Question

Jan. 2 Stockholders invested $15,000 cash in the business in exchange for common stock. 3 Purchased used car for $8,200 cash for use in the business. 9 Purchased supplies on account for $500. 11 Billed customers $1,800 for services performed. 16 Paid $200 cash for advertising. 20 Received $780 cash from customers billed on January 11. 23 Paid creditor $300 cash on balance owed. 28 Declared and paid a $500 cash dividend. For each transaction indicate the following. (a) The basic type of account debited and credited (Asset, Liability, Stockholders’ Equity). (b) The specific account debited and credited (Cash, Rent Expense, Service Revenue, etc.). (c) Whether the specific account is increased or decreased. (d) The normal balance of the specific account.

Answer 1

Explanation:

The categorization is presented below:

For debited accounts

Transaction date    Basic Type   Specific account   Effect  Normal balance

Jan.2                        Asset            Cash                      Increase   $15,000

Jan.3                        Asset             Car used              Increase    $8,200

Jan.9                        Asset             Supplies              Increase     $500

Jan.11                        Asset             Account receivable  Increase  $1,800

Jan.16                       Expense         Advertisement        Increase   $200

Jan.20                      Asset              Cash                        Increase  $7,380

Jan.23                     Liability          Account payable     Decrease  $200

Jan.28                      Asset             Retained earnings   Decrease   $500

Jan.28                      Liability          Dividend payable    Decrease   $500

For credited accounts

Transaction date    Basic Type   Specific account   Effect  Normal balance

Jan.2                        Asset             Common stock     Increase   $15,000

Jan.3                        Asset             Cash                      Decrease   $6,800

Jan.9                        Asset             Account payable  Increase     $500

Jan.11                        Asset            Service revenue   Increase     $1,800

Jan.16                       Expense        Cash                     Decrease   $6,600

Jan.20                      Asset             Account receivable Decrease  $1,020

Jan.23                     Liability         Cash                         Decrease  $7,080

Jan.28                      Asset             Dividend payable   Increase   $500

Jan.28                      Liability          Cash                        Decrease   $6,580

We determining the balances by adding the received or that transactions which increases the balance and deduct the paid amount or that transactions which decreases the balance