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3 July, 04:20

Derrick invested $70,000 cash in the business. Paid $10,000 in cash for equipment. Performed services for cash amounting to $7,000. Paid $1,800 in cash for advertising expense. Paid $1,000 in cash for supplies. Select which two accounts are affected in each of the above transactions.

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  1. 3 July, 08:00
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    The effect of each transactions are shown below:

    The journal entries are shown below:

    1. Cash A/c Dr $70,000

    To Derrick's capital A/c $70,000

    (Being the invested cash is recorded)

    So as we can see that the cash is debited and derrick capital is credited

    2. Equipment A/c Dr $10,000

    To Cash A/c $10,000

    (Being the equipment is paid for cash)

    So as we can see that the equipment is debited and cash is credited

    3. Cash A/c Dr $7,000

    To Service revenue A/c $7,000

    (Being the cash is received)

    So as we can see that the cash is debited and service revenue is credited

    4. Advertising expense A/c Dr $1,800

    To Cash A/c $1,800

    (Being the advertising expense is paid for cash)

    So as we can see that the advertising expense is debited and cash is credited

    5. Supplies A/c Dr $1,000

    To Cash A/c $1,000

    (Being the supplies are paid in cash)

    So as we can see that the supplies are debited and cash is credited
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