Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition

SOLUTION TO EXERCISE 2-2

Approach: Analyze each transaction to determine what items are increased or decreased. Translate that information into debit and credit language by applying the debit and credit rules (see Illustration 2-1). Visualize the resulting journal entry.

TIP: The account Supplies is sometimes called Supplies on Hand.

TIP: The fourth transaction could be recorded by a debit to Prepaid Rent and a credit to Cash at the date the rent is paid (at the beginning of the rental month). Then, at the end of the rental month, the expired amount would be transferred to the expense account (this approach will be explained in Chapter 3).