Question
Landscaping Company offers lawn maintenance services. Two frequent transactions for the company are billing customers for services performed and paying employee salaries. For example, on
Landscaping Company offers lawn maintenance services. Two frequent transactions for the company are billing customers for services performed and paying employee salaries. For example, on March 15, bills totaling $6,600 were sent to customers, and $2,200 was paid in salaries to employees.
Instructions: Write a memo to Mr. Lawner that explains and illustrates the steps in the recording process for each of the March 15 transactions. Use the format illustrated below for reference.
The Recording Process
Transactions are recorded in the general journal with a journal entry. The journal entries are posted into the general ledger. The general ledger has a t-account for every account and shows you the ending balance for each account. Using the ending balance of each account you will create a trial balance, which is just a listing of all the accounts. Start with assets, liabilities, and then equity. If you confirm that the debits equal the credits, then you will move on to create the financial statements. With the DEAD CROL acronym, you see how these accounts increase with a debit or a credit. The opposite causes them to go down.
Debit (dr); Expense (recorded when you "use up" an asset; Asset (own); Dividend (paid to investors as a thank you for buying their stock).
Credit (cr); Revenue (earned when you perform a service or deliver a product (not when you receive the money); Owners' Equity *Stock & *Retained Earnings; Liability (owe).
When you perform a service or deliver a product but don't get paid right away, you will record Accounts Receivable. When you receive the money, you will increase cash with a debit and decrease the account receivable with a credit. If you do not earn revenue, use an asset, or acquire an asset, a transaction has not occurred.
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