Question

Following are the transactions of a new company called Pose-for-Pics.

Aug. 1    
Madison Harris, the owner, invested $6,500 cash and $33,500 of photography equipment in the company in exchange for common stock.

2     The company paid $2,100 cash for an insurance policy covering the next 24 months.
5     The company purchased office supplies for $880 cash.
20     The company received $3,331 cash in photography fees earned.
31     The company paid $675 cash for August utilities.

Prepare an August 31 trial balance for Pose-for-Pics.

Debit Credit

Cash

Offices

Prepaid insurance

Photography equipment

Common stock

Photography fees earned

Utilities expense

Totals

Dont have to caculate totals. Thank you!

Answer 1

Concepts and reason

Journal entry: Journal is the book of original entry whereby all the financial transactions are recorded date-wise with the debit and credit entry to the respective accounts in transaction. Journal entry is the primary books of accounts for any entity to record the daily transactions and processed further till the presentation of the financial statements.

Accrual accounting: Accrual accounting refers to the accounting system, where revenues and expenditures are recorded when goods and services are sold or when the expenses are incurred, irrespective of the payment received or paid.

Accrued revenue: According to accrual, method of accounting, all accrued revenues must be recognized and recorded as the revenue of the accounting period, even if cash is not received in respect of those revenues.

Accrued expenses: Accrued expenses refer to the expense that is incurred during a particular period but has not been paid.

Fundamentals

Accounting Equation: This is a mathematical equation which represents the association between assets, liabilities and stockholders’ equity. This is also called as balance sheet equation. It is represented as follows:

Asset (A): The source which is possessed or controlled to generate income in the future is known as an asset. Examples: Cash, prepaid expense, Machinery, Goodwill, and Supplies. (A+) indicates increase in asset and (A–) indicates decrease in asset.

Liability (L): Liability is an agreement made by the company to pay a certain amount for the goods or services received by the company in the past. Examples: Accounts Payable, Loans and Advances, and Outstanding Expenses. (L+) indicates increase in liability and (L–) indicates decrease in liability.

Stockholders’ equity (E): Stockholders’ equity refers to the shareholders claims on the assets or resources of a company, and so known also as net assets of the company, which are assets minus liabilities. Examples: Retained Earnings, Dividends, and Capital. . (E+) indicates increase in equity and (E–) indicates decrease in equity.

Revenue: Revenue is the total income earned by an organization by selling goods or rendering services.

Expense: Expense is the cost borne by a company to produce and sell the goods and services to the customers.

Rules of debit and credit: The category of accounts determines how the increases and decreases are recorded in the said account. In other words, the account category determines the rule of debit and credit for that particular account. The following are the rules of debit and credit:

Debit increases all asset accounts. Debit decreases all liabilities and stockholders’ equity account.

Credit increases all liabilities and stockholders’ equity account. Credit decreases all asset accounts.

T-Accounts: This is a format of account with two columns indicating a debit entry on the left and credit entry on the right.

The following is the accounting equation for the journal entry:

Journalise the transaction as follows:

The following is the accounting equation for the journal entry:

Journalise the transaction as follows:

The following is the accounting equation for the journal entry:

Journalise the transaction as follows:

The following is the accounting equation for the journal entry:

Journalise the transaction as follows:

The following is the accounting equation for the journal entry:

Journalise the transaction as follows:

The T-accounts can be prepared as follows:

The Trial balance of P Company is prepared as follows:

Ans: