Financial Accounting: An Integrated Statements Approach, 2nd Edition

Chapter 4 Accounting Information Systems 187

Retained Earnings

Royalties and Programming Costs Payable

Selling, General, and Administrative Expense

Short-Term Investments

Unearned Subscriptions

Identify each account as either a balance sheet account or an income statement account. For each

balance sheet account, identify it as an asset, a liability, or stockholders’ equity. For each income

statement account, identify it as a revenue or an expense.

For each account listed in Exercise 4-3, indicate whether its normal balance is a debit or a

credit.

During the month, Gilbert Labs Co. has a substantial number of transactions affecting each of

the following accounts. State for each account whether it is likely to have (a) debit entries only,

(b) credit entries only, or (c) both debit and credit entries.

1. Accounts Payable 5. Dividends


2. Accounts Receivable 6. Miscellaneous Expense


3. Cash 7. Supplies Expense


4. Fees Earned

Identify each of the following accounts of Haifa Services Co. as asset, liability, stockholders’

equity, revenue, or expense, and state in each case whether the normal balance is a debit or a

credit.

a. Accounts Payable f. Equipment

b. Accounts Receivable g.Fees Earned

c. Cash h.Rent Expense

d. Capital Stock i. Salary Expense

e. Dividends j. Supplies

The following table summarizes the rules of debit and credit. For each of the items (a) through

(n), indicate whether the proper answer is a debit or a credit.

Normal

Increase Decrease Balance

Balance sheet accounts:

Asset Debit Credit (a)

Liability (b) (c) (d)

Stockholders’ Equity:

Capital Stock (e) (f) Credit

Retained Earnings Credit (g) (h)

Dividends (i) Credit (j)

Income statement accounts:

Revenue (k) Debit (l)

Expense (m) Credit (n)

Exercise 4-4

Normal account balances

Goal 3

Exercise 4-5

Normal entries for accounts

Goal 3

Exercise 4-6

Normal balances of accounts

Goal 3

Exercise 4-7

Rules of debit and credit

Goal 3