CHAPTER y2
yANALYZING yTRANSACTIONS
DISCUSSION yQUESTIONS
1. An yaccount yis ya yform ydesigned yto yrecord ychanges yin ya yparticular yasset, yliability,
yowner’s yequity, yrevenue, yor yexpense. yA yledger yis ya ygroup yof yrelated yaccounts.
2. The yterms ydebit y and ycredit y may ysignify yeither yan yincrease yor ya ydecrease, ydepending yupon
ythe ynature yof ythe yaccount. yFor yexample, ydebits ysignify yan yincrease yin yasset yand yexpense
yaccounts ybut ya ydecrease yin yliability, yowner’s yequity, yand yrevenue yaccounts.
3. a. y Assuming ythat yno yerrors yhave yoccurred, ythe ycredit ybalance yin ythe ycash yaccount
yresulted yfrom ydrawing ychecks yfor y$1,850 yin yexcess yof ythe yamount yof ycash yon
ydeposit.
b. The y$1,850 ycredit ybalance yin ythe ycash yaccount yas yof yDecember y31 yis ya yliability yowed
yto ythe ybank. yIt yis yusually yreferred yto yas yan y“overdraft.”
4. a. y y The yrevenue ywas yearned yin yOctober.
b. (1) y Debit yAccounts yReceivable yand ycredit yFees yEarned yor yanother yappropriately ytitled
yrevenue yaccount yin yOctober.
(2) y Debit yCash yand ycredit yAccounts yReceivable yin yNovember.
5. No. yErrors ymay yhave ybeen ymade ythat yhad ythe ysame yerroneous yeffect yon yboth ydebits yand
ycredits, ysuch yas yfailing yto yrecord yand/or ypost ya ytransaction, yrecording ythe ysame
ytransaction ymore ythan yonce, yand yposting ya ytransaction ycorrectly ybut yto ythe ywrong
yaccount.
6. Recording y$9,800 yinstead yof ythe ycorrect yamount yof y$8,900 yis ya ytransposition. yRecording
y$100 yinstead yof ythe ycorrect yamount yof y$1,000 yis ya yslide.
7. a. No. yBecause ythe ysame yerror yoccurred yon yboth ythe ydebit yside yand ythe ycredit yside
yof ythe ytrial ybalance, ythe ytrial ybalance ywould ynot ybe yout yof ybalance.
b. Yes. yThe ytrial ybalance ywould ynot ybalance. yThe yerror ywould ycause ythe ydebit ytotal
yof ythe ytrial ybalance yto yexceed ythe ycredit ytotal yby y$90.
8. a. The yequality yof ythe ytrial ybalance ywould ynot ybe yaffected.
b. On ythe yincome ystatement, ytotal yoperating yexpenses y(salary yexpense) ywould ybe yoverstated yby
$7,500, yand ynet yincome ywould ybe yunderstated yby y$7,500. yOn ythe ystatement yof
yowner’s yequity, ythe ybeginning yand yending yowner’s ycapital ywould ybe ycorrect. yThe
yunderstatement yof ynet yincome yunderstates yowner’s yequity yby y$7,500, ywhile ythe
yunderstatement yof ywithdrawals yoverstates yowner’s yequity yby y$7,500. yThus, yending
yowner’s yequity yis ycorrect. yThe ybalance ysheet yis ynot yaffected yby ythe yerror.
9. a. The yequality yof ythe ytrial ybalance ywould ynot ybe yaffected.
b. On ythe yincome ystatement, yrevenues y(fees yearned) ywould ybe yoverstated yby y$300,000,
yand ynet yincome ywould ybe yoverstated yby y$300,000. yOn ythe ystatement yof yowner’s
yequity, ythe ybeginning ycapital ywould ybe ycorrect. yHowever, ynet yincome yand yending
ycapital ywould ybe yoverstated yby
$300,000. yThe ybalance ysheet ytotal yassets yis ycorrect. yHowever, yliabilities y(notes
ypayable) yis yunderstated yby y$300,000, yand yowner’s yequity yis yoverstated yby y$300,000.
yThe yunderstatement yof yliabilities yis yoffset yby ythe yoverstatement yof yowner’s yequity,
yand ythus, ytotal yliabilities yand yowner’s yequity yis ycorrect.
