Question

Exercise 2-12 Analyzing and journalizing transactions involving receipt of cash LO P1 Following are transactions for Valdez Services, a company owned by Brina Valdez. Brina Valdez invested $20,000 cash in the company. The company provided services to a client and immediately received $900 cash. The company received $10,000 cash from a client in payment for services to be provided next year. The company received $3,500 cash from a client in partial payment of accounts receivable. The company borrowed $5,000 cash from the bank by signing a note payable. 1. Prepare general journal entries for the above transactions of Valdez Services

Answer 1

Answer:

Valdez Services Company

General Journal:

Debit Cash Account $20,000

Credit Common Stock $20,000

To record the investment of Brina Valdez.

Debit Cash Account $900

Credit Service Revenue $900

To record the cash receipt from a customer.

Debit Cash Account $10,000

Credit Deferred Service Revenue $10,000

To record the cash receipt from a customer for services to be provided next year.

Debit Cash Account $3,500

Credit Accounts Receivable $3,500

To record the cash receipt from a customer on account.

Debit Cash Account $5,000

Credit Bank Notes Payable $5,000

To record the borrowing of cash with a note payable.

Explanation:

These journal entries record the cash receipt transactions which the company has witnessed as they occur on a daily basis.  The procedure is to first identify the two accounts involved in each transaction.  Since the Cash account is always receiving the values, and is debited, the accounts giving the values are credited.  The general journal records all kinds of business transactions.  It is distinguishable from more specialized journals like the cash receipts journal, used for accumulating cash receipts for a particular period, say a day, before the total is posted to the general ledger while the individual accounts are posted to the affected accounts.