Horngren’s Accounting, Volume 1, 11th Canadian Edition by Tracie Miller-Nobles Solution manual
Horngren’s Accounting, 11Ce Chapter 2 Instructor’s Solutions Manual
Copyright © 2020 Pearson Canada Inc. 2-54
Chapter 2
Recording Business Transactions
Questions
1. The statement is false because debit means left and credit means right. Debits
and credits are used to record increases and decreases in accounts, so debits can
be increases or decreases depending on the type of account involved and likewise
for credits.
2. Debits are on the left-hand side and credits are on the right-hand side. Depending
on which side of the equation you are on, debits will either increase or decrease
an accounting equation item.
Assets = Liabilities + Owner’s Equity
Dr | Cr Dr | Cr Dr | Cr
+ - - + - +
Capital
Dr | Cr
- +
Revenues
Dr | Cr
- +
Expenses
Dr | Cr
+ -
Withdrawals
Dr | Cr
+ -
3. The three basic types of accounts are ASSETS, LIABILITIES, and OWNER’S
EQUITY. Two additional types of accounts are REVENUES and EXPENSES.
They are part of owner’s equity; revenues increase owner’s equity and expenses
decrease owner’s equity.
4. The dual effects of an owner’s investment in her business are (1) an increase in the
entity’s cash and (2) an increase in the owner’s equity.
Horngren’s Accounting, 11Ce Chapter 2 Instructor’s Solutions Manual
Copyright © 2020 Pearson Canada Inc. 2-55
5. Unadjusted
Business Transaction Entry in Posting to Trial
Creates Source Document
Journal
Ledger
Balance
6. The normal balance of an account is the side of the account—debit or credit—that
records increases. Also, an account’s normal balance is the side of the account that
usually has the account’s balance.
7. Account Type Normal Balance
Assets Debit
Liabilities Credit
Owner’s equity Credit
Revenues Credit
Expenses Debit
8. Posting transfers amounts from the journal to the ledger is important because the
transaction entries in the journal do not accumulate all the information related to
each account. The accounts in the ledger hold that information. The ledger groups
together transactions that are similar. For example, all cash transaction from the
journal are grouped together in the ledger. Therefore, the transfer of data to the
accounts in the ledger—that is, posting from the journal to the ledger—makes it
possible to determine the balance in each account. Posting comes after journalizing.
9. + a. Investment by owner 0 e. Cash payment on account
+ b. Invoice customer for services – f. Withdrawal of cash by owner
0 c. Purchase of supplies on credit 0 g. Borrowing money on a note payable
– d. Pay expenses with cash + h. Sale of services on account
10. Posting’s four steps are (1) copy the date of a transaction from the journal to the
ledger, (2) copy the journal page number from the journal to the ledger, (3) copy
(post) the dollar amounts of the debit and the credit from the journal to the ledger,
and (4) copy the account numbers from the ledger back to the journal to indicate
that the transaction amount has been posted to the ledger. Step 3, transferring the
transaction amount to the account, is the fundamental purpose of posting.
11. Cash
Accounts Receivable
Note Payable
Sam Westman, Capital
Sales Revenue
Salaries Expense
12. “Accounts Payable has a credit balance of $2,800” means that the entity owes $2,800
to its creditors on a debt that is not evidenced by a formal note payable.
13. The two business transactions are (1) Spiffy Cleaners providing laundry service and
earning revenue and (2) Bobby Ng paying cash to Spiffy Cleaners. The business’s
Horngren’s Accounting, 11Ce Chapter 2 Instructor’s Solutions Manual
2-56 Copyright © 2020 Pearson Canada Inc.
earning of the revenue increases the owner’s equity in the company, and Ng’s payment
of cash increases the business’s cash.
14. The ledger is the group of actual accounts in use that contain a record of activity in
those accounts. The chart of accounts is a list of all the accounts set up in the ledger
with their account numbers.
