How do I become an Expert in Accounting? 18 Sections94 Lessons10 Weeks
Problem and Solution
XYZ Corporation began operations on January 1, 2023. During the first month of operations, the company had the following transactions:
- Received $10,000 cash from investors in exchange for common stock.
- Purchased equipment for $5,000 cash.
- Provided services to clients on account (on credit) totaling $7,000.
- Paid salaries to employees amounting to $3,000.
- Received $5,000 from clients for services provided earlier on account.
Required: a) Record the transactions in the journal. b) Prepare the trial balance as of January 31, 2023.
Solution:
a) Journal Entries:
- Debit: Cash $10,000
- Credit: Common Stock $10,000
b) Trial Balance as of January 31, 2023:
| Account Title | Debit ($) | Credit ($) |
|---|---|---|
| Cash | 12,000 | – |
| Equipment | 5,000 | – |
| Accounts Receivable | 2,000 | – |
| Common Stock | – | 10,000 |
| Service Revenue | – | 7,000 |
| Salaries Expense | 3,000 | – |
|---|---|---|
| Total | 20,000 | 20,000 |
This solution provides a basic overview of how transactions are recorded and summarized in the trial balance, a critical step in the accounting cycle.