ND Paint Designs began operations on April 1, 2017. The company completed the following transactions in its first month:

Apr. 1 The owner, Nazim Dhaliwal, invested $12,8000 cash in the company.

2 Purchased equipment for $5,000 on account.

2 Purchased a one-year insurance policy effective April 1, and paid the first month's premium of $134.

2 Paid for $590 of supplies.

7 Paid cash for $600 of advertising expenses.

8 Finished a painting project for Maya Angelina and collected $630 cash.

10 Received a $1,270 contract from a customer, SUB Terrain Inc., to paint its new office space. SUB Terrain will pay when the project is complete.

25 The owner, Nazim Dhaliwal, withdrew $960 cash for his use.

28 Completed the contract with SUB Terrain Inc. from April 10 and collected the amount owing.

29 Received $1,800 cash from Memphis Shek for a painting project that ND Paint Designs will start on

May 5. 30 Paid for the equipment purchased on account on April 2.

Instructions

(a) For each transaction, indicate: (1) the basic type of account debited and credited (asset, liability, or owner’s equity); (2) the specific account debited and credited (Cash, Rent Expense, Service Revenue, etc.); and (3) whether each account is increased (+) or decreased (−), and by what amount. Use the following format, in which the first transaction is given as an example:

(b) Prepare a journal entry for each transaction.
TAKING IT FURTHER
Nazim doesn't understand why a debit increases the cash account and yet a credit to N. Dhaliwal, Capital increases that account. He reasons that debits and credits cannot both increase account balances. Explain to Nazim why he is wrong.

Transcribed Image Text:

Account Debited Account Credited Basic Basic Specific TransactionTypeAc EffectType Acount Effect Apr. 1 Cash +$12,800 Owner's N. Dhaliwal, +$12,800 EquityCapital Asset