Question

As the manager of Margarita Mexican​ Restaurant, you must deal with a variety of business transactions. Provide an explanation for the following​ transactions:

A. Debit Equipment and credit Cash.
B. Debit Dividends and credit Cash.
C. Debit Wages Payable and credit Cash.
D. Debit Equipment and credit Common Stock.
E. Debit Cash and credit Unearned Revenue.
F. Debit Advertising Expense and credit Cash.
G. Debit Cash and credit Service Revenue.

Answer 1

A. Debit Equipment and credit Cash.

• You purchase equipment and you pay in cash.

B. Debit Dividends and credit Cash.

• You paid cash dividends.

C. Debit Wages Payable and credit Cash.

• You paid wages that you owed to your employees. Generally wages are paid at the end of the week and not all months end on a weekend. So you must record wages payable until you actually pay the wages.

D. Debit Equipment and credit Common Stock.

• You received equipment in exchange for common stock.

E. Debit Cash and credit Unearned Revenue.

• You received cash in advance for some food that you will deliver in the future.

F. Debit Advertising Expense and credit Cash.

• You incurred in advertising costs and you paid them in cash.

G. Debit Cash and credit Service Revenue.

• You sold meals and your clients paid you in cash.