Examine the following transactions and identify those that create expenses for V

Question

Examine the following transactions and identify those that create expenses for Valdez Services. Prepare general journal entries to record those expense transactions and explain why the other transactions did not create expenses. The company paid $12,200 cash for payment on a 16-month-old liability for office supplies. The company paid $1,233 cash for the just completed two-week salary of the receptionist. The company paid $39,200 cash for equipment purchased. The company paid $870 cash for this month's utilities. Owner (Valdez) withdrew $4,500 cash from the company for personal use.

Explanation / Answer

Valdez Services a The payment of liability is not expense as only liability is reduced. Expense booked earlier when the expense was not paid and liability created. c Payment for purchase of equipment is not expense as it is creating a new long term asset. The depreciation of asset will be expense in future. e Owner's withdrawal of cash is not expense for business as it reflects   reduction of Owner's capital. Journal entries of expenses Sr No Account Title Dr $ Cr $ b Salary Expense                                          1,233 Cash               1,233 (recording salary paid to receptionist) d Utilities Expense                                              870 Cash                   870 (Payment of utilities for the month)

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.