For each of the following accounts indicate the effects of

(a) a debit and

(b) a credit

(a) Should business transaction debits and credits be recorded directly in the ledger accounts?

(b) What are the advantages of first recording transactions in the journal and then posting to the ledger?

The account number is entered as the last step in posting the amounts from the journal to the ledger.

What is the advantage of this step?

Journalize the following business transactions.

(a) Alberto Rivera invests $9,000 cash in the business in exchange for shares of common stock.

(b) Insurance of $800 is paid for the year.

(c) Supplies of $2,000 are purchased on account.

(d) Cash of $7,500 is received for services rendered.

(a) What is a ledger?

(b) What is a chart of accounts and why is it important?

What is a trial balance and what are its purposes?

Joe Kirby is confused about how accounting information flows through the accounting system. He believes the flow of information is as follows.

(a) Debits and credits posted to the ledger.

(b) Business transaction occurs.

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Brief Exercises 81

(c) Information entered in the journal.

(d) Financial statements are prepared.

(e) Trial balance is prepared.

Is Joe correct? If not, indicate to Joe the proper flow of the information.

Two students are discussing the use of a trial balance.

They wonder whether the following errors, each considered separately, would prevent the trial balance from balancing. What would you tell them?

(a) The bookkeeper debited Cash for $600 and credited Salaries and Wages Expense for $600 for payment of wages.

(b) Cash collected on account was debited to Cash for

$900 and Service Revenue was credited for $90.

Pepsico What are the normal balances for PepsiCo’s Cash, Accounts Payable, and Interest Expense accounts?

Indicate debit and credit on the accounts and

(c) the normal balance of the account. effects and normal balance.

. Accounts Payable. (LO 2)

. Advertising Expense.

. Service Revenue.

. Accounts Receivable.

. Common Stock.

Dun bBWN Ke . Dividends.

Identify accounts to be debited and credited.

(LO 2)