Question

Using the list of accounts below, construct a chart of accounts for a merchandising business that rents out a portion of its building, and assign account numbers and arranging the accounts in balance sheet and income statement order (“1” for assets, and so on). Each account number should have three digits. Contra accounts should be designated with a decimal of the account (100.1 for contra of account 100). Assets and liabilities should be in order of liquidity, expenses should be in alphabetical order.

Accounts Payable		Equipment		Sales
Accounts Receivable		Interest Expense		Supplies Expense
Accumulated Depr.—Equip.		Land		Unearned Revenue
Advertising Expense		Merchandise Inventory		Utilities Expense
Capital, Owner		Notes Payable
Cash		Office Supplies
Cost of Merchandise Sold		Rent Revenue
Depreciation Expense-Equipment		Salaries Expense
Drawing, Owner		Salaries Payable

Answer 1

Step 1: Classified above account in Current Asset, Non-Current Assets, Current Liabilities, Owner's Equity, Revenue, Expense.

Current Assets (Balance sheet)

Accounts Receivable

Cash

Merchandise Inventory

Office Supplies

Non-Current Assets (Balance sheet)

Accumulated Depr.—Equip.

Equipment

Land

Current Liabilities (Balance sheet)

Accounts Payable

Notes Payable

Salaries Payable

Unearned Revenue

Owner's Equity (Balance sheet)

Capital, Owner

Drawing, Owner

Revenue (Income Statement)

Rent Revenue

Sales

Expense (Income Statement)

Advertising Expense

Depreciation Expense-Equipment

Cost of Merchandise Sold

Interest Expense

Salaries Expense

Supplies Expense

Utilities Expense

Hint: Accumulated Depr.—Equip. is contra account of Equipment

Step 2: Your Answer

Account number	Description	Account number	Description
100	Cash	302	Drawing, Owner
103	Accounts Receivable	400	Sales
105	Merchandise Inventory	500	Cost of Merchandise Sold
107	Office Supplies	502	Advertising Expense
110	Land	504	Depreciation Expense-Equipment
120	Equipment	506	Salaries Expense
120.1	Accumulated Depr.—Equip.	508	Supplies Expense
200	Accounts Payable	510	Utilities Expense
201	Notes Payable	512	Rent Revenue
202	Salaries Payable	514	Interest Expense
203	Unearned Revenue
301	Capital, Owner