Question

The following transactions occur for the Wolfpack Shoe Company during the month of June:

Provide services to customers for $30,000 and receive cash.
Purchase office supplies on account for $20,000.
Pay $7,000 in salaries to employees for work performed during the month.
1. Analyze each transaction.
2. Record the transaction.
3. Post the transaction to T-accounts. Assume the opening balance in each of the accounts is zero.

Answer 1

1.

Assets = $30,000 (increase) and Revenue = $30,000 (increase)

Assets = $20,000 (increase) and Liabilities = $20,000 (increase)

Assets = $7,000 (decrease) and Liabilities = $7,000 (decrease)

2.

Cash $30,000 (debit)

Service Revenue $30,000 (credit)

Cash Received for Service Rendered

Office Supplies $20,000 (debit)

Accounts Payable $20,000 (credit)

Office Supplies purchased on credit

Salaries Expense $7,000 (debit)

Cash $7,000 (credit)

Salaries Paid

3.

Cash Account

Debit :

Service Revenue $30,000

Credit :

Salaries Payable $7,000

Balance c/d $23,000

Revenue Account

Debit :

Balance c/d $30,000

Credit :

Cash $30,000

Office Supplies Account

Debit :

Accounts Payable $20,000

Credit :

Balance c/d $20,000

Accounts Payable Account

Debit :

Balance c/d $20,000

Credit :

Office Supplies $20,000

Salaries Expense Account

Debit :

Cash $7,000

Credit :

Balance c/d $7,000

Step-by-step explanation:

Accounting starts with analyzing transactions and their effects on Assets, Liabilities, Equity, Revenues and Expenses.

The next stage is to record the transactions in Journals. See journals and narrations above.

Then the preparation of Ledger Accounts using the Journal entries.