Understanding Historical Cost and Fair Value Principles in Business Accounting

Business Accounting

TABLE OF CONTENTS
a. Journal entries.....................................................................................................................3
b. Posting entries to ledger.....................................................................................................4
c. Adjusted trial balance.........................................................................................................7
d. Preparing income statement and balance sheet..................................................................8
e. Closing entries and posting them to the ledger..................................................................9
f. Business report..................................................................................................................11
REFERENCES.........................................................................................................................13

a. Journal entries
Date Account title and explanation
Referenc
e
Debit
($)
Credit
($)
Jul-01 Cash a/c Dr 101 650000
To Owner's Capital a/c 301 650000
(Being Cash Investment received from Franklin Walker recorded)
Jul-01 Equipment a/c Dr 110 50000
To Cash a/c 101 50000
(Equipment purchased for cash)
Jul-01 Rent expense a/c Dr 510 3333
To Cash a/c 101 3333
(Being rent paid for the month of July)
Jul-01 Prepaid Rent a/c Dr 105 20000
To Cash a/c 101 20000
(Rent paid in advance for next six months)
Jul-04 Cash a/c Dr 101 10000
To service revenue 401 10000
(Cash received for service provided)
Jul-05 Supplies a/c Dr 103 1000
To accounts payable a/c 201 1000
(Purchase of supplies on credit)
Jul-06 Advertisement expense a/c Dr 505 1500
To Cash a/c 101 1500
(Advertisement expenses paid in cash)
Jul-12 Accounts receivable a/c Dr 102 6500
To service revenue a/c 401 6500
(Service rendered on credit)
Jul-15 Cash a/c Dr 101 6000
To Unearned revenue a/c 205 6000
(Cash received in advance)
Jul-20 Telephone expense a/c Dr 511 220
To cash a/c 101 220
(Telephone expense paid in cash)
Jul-20 Accounts payable a/c Dr 201 1000
To Cash a/c 101 1000

(Made payment for supplies)
Jul-31 Owner's Drawings a/c Dr 302 3000
To Cash a/c 301 3000
(Cash withdraw for personal use)
Jul-31 Salary expense a/c Dr 501 8000
To Cash a/c 101 8000
(Being Salary paid in cash)
Jul-31 Supply expense a/c Dr 503 200
To Cash a/c 101 200
(Being supplies purchased)
Jul-31 Unearned revenue a/c Dr 205 1200
To Service revenue a/c 401 1200
(Services rendered for unearned revenue)
Jul-31 Depreciation expense a/c Dr 507 817
To Accumulated Depreciation a/c 111 817
(Depreciation for 1 month charged0
Total 762770 762770
b. Posting entries to ledger
Account name: Cash
Accoun
t no.
101
Dat
e Explanation
Referenc
e Debit Credit Balance
Jul-
01 Cash Investment received from Franklin Walker 650000
Jul-
01 Equipment purchased for cash 50000
Jul-
01 Rent paid for July month 3333
Jul-
01 Prepaid rent 20000
Jul-
04 Cash received for service provided 10000
Jul-
06 Advertisement expenses paid in cash 1500
Jul-
15 Cash received in advance 6000
Jul-
20 Telephone expense paid in cash 220