Posted: January 6th, 2017

describe three examples of transactions that would affect a firm’s income statement AND to identify if the transaction has a positive or negative effect on the firm’s net income

  • Question 1: In the last part of the Proficient-level question, you are asked to name the types of accounts that are (and four items are listed.) Here is the correct response to the first item listed, that serves as an example of an acceptable response (feel free to use this response and respond to the other listed items in the same format):

    Increased by a debit:    assets, expenses

    (Provide 3 of 4 correct responses for Proficient-level work. Provide all 4 correct responses for Distinguished-level work.)

    Question 2: In the Distinguished-level question, you are asked to research three of the most commonly used accounting software packages and decide which one you would choose if you were starting a small business this year. I am waiving the need to respond to this question, and assuming you correctly and completely respond to the Proficient-level questions asked in this second question, you will receive a Scoring Guide Rubric grade of “Distinguished.”

    Question 3: In the second part of the Proficient-level question, you are asked to describe three examples of transactions that would affect a firm’s income statement AND to identify if the transaction has a positive or negative effect on the firm’s net income. Here is an example of an acceptable response (from Transaction #7, Page 98):

    “Performed training services for a customer for $5,000 cash. (Since revenue is increased; net income is increased.)”

    Feel free to use this as one of your three required responses. Review all 15 transactions presented in Section 3.8 to find two more transactions that affect a firm’s income statement and identify if the transactions has a positive or negative effect on net income.

    Question 4: In the Proficient-level question, you are asked if the listed possibilities are  conceivable in an entry involving only one debit and only one credit and to explain your response.  Here is the correct response to the first item listed, that serves as an example of an acceptable response (feel free to use this response and respond to the other listed items similarly):

    1) Increase a liability and increase an expense?  (It takes a credit to increase a liability and a debit to increase an expense; so this entry is possible because there is one debit and one credit allowed in this “only one debit and only one credit” journal entry.)

    Question 5: To answer this question, the following 4 items constitutes a review of VERY IMPORTANT INFORMATION contained in section 3.4, pages 82-86, stating:

    -Assets increase by debits (left side) to the T-account and decrease by credits (right side) to the T-account.

    -Liabilities and stockholders’ equity decreases by debits (left side) to the T-account and increase by credits (right side) to the T-account.

    -Record increases in revenues on the right (credit) side of the T-account and decreases on the left (debit) side.

    -Record increases in expenses on the left (debit) side of the T-account and decreases on the right (credit) side.

     

    Using the above information obtained from the text, here are some example responses to sections of the 5th question:

    The “normal” balance for an asset would be a debit balance (since assets are increased by debits.) The entry (debit or credit) that increases the account will represent its “normal’ balance. Use this response for assets and then give the “normal” balance responses for liabilities and stockholders’ equity,  revenues, and expenses.

    The rules of debits and credits for assets is: Assets increase by debits (left side) to the T-account and decrease by credits (right side) to the T-account. Use this response for assets and then give the rules of debits and credits responses for liabilities and stockholders’ equity.

    Assignment Hints/Suggestions: The u02a2 assignment relates to recording business transactions and will familiarize you with aspects relating to preparation and use of journal entries. Here are some hints and suggestions for certain questions in this assignment:

  • Question 1: For the definition of “General Journal” you might consider using your “Dictionary of Accounting Terms” or some other source of information.

    Question 2: In the Proficient-level question, you are asked to prepare journal entries for the listed transactions. Here is the correct response to the first item listed (feel free to use this response and its manner of presentation and respond to the other listed items similarly, and leave a blank row between each set of journal entries):

    Account                               Debit                     Credit

    Cash                                      1,200

    Service Revenue                                              1,200

     

    (Leave a blank row between each of the remaining 5 requested journal entries

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