10. a. From ythe yviewpoint yof ySurety yStorage, ythe ybalance yof ythe ychecking yaccount yrepresents yan
yasset.
2-1
© 2021 Cengage Learning, Inc. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, b. From ythe yviewpoint yof yAda ySavings yBank, ythe ybalance yof ythe ychecking yaccount
yrepresents ya yliability.
2-2
© 2021 Cengage Learning, Inc. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 2 Analyzing Transactions
PE 2-3A PRACTICE yEXERCISES
PE y 2-1A
1. Debit y and y credit y entries y (c), y normal y debit y balance
2. Credit y entries y only y (b), y normal y credit y balance
3. Credit y entries y only y (b), y normal y credit y balance
4. Debit y entries y only y (a), y normal y debit y balance
5. Credit y entries y only y (b), y normal y credit y balance
6. Debit y and y credit y entries y (c), y normal y credit y balance `
PE y 2-1B
1. Debit y and y credit y entries y (c), y normal y credit y balance
2. Debit y and y credit y entries y (c), y normal y debit y balance
3. Debit y entries y only y (a), y normal y debit y balance
4. Debit y entries y only y (a), y normal y debit y balance
5. Debit y entries y only y (a), y normal y debit y balance
6. Credit y entries y only y (b), y normal y credit y balance
PE y 2-2A
Feb. 19 Office y Equipment 14,800
Cash 3,600
Accounts y Payable 11,200
PE y 2-2B
Sept. 30 Office y Supplies 1,900
Cash 600
Accounts y Payable 1,300
2-3
© 2021 Cengage Learning, Inc. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
,
yANALYZING yTRANSACTIONS
DISCUSSION yQUESTIONS
1. An yaccount yis ya yform ydesigned yto yrecord ychanges yin ya yparticular yasset, yliability,
yowner’s yequity, yrevenue, yor yexpense. yA yledger yis ya ygroup yof yrelated yaccounts.
2. The yterms ydebit y and ycredit y may ysignify yeither yan yincrease yor ya ydecrease, ydepending yupon
ythe ynature yof ythe yaccount. yFor yexample, ydebits ysignify yan yincrease yin yasset yand yexpense
yaccounts ybut ya ydecrease yin yliability, yowner’s yequity, yand yrevenue yaccounts.
3. a. y Assuming ythat yno yerrors yhave yoccurred, ythe ycredit ybalance yin ythe ycash yaccount
yresulted yfrom ydrawing ychecks yfor y$1,850 yin yexcess yof ythe yamount yof ycash yon
ydeposit.
b. The y$1,850 ycredit ybalance yin ythe ycash yaccount yas yof yDecember y31 yis ya yliability yowed
yto ythe ybank. yIt yis yusually yreferred yto yas yan y“overdraft.”
4. a. y y The yrevenue ywas yearned yin yOctober.
b. (1) y Debit yAccounts yReceivable yand ycredit yFees yEarned yor yanother yappropriately ytitled
yrevenue yaccount yin yOctober.
(2) y Debit yCash yand ycredit yAccounts yReceivable yin yNovember.
5. No. yErrors ymay yhave ybeen ymade ythat yhad ythe ysame yerroneous yeffect yon yboth ydebits yand
ycredits, ysuch yas yfailing yto yrecord yand/or ypost ya ytransaction, yrecording ythe ysame
ytransaction ymore ythan yonce, yand yposting ya ytransaction ycorrectly ybut yto ythe ywrong
yaccount.
