Question

On January 1, Merry Walker established a catering service. Listed below are accounts to use for transactions (a) through (f), each identified by a number. Following are the transactions that occurred in Walker's first month of operations. You need to indicate for each transaction the accounts that should be debited and credited by selecting the account number(s).

1. Cash
2. Accounts Receivable
3. Supplies
4. Prepaid Insurance
5. Equipment
6. Truck
7. Notes Payable
8. Accounts Payable
9. Merry Walker, Capital
10. Merry Walker, Drawing
11. Fees Earned
12. Wages Expense
13. Rent Expense
14. Utilities Expense
15. Truck Expense
16. Miscellaneous Expense
17. Insurance Expense

Answer 1

Answer:

a. Recorded jobs completed on account and sent Invoices to customers.

Account to be Debited ⇒ 2. Accounts Receivable

Account to be Credited ⇒ 11. Fees Earned

The fees are to be credited as it is revenue. The amount will be debited to Accounts receivables because the customers owe the company.

b. Received an invoice for truck expense to be paid in February.

Account to be Debited ⇒ 15. Truck Expense

Account to be Credited ⇒ 8. Accounts Payable

This is an expense so it is debited as expenses are debited when they increase. As it is to be paid in future, it is a liability and will be credited to Payables.

c. Paid utilities expense

Account to be Debited ⇒ 14. Utilities Expense

Account to be Credited ⇒ 1. Cash

As explained, this is an expense and will have to be debited. It was paid with cash which will reduce the cash balance so Cash should be credited.

d.  Received cash from customers on account

Account to be Debited ⇒ 1. Cash

Account to be Credited ⇒ 2. Accounts Receivable

Debtors are paying the company cash which will increase the cash balance so Cash is debited. The Receivables will be credited to reflect that they are decreasing from the debt settlement.

e. Paid Employees Wages

Account to be Debited ⇒ 12. Wages Expense

Account to be Credited ⇒ 1. Cash

As explained, this is an expense and will have to be debited. It was paid with cash which will reduce the cash balance so Cash should be credited.

f. Withdrew cash for personal use.

Account to be Debited ⇒ 10. Merry Walker, Drawing

Account to be Credited ⇒ 1. Cash

The owner withdrew cash for personal use and so this is sent to the Drawings account. It is debited to reflect that it is reducing capital. Cash will be credited as it is decreasing.