Question

For each transaction, (1) analyze the transaction using the accounting equation, (2) record the transaction in journal entry form, and (3) post the entry using T-accounts to represent ledger accounts. Use the following (partial) chart of accounts—account numbers in parentheses: Cash (101); Accounts Receivable (106); Office Supplies (124); Trucks (153); Equipment (167); Accounts Payable (201); Unearned Landscaping Revenue (236); D. Tyler, Capital (301); D. Tyler, Withdrawals (302); Landscaping Revenue (403); Wages Expense (601), and Landscaping Expense (696).

a. On May 15, DeShawn Tyler opens a landscaping company called Elegant Lawns by investing $7,000 in cash along with equipment having a $3,000 value.
b. On May 21, Elegant Lawns purchases office supplies on credit for $500.
c. On May 25, Elegant Lawns receives $4,000 cash for performing landscaping services.
d. On May 30, Elegant Lawns receives $1,000 cash in advance of providing landscaping services to a customer.

Answer 1

Transactions within a business impact the accounting equation and are recorded in journal entries and posted to T-accounts, which clearly show the debits and credits for each account affected.

Step-by-step explanation:

When examining transactions and posting them to T-accounts, we are working within the fundamental concept of the accounting equation, which states that Assets = Liabilities + Equity. The T-account is a simple representation of ledger accounts, showcasing two columns with one side representing debits (left) and the other credits (right). It helps in visualizing the impact of transactions on the accounts of a business.

For instance, when DeShawn Tyler opens Elegant Lawns, this transaction affects the business in the following way: Cash (an asset) increases by $7,000, Equipment (another asset) increases by $3,000, and D. Tyler, Capital (owner's equity) increases by $10,000. The journal entry would be a debit to Cash for $7,000, a debit to Equipment for $3,000, and a credit to D. Tyler, Capital for $10,000. Each of these would be posted to their respective T-accounts, with debits on the left and credits on the right. Similarly, for each subsequent transaction, we analyze the effect on the accounting equation, make the journal entry, and post to T-accounts in accordance to whether we are increasing or decreasing the balance of each account.

For transactions like purchasing office supplies on credit, receiving cash for services, and receiving cash in advance, each action has a corresponding effect on the various accounts involved in the transaction such as Cash, Office Supplies, Accounts Payable, Unearned Landscaping Revenue, and Landscaping Revenue. Each of these is recorded and posted following the dual aspect of accounting, where each transaction has an equal and opposite effect on the accounts, maintaining the balance between assets, liabilities, and equity.