Accounting & Bookkeeping & Small Business Forum

[Watermelon]

Can anyone explain how to do this problem? And things to remember when doing future problems such as this?

Preparing a trial balance
These are the transactions:

a. Sergey Amena, owner, invested $20,000 cash in the business in exchange for its common stock.
b. The business purchased office supplies for $580 cash.
c. Purchased $11,060 of office equipment on credit.
d. Received $2,360 cash as fees for services provided to a customer.
e. Paid $11,060 cash to settle the payable for the office equipment purchased in transaction c.
f. Billed a customer $4,240 as fees for services provided.
g. Paid $530 cash for the monthly rent.
h. Collected $1,780 cash as partial payment for the account receivable created in transaction f.
i. Paid $1,000 cash for dividends.

Need to know:
-Debited amount in cash account
-Debited amount in accounts receivable
-Credited amount in accounts payable

Please help! Very confused.

[Dominic Bradish]

A problem like this can be confusing because there seems to be so much going on at one time for so few questions asked. The way I have always approached things like this is the pedantic way. Section off your scratch paper to include a general journal and then all of the T-accounts that are affected. Begin with journalizing each entry and create the T-accounts as needed. Arrange the T-accounts to corresponed with the accounting equation. That means, on the left, reserve a third of the paper for assets, the middle for liabilities and the right for owners equity. Create the journal at the top or the bottem as you prefer. Follow the problem through each transaction, first journalizing and then recording to the T-accounts. Once you have followed through each transaction, you can then calculate the end result to each of the accounts and find the answers to each question. This may seem to take a lot of time, but once done, you will see that it takes less time than trying to guess, and the added advantage is that you can easily check and re-check your calculations with ease using the remaining time that you have when you are tested.

[Des]

CASH +20,000 -580 +2,360 -11,060 -530 +1,780 -1000 = 10,970

AR +4,240 -1,780 = 2,460

AP +11,060 -11,060 = 0

That's an easy way to set it up without annoying T-accounts. You need to understand what a positive or negative balance in each account means though. Ie. AR(+ = debit, - = credit) and AP(+ = credit, - = debit)