Speedy Delivery Services had the following transactions during April: 1. Received cash from...
Question:
Speedy Delivery Services had the following transactions during April:
| 1. | Received cash from issuance of capital stock, $100,000. |
| 2. | Paid rent for April, $4,200. |
| 3. | Paid advertising expense. $3,000. |
| 4. | Received cash for providing delivery services, $27,000. |
| 5. | Purchased supplies for cash, $2,500. |
| 6. | Billed customers for delivery services on account, $81,200. |
| 7. | Paid creditors on account. $8,300. |
| 8. | Received cash from customers on account, $25,600. |
| 9. | Determined that the cost of supplies on hand was $900; therefore $1,600 of supplies had been used during the month. |
| 10. | Paid dividends, $3,000. |
Indicate the effect of each transaction on the accounting equation by listing the numbers identifying the transactions, (1) through (10) in a vertical column, and inserting at the right of each number the appropriate letter from the following list:
| a. | Increase in an asset, decrease in another asset. |
| b. | Increase in an asset, increase in a liability. |
| c. | Increase in an asset, increase in stockholders' equity. |
| d. | Decrease in asset, decrease in liability. |
| e. | Decrease in an asset, decrease in stockholders' equity. |
| 1. | |
| 2. | |
| 3. | |
| 4. | |
| 5. | |
| 6. | |
| 7. | |
| 8. | |
| 9. | |
| 10. |
Accounting:
The accounting profession is responsible for maintaining accurate and timely financial information which will be utilized to made business and financial decisions for a firm. The flow of information in the ledger is an important aspect of the profession.
Answer and Explanation: 1
When understanding the general ledger it is important to understand the following:
- Assets and expenses are increased by debits and decreased by a credits
- Liabilities, Equity, and Sales are increased by credits and decreased by a debits
- Increases in sales increases stockholder's equity; Increases in expenses decreases stockholder's equity
| Item | Description | Answer | Accounting flow | Explanation |
| 1 | Received cash from the issuance of capital stock, $100,000. | c. | Increase in an asset, increase in stockholders' equity. | Cash (Asset) and Capital Stock (Equity) is increased |
| 2 | Paid rent for April, $4,200. | e. | Decrease in an asset, decrease in stockholders' equity. | Cash (Asset) is decreased, Rent Expense (Expense) is increased which results in a decrease of stockholder's equity |
| 3 | Paid advertising expense. $3,000. | e. | Decrease in an asset, decrease in stockholders' equity. | Cash (Asset) is decreased, Advertising Expense (Expense) is increased which results in a decrease of stockholder's equity |
| 4 | Received cash for providing delivery services, $27,000. | c. | Increase in an asset, increase in stockholders' equity. | Cash (Asset) is increased; Services Revenue (Revenue) is increased resulting in an increase in stockholder's equity |
| 5 | Purchased supplies for cash, $2,500. | a. | Increase in an asset, decrease in another asset. | Cash (Asset) is decreased; Supplies (Asset) is increased |
| 6 | Billed customers for delivery services on account, $81,200. | c. | Increase in an asset, increase in stockholders' equity. | Accounts Receivable (Asset) is increased; Services Revenue (Revenue) is increased resulting in an increase in stockholder's equity |
| 7 | Paid creditors on account. $8,300. | d. | Decrease in asset, decrease in liability. | Cash (Asset) is decreased; Accounts Payable (Liability) is decreased |
| 8 | Received cash from customers on account, $25,600. | a. | Increase in an asset, decrease in another asset. | Cash (Asset) is increased; Accounts Receivable (Asset) is decreased |
| 9 | Determined that the cost of supplies on hand was $900; therefore $1,600 of supplies had been used during the month. | e. | Decrease in an asset, decrease in stockholders' equity. | Supplies (Asset) is decreased; Supplied Expense (Expense) is increased which results in a decrease in stockholders equity |
| 10 | Paid dividends, $3,000. | e. | Decrease in an asset, decrease in stockholders' equity. | Cash (Asset) is decreased; Dividends (Equity) is decreased |
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Chapter 3 / Lesson 5Discover the chart of accounts and ledger accounting definitions. Learn about the different ledgers and account types, as well as the chart of accounts numbering system.
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