American International University – Bangladesh

BBA 1102
Principles of Accounting
What we have discussed in the last class….

● Trial balance is the list of accounts (based

on the chart of accounts) with their updated
balances at the end of a specific time period.
● A and E are always with debit balance and L
and I are always with credit balance
● Contra account: Represents any decrease of
the mother (or the main) account
TOPICS

▪ Solution of the assignment

▪ Identifying nature of accounts
▪ Understanding the meanings of different
account balances
▪ Adjusting entries
▪ Periodicity (Time period) assumption
 Assignment Solution

Question 1: Pat Donahue started his repair shop on January 01, 2018 and the following transactions occurred during the month.
January 01: Made cash investment to start the business $20,000.
05: Paid $2,400 for one-year accidental insurance policy.
12: Purchase equipment for $10,000 – paid $3,500 cash and signed a note payable for the
remaining balance.
14: Placed an order for purchase $3,000 of supplies from Henry Hook.
18: Paid rent for the month $6,000.
22: Received $10,800 in cash from customers for repair service.
25: Received supplies from Henry Hook and paid $3,000.
27: Received $500 cash in advance from Mr. R for the repair of a machinery.
30: Paid salaries $ 6,500 and incurred advertisement expenses on account $2,000.

Requirement:
1. Prepare a tabular analysis of January transactions.
2. Journalize the January transactions.
3. Post the January journal entries to the ledger accounts.
4. Prepare a trial balance on January 31, 2018.
 Assignment Solution: Tabular Analysis
Jan 01: Made cash investment to start the business $20,000. Jan 05: Paid $2,400 for one-year accidental
insurance policy. Jan 12: Purchase equipment for $10,000 – paid $3,500 cash and signed a note payable for the
remaining balance. Jan 14: Placed an order for purchase $3,000 of supplies from Henry Hook. Jan 18: Paid rent
for the month $6,000. Jan 22: Received $10,800 in cash from customers for repair service. Jan 25: Received
supplies from Henry Hook and paid $3,000. Jan 27: Received $500 cash in advance from Mr. R for the repair of
a machinery. Jan 30: Paid salaries $ 6,500 and incurred advertisement expenses on account $2,000.

Assets Liabilities
Owner’s
Date Remarks
Prepaid Note Unearned Accounts Equity
Cash Equipment Supplies
Insurance Payable Revenue Payable
Jan 1 20,000 - - - - - - 20,000 Investment
5 (2,400) 2,400 - - - - - -
12 (3,500) - 10,000 - 6,500 - - -
14 - - - - - - - -
18 (6,000) - - - - - - (6,000) Rent expense
22 10,800 - - - - - - 10,800 Service revenue
25 (3,000) - - 3,000 - - - -
27 500 - - - - 500 - -
30 (6,500) - - - - - - (6,500) Salary expense
30 - - - - - - 2,000 (2,000) Advertisement
 Assignment Solution: Journal Entries
Amount ($)
Date Account titles and explanation Ref.
Debit Credit
Jan 01: Made cash investment to start the May 1 Cash account Dr. 20,000
business $20,000. Jan 05: Paid $2,400 for Capital account Cr. 20,000
5 Prepaid insurance Dr. 2,400
one-year accidental insurance policy. Jan
Cash account Cr. 2,400
12: Purchase equipment for $10,000 – paid
12 Equipment account Dr. 10,000
$3,500 cash and signed a note payable for Cash account Cr. 3,500
the remaining balance. Jan 14: Placed an Notes payable account Cr. 6,500
order for purchase $3,000 of supplies from 14 No Entry
Henry Hook. Jan 18: Paid rent for the 18 Rent expense Dr. 6,000
month $6,000. Jan 22: Received $10,800 Cash account Cr. 6,000
22 Cash account Dr. 10,800
in cash from customers for repair service.
Service revenue account Cr. 10,800
Jan 25: Received supplies from Henry Hook 25 Supplies Dr. 3,000
and paid $3,000. Jan 27: Received $500 Cash account Cr. 3,000
cash in advance from Mr. R for the repair of 27 Cash account Dr. 500
a machinery. Jan 30: Paid salaries $ 6,500 Unearned revenue Cr. 500
and incurred advertisement expenses on 30 Salary account Dr. 6,500
Cash account Cr. 6,500
account $2,000.
30 Advertisement expense account Dr. 2,000
Accounts payable account Cr. 2,000
 Assignment Solution: Ledger Accounts

