Chapter 9.6® - How to Analyze Accounting Transactions Part #2

• Part 9.1 - Basic Introductory Accounting Terminologies
• Part 9.2 - Double Entry Accounting - Accounting Debits & Credits
• Part 9.3 - General Ledger & Chart of Accounts - Debits & Credits to Accounts
• Part 9.4 - Important Rules for Double Entry Accounting – Balance Sheet Accounts
• Part 9.5 - How to Analyze Accounting Transactions Part #1
• Part 9.6 - How to Analyze Accounting Transactions Part #2

9. Receives Cash for office space rented out.

Transaction: Simpsons Corp receives $700 cash for office space it rented out.

Analysis: Asset (Cash) increases. Asset (Accounts Receivable) from transaction#8 decreases.

Double-Entry Accounting: Debit the Cash account for $700. Credit the Accounts Receivable account for $700.

10. Partial Payment of Accounts Payable from #4

Transaction: Simpsons Corp pays $1,000 for its office printer it purchased in transaction #4.

Analysis: Accounts payable decrease (debit). Cash decreases (credit).

Double-Entry Accounting: Debit the Accounts Payable for $1,000 and Credit the cash account for $1,000.

11. Withdrawal of Cash by Owner

Transaction: Owner of Simpsons Corp withdraws $5,000 cash for personal use.

Analysis: Owner’s Withdrawals increase (debit). Cash decrease (credit).

Double-Entry Accounting: Debit the Owner’s Withdrawals account for $5,000 and Credit the Cash account for $5,000.

12. Receipt of Cash for Future Service

Transaction: Simpsons Corp. receives $8,000 in advance for services to be performed later.

Analysis: Cash increase (debit). Unearned Service Revenues increase (credit).

Double-Entry Accounting: Debit the Cash account for $8,000. Credit the Unearned Service Revenues account for $8,000.

13. Upfront Payment for Insurance Policy Coverage

Transaction: Simpsons Corp. pays $1,600 upfront for a 2 year insurance policy on its building.

Analysis: Prepaid insurance increase (debit). Cash decrease (credit).

Double-Entry Accounting: Debit the Prepaid Insurance account for $1,600 and credit the Cash account for $1,600.

14. Recognize 1 Month Use of Prepaid Insurance

Transaction: 1 month passes since Simpsons Corp prepaid its insurance policy and wants to recognize the expense ($1,600 x 1/24 months = $67)

Analysis: Insurance expense increase (debit); Prepaid insurance decrease (credit)

Double-Entry Accounting: Debit the Insurance expense account for $67

15. Payment of Electricity Expense in Cash.

Transaction: Simpsons Corp. pays its insurance expense for $200 in cash.

Analysis: Utilities expense increase (debit); Cash decrease (credit).

Double-Entry Accounting: Debit the Utilities expense for $200 and credit the Cash account for $200.