Page 77 - Accounting Principles (A Business Perspective)

2. Recording business transactions

No other transactions occurred in November. The company prepares financial statements at the end of each
month. Exhibit 5 shows the company's balance sheet at 2010 November 30.
The balance sheet reflects ledger account balances as of the close of business on 2010 November 30. These

closing balances are the beginning balances on 2010 December 1. The ledger accounts show these closing balances
as beginning balances (Beg. bal.).
Now assume that in December 2010, MicroTrain Company engaged in the following transactions. We show the
proper recording of each transaction in the journal and then in the ledger accounts (in T-account form), and
describe the effects of each transaction.
MICROTRAIN COMPANY Balance Sheet 2010 November 30
Assets Liabilities and Stockholders' Equity
Cash $50,000 Stockholders' equity:
Capital stock $50,000
Total Assets $50,000 Total liabilities and stockholders'
equity $50,000
Exhibit 9: Balance sheet

Transaction 2: Dec. 1 Paid cash for four small trucks, $40,000.
General Journal
Date Account Titles and Explanation Post. Debit Credit
Ref.
2010 Dec. 1 Trucks (+A) 150 4 0 0 0 0 (A)
Cash (-A) 100 4 0 0 0 0 (B)
To record the purchase of four trucks.

General Ledger
Trucks

(Dr.) Acct. No. 150 (Cr.)
2010 Dec. 1 (A)40,000
Cash

(Dr.) Acct. No. 100 (Cr.)
2010 50,000 2010 Dec. (B)40,0
Dec. 1 Beg. bal. 1
00
Transaction 3: Dec. 1 Paid cash for insurance on the trucks to cover a one-year period from this date.
General Journal
Date Account Titles and Explanation Post. Debit Credit
Ref.
2010 Dec. 1 Prepaid Insurance (+A) 108 2 4 0 0
Cash (-A) 100 2 4 0 0
Purchased truck insurance to cover a one-year period.

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