Cash Accounts Rent Expense Accounts

Date Explanation Ref. Debit Credit Balance Date Explanation Ref. Debit Credit Balance
Jan 1 20,000 - 20,000 Jan 18 6,000 - 6,000
5 - 2,400 17,600 Service Revenue Accounts
12 - 3,500 14,100
Date Explanation Ref. Debit Credit Balance
18 - 6,000 8,100
Jan 22 - 10,800 10,800
22 10,800 - 18,900
25 - 3,000 15,900 Supplies Accounts
27 500 - 16,400 Date Explanation Ref. Debit Credit Balance
30 - 6,500 9,900 Jan 25 3,000 - 3,000

Capital Accounts Unearned Revenue Accounts

Date Explanation Ref. Debit Credit Balance Date Explanation Ref. Debit Credit Balance
Jan 1 - 20,000 20,000 Jan 27 - 500 500
Prepaid Insurance Accounts Salary Expense Accounts
Date Explanation Ref. Debit Credit Balance Date Explanation Ref. Debit Credit Balance
Jan 1 2,400 - 2,400 Jan 30 6,500 - 6,500
Equipment Accounts Advertisement Expense Accounts
Date Explanation Ref. Debit Credit Balance Date Explanation Ref. Debit Credit Balance
Jan 12 10,000 - 10,000 Jan 30 2,000 - 2,000
Notes Payable Accounts Accounts Payable Accounts
Date Explanation Ref. Debit Credit Balance Date Explanation Ref. Debit Credit Balance
Jan 12 - 6,500 6,500 Jan 30 - 2,000 2,000
Assignment Solution: Ledger Accounts
Pat Donahue
Trial Balance
as on 31st January 2018
Sl. Amount ($)
Accounts Title Ref.
No. Debit Credit
1. Cash Account 9,900 -
2. Capital Account - 20,000
3. Prepaid Insurance Account 2,400 -
4. Equipment Account 10,000 -
5. Notes Payable Account - 6,500
6. Rent Expense Account 6,000 -
7. Service Revenue - 10,800
8. Supplies Account 3,000 -
9. Unearned Revenue Account - 500
10. Salaries Account 6,500 -
11. Advertisement Expense Account 2,000 -
12 Accounts Payable Account - 2,000
Total 39,800 39,800
 Quiz
15 MCQ 15 minutes
Adjusting the Accounts
 Understand Nature of Accounts
Identify the following accounts as assets (A), liability (L), income (I), expense (E), or owner’s equity (OE) account. Also
explain the meanings of the balances of the accounts.
Dr. Cr.
A Cash Account 9,900 - I am holding cash 9,900 at Jan 31
OE Capital Account - 20,000 Owner invested 20,000
A Prepaid Insurance Account 2,400 - We will get 2,400 benefit from insurance company
A Equipment Account 10,000 - We have equipment of 10,000 in the business
L Notes Payable Account - 6,500 We have to pay 6,500 against the notes
E Rent Expense Account 6,000 - Rent for the month is 6,000
I Service Revenue - 10,800 We have performed services of total 10,800 in January

A Supplies Account 3,000 - We have supplies of total 3,000 at January 31

L Unearned Revenue Account - 500 We took total advance 500 from a client
E Salaries Account 6,500 - We took services from employees for 6,500
E Advertisement Expense Account 2,000 - We took advertisement services of 2,000 in January
L Accounts Payable Account - 2,000 We have to pay 2,000 in future