ACCTG 215 Quiz Section 2 Autumn 2013 The Five Steps to Recording External Transactions 1 Determine the effect on the accounting equation A L E Assets Resources Liabilities Stockholders Equity Claims to Resources Each transaction will have a dual effect which is the foundation of A DOUBLE ENTRY ACCOUNTING SYSTEM Three Things Used to Determine the Effect on the Accounting Equation 1 Account 2 Direction 3 Amount 2 Determine whether to debit or credit affected accounts Rules of the Game 1 Debits Credits 2 Assets Liabilities Stockholders Equity For every debit there will be at least one credit ACCTG 215 Quiz Section 2 Autumn 2013 3 Record transactions in the journal To be discussed next quiz section 4 Post transactions to the ledger To be discussed next quiz section 5 Prepare a trial balance To be discussed in lecture ACCTG 215 Quiz Section 2 Autumn 2013 Practice Problem Jake owns a lawn maintenance company while Lucy owns a machine repair shop For the month of July the following transactions occurred July 3 Jake provides lawn services to Lucy s repair shop on account 400 July 6 One of Jake s mowers malfunctions Lucy provides repair services to Jake on account 350 July 9 Lucy pays 400 to Jake for lawn services provided on July 3 July 14 Lucy borrows 500 from Jake by signing a note July 18 Jake purchases advertising in a local newspaper for the remainder of July and pays cash 100 July 20 Jake pays 350 to Lucy for services provided on July 6 July 27 Lucy performs repair services for other customers for cash 700 July 30 Lucy pays employees salaries for month 200 July 31 Lucy pays 500 to Jake for money borrowed on July 14 Required Determine the effect on the accounting equation record the transactions as journal entries and post the journal entries to the T accounts for Jake s Lawn Maintenance Company Assume that Jake starts the month of July with 1 000 in cash ACCTG 215 Quiz Section 2 Autumn 2013 Solutions Key A ASSET L LIABILITY SE STOCKHOLDERS EQUITY R REVENUE E EXPENSE 7 3 A Accounts Receivable R SE Service Revenue 7 6 E SE Maintenance Expense L Accounts Payable 7 9 A Cash A Accounts Receivable 7 14 A Notes Receivable A Cash 7 18 E SE Advertising Expense A Cash 7 20 L Accounts Payable A Cash 7 27 No Entry 7 30 No Entry 7 31 A Cash A Notes Receivable
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