15. Accountants prepare a trial balance to check the accuracy of postings to accounts and
determine whether the total debits equal the total credits. It is a useful summary of all
Copyright © 2020 Pearson Canada Inc. 2-54
Chapter 2
Recording Business Transactions
Questions
1. The statement is false because debit means left and credit means right. Debits
and credits are used to record increases and decreases in accounts, so debits can
be increases or decreases depending on the type of account involved and likewise
for credits.
2. Debits are on the left-hand side and credits are on the right-hand side. Depending
on which side of the equation you are on, debits will either increase or decrease
an accounting equation item.
Assets = Liabilities + Owner’s Equity
Dr | Cr Dr | Cr Dr | Cr
+ - - + - +
Capital
Dr | Cr
- +
Revenues
Dr | Cr
- +
Expenses
Dr | Cr
+ -
Withdrawals
Dr | Cr
+ -
3. The three basic types of accounts are ASSETS, LIABILITIES, and OWNER’S
EQUITY. Two additional types of accounts are REVENUES and EXPENSES.
They are part of owner’s equity; revenues increase owner’s equity and expenses
decrease owner’s equity.
4. The dual effects of an owner’s investment in her business are (1) an increase in the
entity’s cash and (2) an increase in the owner’s equity.
Horngren’s Accounting, 11Ce Chapter 2 Instructor’s Solutions Manual
Copyright © 2020 Pearson Canada Inc. 2-55
5. Unadjusted
Business Transaction Entry in Posting to Trial
Creates Source Document
Journal
Ledger
Balance
6. The normal balance of an account is the side of the account—debit or credit—that
records increases. Also, an account’s normal balance is the side of the account that
usually has the account’s balance.
7. Account Type Normal Balance
Assets Debit
Liabilities Credit
Owner’s equity Credit
Revenues Credit
Expenses Debit
8. Posting transfers amounts from the journal to the ledger is important because the
transaction entries in the journal do not accumulate all the information related to
each account. The accounts in the ledger hold that information. The ledger groups
together transactions that are similar. For example, all cash transaction from the
journal are grouped together in the ledger. Therefore, the transfer of data to the
accounts in the ledger—that is, posting from the journal to the ledger—makes it
possible to determine the balance in each account. Posting comes after journalizing.
9. + a. Investment by owner 0 e. Cash payment on account
+ b. Invoice customer for services – f. Withdrawal of cash by owner
0 c. Purchase of supplies on credit 0 g. Borrowing money on a note payable
– d. Pay expenses with cash + h. Sale of services on account
10. Posting’s four steps are (1) copy the date of a transaction from the journal to the
ledger, (2) copy the journal page number from the journal to the ledger, (3) copy
(post) the dollar amounts of the debit and the credit from the journal to the ledger,
and (4) copy the account numbers from the ledger back to the journal to indicate
that the transaction amount has been posted to the ledger. Step 3, transferring the
transaction amount to the account, is the fundamental purpose of posting.
11. Cash
Accounts Receivable
Note Payable
Sam Westman, Capital
Sales Revenue
Salaries Expense
12. “Accounts Payable has a credit balance of $2,800” means that the entity owes $2,800
to its creditors on a debt that is not evidenced by a formal note payable.
13. The two business transactions are (1) Spiffy Cleaners providing laundry service and
earning revenue and (2) Bobby Ng paying cash to Spiffy Cleaners. The business’s
Horngren’s Accounting, 11Ce Chapter 2 Instructor’s Solutions Manual
2-56 Copyright © 2020 Pearson Canada Inc.
earning of the revenue increases the owner’s equity in the company, and Ng’s payment
of cash increases the business’s cash.
14. The ledger is the group of actual accounts in use that contain a record of activity in
those accounts. The chart of accounts is a list of all the accounts set up in the ledger
with their account numbers.
15. Accountants prepare a trial balance to check the accuracy of postings to accounts and
determine whether the total debits equal the total credits. It is a useful summary of all