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7/21/2019 U04L1 - Handout[1]

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The Expanded Ledger

Practice Questions

1. A business has the beginning financial position recorded in the schedule below. Ten simpletransactions are listed in the left-hand column.

a. Work out the revised totals for assets, liabilities and owner’s equity after eachtransaction. Enter those totals in the chart below.

b. Complete the last two columns of the chart by recording:

i. The amount of changes in equity, if any, andii. Whether the change in equity represents revenue, expense, or drawings.

The first transaction is completed for you.

Trans#

TransactionTotalAssets

TotalLiabilities

Owner’sEquity

Changein

Equity

Revenue?Expense?Drawings?

Beginning financial position 10,000 6,000 4,000

1. Purchased $400 of supplies for futureuse and paid cash 10,000 6,000 4,000 nil none

2. Reduced bank loan by $1,000.

3. Received $800 cash from a debtor.

4. Sold services for $900 cash.

5. Sold services on credit, $1,500.

6. Paid hydro for month just ended,$125.

7. Owner withdrew $750 cash for personal use.

8. Paid employee’s wages, $600.

9. Purchased truck on credit, $20,000.

10. Owner took supplies for personal use,$250.

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7/21/2019 U04L1 - Handout[1]


The Expanded Ledger

Practice Questions

2. Eric Inahaba is in business for himself as a groundskeeper and gardener in Hamilton,Ontario. He cuts grass, weeds gardens, and trims trees and shrubs for a number of customeron a regular basis. The following accounts are in Eric Inahaba’s ledger:

Bank A/P – Pesticide Products

A/R – G. Hung A/P – Pro HardwareA/R – F. Sawchuck E. Inahaba, CapitalA/R – W. Scott E. Inahaba, DrawingsChemical Supplies RevenueEquipment Advertising ExpenseTruck Miscellaneous ExpenseBank Loan Telephone ExpenseA/P – Banner News Truck Expense

Wage Expense

Record the transactions below, using the chart provided. The first transaction is

completed for you.

TRANSACTIONS

July 2 Received a bill from Pesticide Products regarding the purchase of $125 worth ofinsecticide on credit.

5 Received a bill from Pro Hardware for $150 for the purchase of a new ladder on credit.

6 Issued a cheque for $100 to W. Decorte for part-time wages.

10 Received $50 from a customer for services performed for cash.

13 Issued a bill to G. Hung for $100 for services sold on credit.

13 Received a bill from the Banner News regarding a $50 advertisement placed in thenewspaper on credit.

16 Issued a cheque for $175 to E. Inahaba, the owner, for his personal use.

19 Received a notice from the bank stating that $490 had been taken by it from the business’s bank account to pay for interest charges on the bank loan.

20 Received a memo from E. Inahaba, the owner, stating that he had received $100 from acash customer. The money was not put in the bank as usual, but was kept by Mr. Inahaba.

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7/21/2019 U04L1 - Handout[1]


The Expanded Ledger

Practice Questions

DEBITS CREDITS

Date Account(s) Amount Account(s) Amount

July 2 Chemical Supplies 125 A/P – Pesticide Products 125

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7/21/2019 U04L1 - Handout[1]


The Expanded Ledger

Practice Questions

3. Complete each of the following statements with either the word “debit” or the word “credit.”

a. The Bank account normally has a _______________ balance.

b. A revenue account normally has a _______________ balance.

c. An expense account normally has a ______________ balance.

d. Paying a creditor involves a _____________ entry to the creditor’s account.

e. The Drawings account receives a _______________ entry when the owner withdrawsmoney for personal use.

f. A lawyer gives a refund to a customer. The Bank account will receive a __________.

g. Supplies are bought on credit. The supplies account will receive a ________ entryand the Supplier’s Accounts Payable will receive a ______________ entry.

h. The Drawings account will not normally receive ________________ entries.

i. An increase in equity can be thought of as a ___________ to the Capital account.

j. Net profit can be thought of as a ______________ to the Capital account.

k. Net loss can be thought of as a ______________ to the Capital account.

l. The owner takes a computer from the business for his personal (permanent) use. Thedrawings account will receive a _____________ entry.

4. Give the Debit and Credit relationship in the Expanded Ledger.

Type of Account To Increase To Decrease

Assets

Liabilities

Capital

DrawingsRevenue

Equity

Expense

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7/21/2019 U04L1 - Handout[1]


The Expanded Ledger

Practice Questions

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5. Using the table shown below, complete the practice exercise below:

i. Asset debit 7. Drawings debitii. Asset credit 8. Drawings credit

iii. Liability debit 9. Revenue debit

iv. Liability credit 10. Revenue creditv. Capital debit 11. Expense debit

vi. Capital credit 12. Expense credit

A series of transactions is given below. Show the effect of the account entry for eachtransaction. Use the 12 codes supplied above.

The first transaction is done for you.

DR CR

1. Purchase a new car on account 1 4

2. Receive payment on account from a customer

3. Owner withdraws cash for personal use

4. Owner starts a new business by investing Cash

5. The car is repaired and paid for in cash immediately.

6. Performs a service for a customer in cash

7. Performs a service for a customer on account

8. Purchase supplies for cash

9. Receives a bill for gas and oil for the car.

10. Pays a creditor on account.

11. Throw out some ruined supplies.

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