Book 1 - Chapter 20

LG 20-3, continued

Increase/decrease: Accounts Payable increases and Anna Chan, Capital decreases.

Description: (from operations) The business received a $750 bill for an expense, but the
bill was not paid immediately. An expense reduces the owner’s capital.

Increase/decrease: Cash increases, Accounts Receivable increases, and Anna Chan, Capital
increases.

  Description: (from operations) The business earned $2,000 revenue by providing services
    to a customer; the customer made a cash payment of $500 and will pay the rest later.
   (Revenue earned increases the owner’s capital.)


LG 20-4.
	a. St. Phillips Company

Analysis: (identify which accounts increase and/or which accounts decrease): The asset Supplies
increases by $800 and the liability Accounts Payable increases by $800.

  Rules (specify what entries on the left or right side of the accounts are required): Assets are
     increased by a left-side entry, so record $800 on the left side of Supplies. Liabilities are
     increased by a right-side entry, so record $800 on the right side of Accounts Payable.

Learning Goal 20, continued

SOLUTIONS

Learning Goal 20: Explain the Use of Accounts

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