Final answer:
The question relates to business accounting and involves making accounting entries such as crediting a bank account and debiting a vendor, reflective of a real-world situation where careful transaction monitoring like Noel's can prevent financial errors. Additionally, setting up a T-account balance sheet illustrates the calculation of a bank's net worth based on its assets and liabilities.
Step-by-step explanation:
Understanding Accounting Entries
The question involves recording a transaction in the company's accounting records. Specifically, you are being asked to make two separate journal entries:
Credit the bank account in the general ledger (G/L).
Debit the vendor sub-ledger and accounts payable reconciliation general ledger (G/L) for $225.00.
This type of question falls under the subject of business accounting, which typically involves double-entry bookkeeping where every financial transaction affects at least two accounts — one account is debited and another is credited for the same amount, ensuring the accounting equation (Assets = Liabilities + Equity) remains balanced.
In practical terms, this entry indicates that payment to a vendor is being recorded or processed, reducing the liability (Accounts Payable) and the cash in the bank (an asset). Notably, this sort of careful attention to transactions can prevent financial errors such as in the anecdote where Noel catches a $250,000 overpayment error.
Now let's address the sample transaction mentioned in the second part of the question:
T-Account Balance Sheet Creation
To set up a T-account balance sheet for the bank with assets and liabilities:
Assets:
Reserves: $50
Government bonds: $70
Loans: $500
Liabilities:
Deposits: $400
The bank's net worth (or equity) can be calculated as the difference between total assets and total liabilities:
Total Assets = Reserves + Government Bonds + Loans = $50 + $70 + $500 = $620
Total Liabilities = Deposits = $400
Net Worth = Total Assets - Total Liabilities = $620 - $400 = $220
Therefore, the bank's net worth is $220.
The complete question is: Credit the bank account G/L and debit the vendor sub-ledger and accounts payable reconciliation G/L for $225.00 is: