions paid a receptionist and a part-time assistant $950 for two weeks’ wages.
Dec. 16. Net Solutions received $3,100 from fees earned for the first half of December.
Dec. 16. Fees earned on account totaled $1,750 for the first half of December.
Dec. 20. Net Solutions paid $900 to Executive Supply Co. on the $1,800 debt owed
from theDecember 4 transaction.
Dec. 21. Net Solutions received $650 from customers in payment of their accounts.
Dec. 23. Net Solutions paid $1,450 for supplies.
Dec. 27. Net Solutions paid the receptionist and the part-time assistant $1,200 for
two weeks’wages.
Dec. 31. Net Solutions paid its $310 telephone bill for the month.
Dec. 31. Net Solutions paid its $225 electric bill for the month.
Dec. 31. Net Solutions received $2,870 from fees earned for the second half of December.
Dec. 31. Fees earned on account totaled $1,120 for the second half of December.
Dec. 31. Chris Clark withdrew $2,000 for personal use.
Self-Examination Questions
1. A debit may signify: A. an increase in an asset account. B. a decrease in an asset
account.
C. an increase in a liability account. D. an increase in the owner’s capital
account.
2. The type of account with a normal credit balance is: A. an asset. C. a
revenue.
B. drawing. D. an
expense.
3. A debit balance in which of the following accounts would indicate a likely error?
A. Accounts Receivable B. Cash
C. Fees Earned D. Miscellaneous Expense
4. The receipt of cash from customers in payment of their accounts would be recorded by a:
A. debit to Cash; credit to Accounts Receivable.
B. debit to Accounts Receivable; credit to Cash.
C. debit to Cash; credit to Accounts Payable. D. debit to Accounts Payable; credit to
Cash.
5. The form listing the titles and balances of the accounts in the ledger on a given date is the:
A. income statement. B. balance sheet.
C. statement of owner’s equity. D. trial balance.
1) Journalize the following selected transactions for August 2021.
August 1. Paid rent for the month, $1,500.
2. Paid advertising expense, $700.
4. Paid cash for supplies, $1,050.
6. Purchased office equipment on account, $7,500.
8. Received cash from customers on account, $3,600.
12. Paid creditor on account, $1,150.
20. Withdrew cash for personal use, $1,000.
25. Paid cash for repairs to office equipment, $500.
30. Paid telephone bill for the month, $195.
31. Fees earned and billed to customers for the month, $10,150.
31. Paid electricity bill for the month, $380.
GROUP ACTIVITY.
Read the following transactions and then
a. Journalize
b. Post to ledger using t- account
c. Prepare trial balance
1. On oct1. Ahmed invests in advertising company called heego advertising
2. On oct 1, Heego company purchases office equipment costing $5,000 by
signing a 3 – month 12% $5,000 note payable.
3. On oct 2, Heego company receives $1,200 cash advance from client abc
company for advertising services that are expected to be completed by Dec
31.
4. On oct, 3 Heego company pays office rent for October in cash, $900.
5. On oct 4, Heego pays $600 for one year insurance policy that will expire
next year on September 30.
6. On oct 5, Heego company purchases supplies for advertising material on
account from aero – supply for $2,500.
7. On Oct 9, Heego company hires four employees to begin work on October
15. Each employee is to receive a weekly salary of $500 for a 5- day week,
payable every two weeks – first payment made on Oct 26.
8. On oct 20, Ahmed with draws $500 cash for personal use
9. On oct 26, Heego company Owes employee salaries of $4,000. And pays
them in cash
10. On oct 30, Heego company receives $10,000. Cash for service provided.