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Chapter 3: Question 5Q (page 127)

Andrea Pafko, a fellow student, contends that the double-entry system means that each transaction must be recorded twice. Is Andrea correct? Explain.

Short Answer

Expert verified

No, Andrea Pafko is not right. This is because double entry does not mean that the transaction has to be entered twice. According to the rule of double-entry system, every transaction has a double effect, i.e., debit entry must be followed by credit entry and vice versa.

Step by step solution

01

Meaning of Transaction

A transaction is regarded as the economic activity that impacts the businesses financial position and financial statements.

02

Reason for not recording double-entry twice

By the term double-entry system, it means that every transaction has two aspects, a debit, and a credit. Every transaction will have an effect on the balance sheet in two ways, that is, it will either increase or decrease both the assets and liabilities at the same time and with an equal amount. Here, debit and credit must be equal and this doesn鈥檛 mean that the transaction should be recorded twice.

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Most popular questions from this chapter

The financial statements of (M&S) are presented in Appendix E. The company's complete annual report, including the notes to the financial statements, is available online.

Instructions

Refer to M&S鈥檚 financial statements and the accompanying notes to answer the following questions.

(a) What were M&S鈥檚 total assets on 28 March 2015? On 29 March 2014?

(b) How much cash (and cash equivalents) did M&S have on 28 March 2015?

(c) What were M&S鈥檚 selling and marketing expenses in 2015? In 2014?

(d) What were M&S鈥檚 revenues in 2015? In 2014?

(e) Using M&S鈥檚 financial statements and related notes, identify items that may result in adjusting entries for prepayments and accruals.

(f) What were the amounts of M&S鈥檚 depreciation and amortization expense in 2014 and 2015?

The following trial balance of Watteau Co. does not balance:

WATTEAU CO.

TRIAL BALANCE

JUNE 30, 2017

Debit \(

Credit \)

Cash

\(2,870

Accounts receivable

\)3,231

Supplies

800

Equipment

3,800

Account payable

2,666

Unearned service revenue

1,200

Common stock

6,000

Retained earnings

3,000

Service revenue

2,380

Salaries and wages expenses

3,400

Office expenses

940

\(13,371

\)16,916

Each of the listed accounts should have a normal balance per the general ledger. An examination of the ledger and journal reveals the following errors.

  1. Cash received from the customer on account was debited for \(570, and accounts receivable was credited for the same amount. The actual collection was for \)750.
  2. The purchase of a computer printer on account for \(500 was recorded as a debit to Supplies for \)500 and a credit to Accounts Payable for \(500.
  3. Services were performed on account for a client for \)890. Accounts receivable was debited for \(890 and service revenue was credited for \)89.
  4. A payment of \(65 for telephone charges was recorded as a debit to Office Expense for \)65 and a debit to Cash for \(65.
  5. When the unearned service revenue account was reviewed, it was found that service revenue amounting to \)325 was performed prior to June 30 (related to unearned service revenue).
  6. A debit posting to salaries and wages expenses of \(670 was omitted.
  7. A payment on account for \)206 was credited to cash for \(206 and credit to account payable for \)260.
  8. A dividend of \(575 was debited to salaries and wages expenses for \)575 and credit to cash for $575.

Instruction

Prepare a correct trial balance. (Note: It may be necessary to add one or more accounts to the trial balance.)

(L07) (Cash to Accrual Basis) Jill Accardo, M.D., maintains the accounting records of Accardo Clinic on a cash basis. During 2017, Dr. Accardo collected \(142,000 from her patients and paid \)55,470 in expenses. At January 1, 2017, and December 31, 2017, she had accounts receivable, unearned service revenue, accrued expenses, and prepaid expenses as follows. (All long-lived assets are rented.)

January 1, 2017, December 31,2017

Account receivable \(9,250 \)15,927

Unearned service revenue \(2,840 \)4,111

Accrued expenses \(3,435 \)2,108

Prepaid expenses \(1,917 \)3,232

Instructions:

Prepare a schedule that converts Dr. Accardo鈥檚 鈥渆xcess of cash collected over cash disbursed鈥� for the year 2017 to net income on an accrual basis for the year 2017.

E3-2 (L02) (Corrected Trial Balance) The following trial balance of Wanda Landowska Company does not balance. Yourreview of the ledger reveals the following. (a) Each account had a normal balance. (b) The debit footings in Prepaid Insurance,Accounts Payable, and Property Tax Expense were each understated \(100. (c) A transposition error was made in AccountsReceivable and Service Revenue; the correct balances for Accounts Receivable and Service Revenue are \)2,750 and \(6,690,respectively. (d) A debit posting to Advertising Expense of \)300 was omitted. (e) A \(1,500 cash drawing by the owner was debited to Owner鈥檚 Capital and credited to Cash.

WANDA LANDOWSKA COMPANYTRIAL BALANCEAPRIL 30, 2017

Debit (\)) Credit (\()Cash \) 4,800Accounts Receivable 2,570Prepaid Insurance 700Equipment \( 8,000Accounts Payable 4,500Property Taxes Payable 560Owner鈥檚 Capital 11,200Service Revenue 6,960Salaries and Wages Expense 4,200Advertising Expense 1,100Property Tax Expense 800

Total \)20,890 $24,500

Prepare a correct trial balance.

When converting to IFRS, a company must:

(a) recast previously issued financial statements in accordance with IFRS.

(b) use GAAP in the reporting period but subsequently use IFRS.

(c) prepare at least three years of comparative statements.

(d) use GAAP in the transition year but IFRS in the reporting year.
See all solutions

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