6. Recording y$9,800 yinstead yof ythe ycorrect yamount yof y$8,900 yis ya ytransposition. yRecording
y$100 yinstead yof ythe ycorrect yamount yof y$1,000 yis ya yslide.
7. a. No. yBecause ythe ysame yerror yoccurred yon yboth ythe ydebit yside yand ythe ycredit yside
yof ythe ytrial ybalance, ythe ytrial ybalance ywould ynot ybe yout yof ybalance.
b. Yes. yThe ytrial ybalance ywould ynot ybalance. yThe yerror ywould ycause ythe ydebit ytotal
yof ythe ytrial ybalance yto yexceed ythe ycredit ytotal yby y$90.
8. a. The yequality yof ythe ytrial ybalance ywould ynot ybe yaffected.
b. On ythe yincome ystatement, ytotal yoperating yexpenses y(salary yexpense) ywould ybe yoverstated yby
$7,500, yand ynet yincome ywould ybe yunderstated yby y$7,500. yOn ythe ystatement yof
yowner’s yequity, ythe ybeginning yand yending yowner’s ycapital ywould ybe ycorrect. yThe
yunderstatement yof ynet yincome yunderstates yowner’s yequity yby y$7,500, ywhile ythe
yunderstatement yof ywithdrawals yoverstates yowner’s yequity yby y$7,500. yThus, yending
yowner’s yequity yis ycorrect. yThe ybalance ysheet yis ynot yaffected yby ythe yerror.
9. a. The yequality yof ythe ytrial ybalance ywould ynot ybe yaffected.
b. On ythe yincome ystatement, yrevenues y(fees yearned) ywould ybe yoverstated yby y$300,000,
yand ynet yincome ywould ybe yoverstated yby y$300,000. yOn ythe ystatement yof yowner’s
yequity, ythe ybeginning ycapital ywould ybe ycorrect. yHowever, ynet yincome yand yending
ycapital ywould ybe yoverstated yby
$300,000. yThe ybalance ysheet ytotal yassets yis ycorrect. yHowever, yliabilities y(notes
ypayable) yis yunderstated yby y$300,000, yand yowner’s yequity yis yoverstated yby y$300,000.
yThe yunderstatement yof yliabilities yis yoffset yby ythe yoverstatement yof yowner’s yequity,
yand ythus, ytotal yliabilities yand yowner’s yequity yis ycorrect.
10. a. From ythe yviewpoint yof ySurety yStorage, ythe ybalance yof ythe ychecking yaccount yrepresents yan
yasset.
2-1
© 2021 Cengage Learning, Inc. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, b. From ythe yviewpoint yof yAda ySavings yBank, ythe ybalance yof ythe ychecking yaccount
yrepresents ya yliability.
2-2
© 2021 Cengage Learning, Inc. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 2 Analyzing Transactions
PE 2-3A PRACTICE yEXERCISES
PE y 2-1A
1. Debit y and y credit y entries y (c), y normal y debit y balance
2. Credit y entries y only y (b), y normal y credit y balance
3. Credit y entries y only y (b), y normal y credit y balance
4. Debit y entries y only y (a), y normal y debit y balance
5. Credit y entries y only y (b), y normal y credit y balance
6. Debit y and y credit y entries y (c), y normal y credit y balance `
PE y 2-1B
1. Debit y and y credit y entries y (c), y normal y credit y balance
2. Debit y and y credit y entries y (c), y normal y debit y balance
3. Debit y entries y only y (a), y normal y debit y balance
4. Debit y entries y only y (a), y normal y debit y balance
5. Debit y entries y only y (a), y normal y debit y balance
6. Credit y entries y only y (b), y normal y credit y balance
PE y 2-2A
Feb. 19 Office y Equipment 14,800
Cash 3,600
Accounts y Payable 11,200
PE y 2-2B
Sept. 30 Office y Supplies 1,900
Cash 600
Accounts y Payable 1,300
2-3
© 2021 Cengage Learning, Inc. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
,
