Chapter 5 Assignment S2

The Expanded Ledger 19

Section 5.1 Review Questions Page 140: 1, 2, 5, 7, 9, 10, 11, 12, 13, 18

1. The new accounts in the equity section of the ledger are revenue, owner’s
drawings, expenses, and capital.

2. The main purpose of the new accounts on the ledger are to provide essential
information about the business. These help the owner of the business know how
their business is going, giving them the ability to see if they’re making a profit and
help them set goals for the upcoming time period.

5. Three main things an income statement does are provide the owner with
information about whether their business is making profit, or a net income, help
bankers know if their clients will be able to pay back their loans, and help income tax
authorities know how much tax must be received from a business by looking at the
net income.

7. The date stated on an income statement is written in fiscal periods, unlike on a

trial balance, where the date written is the time when the trial balance was made.

9. Revenue is the increasing of capital that is earned when goods or service are sold
to customers. The normal balance of the revenue account is credit.

10. Expenses are the costs that are associated in generating revenue for the
business. Some examples of expenses are advertisement, rent, utilities, and wages.
The normal balance of the expense accounts is debit.

11. The purpose of an expense account is to provide proof that products were
bought to produce revenue. Products that are purchased for the business have their
own expense account since they generate revenue.

12. Net income is profit made by a business. Net incomes or net loss show whether
a business is doing well or not. They are usually made through income statements,
which are later put into a balance sheet. You can find the net income or net loss by
subtracting expenses from total revenue. The equation on finding net income/net
loss is R- E = NI/NL.

13. Owners are interested in income statement because they provide net income or
net loss for the business. Income statements also provide information on whether or
not the business if doing better than the previous year. The income statement
provides owners with information such as how much profit they are making, and help
them set goals and policies for the business.

18. Chart of accounts are a list numbers that help organize accounts on ledgers in
order. Chart of accounts are usually ordered and numbered based on identification
and for reference.

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 Discussion Questions:

1. Explain the DR/CR rules of all sections of Owner’s Equity: Owner’s Capital,
Owner’s Drawings, Revenues, and Expenses.
- The normal balance for expenses and owner’s drawings is debit for increasing in
value, and credit for decreasing in value. The normal balance of revenue and
capital is credit for increasing in value, and debit for decreasing in value.
-
2. Explain the system of chart of accounts
- The system of chart of accounts refers to the listing of all accounts when
recording transactions into ledgers by organizing. Each accounts are given
numbers to be recorded as so that they are arranged a certain way. The numbers
used for the ledger accounts are generally used for identification and referencing.

3. Complete the following chart:

Principle Explanation
the fiscal period A time span from which transactions of a business is recorded
from. They can be monthly, quarterly, or annually, which is the
most common.
the time period States that the economic life of a business must be broken
concept down into fiscal period and be kept consistent.
revenue States that once a service is provided, revenue is recognized or
recognition earned. Earning revenue does not mean receiving cash.
principle
the matching States that business expenses must be matching the business
principle revenue.

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 Chapter Review Exercises Page 167: 7

Aanisha Newaz

A/R -Jenkins and

Bank Co Office Supplies Office equipment
DR CR DR CR DR CR DR CR
$300 $300 $900 $300 $300 $1,100

5000 50 600 300 120

175 100 300
5000 500 300
750 300
70 $1,500 300 $420 $1,100
120 $1,200
120
50
1500
$10,475 $3,560
$6,915
N.A James
Bank Loan N.A James, Capital Drawings
A/P Office
Equiptors DR CR DR CR DR CR
DR CR $5,000 $5,000 $200
$500 $1,100 18000 1500

5000 $23,000
$500 $1,100 $1,700
$600

Misellanous
Expenses Rent Expenses Car Expense
Advertizing
Expenses DR CR DR CR DR CR
DR CR $70 $750 $120
$50
50 $70 $750 $120
$100

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 N.A. James
Trial Balance
October 1, 2019
Account No. DR CR

Bank 101 $6,915

A/R - Jenkins and Co. 110 1200

Office Supplies 120 420

Office Equipment’s 125 1100

Automobile 130 18000

A/P - Office Equippers 201 $600

Bank Loan 210 5000

N.A. James, Capital 301 23000

N.A. James, Drawings 302 1700

Fees Earned 401 1875

Advertising Expenses 505 100

Car Expenses 510 120

Donation Expenses 515 100

Miscellaneous Expenses 520 70

Rent Expenses 525 750

Totals 30475 30475

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