Double-Entry Accounting

Homework Questions Part 1

  1. Why do we have double-entry accounting in our U.S. system of GAAP?
  2. In a capital account, explain which side (debit or credit) will decrease and which side will increase. Provide an example (just make one up) of a transaction with a T-account for each side of the transaction showing which type of accounts will receive the debit and credit (e.g., asset, cash, accounts payable, equipment, revenue, etc.).
  3. Create a journal entry and a T-Account for each of the following transactions (review the applicable textbook chapter) :
  • $15,000 worth of equipment is purchased on credit.
  • $40,000 of patient bills from last year are collected in cash.
  • $10,000 is received from a managed care company for services to be rendered next year for members
  • $20,000 worth of supplies is purchased and paid for in cash.
  • $5,000 of accounts payable is paid in cash.
  • $30,000 of cash is received from taking out a note with the local bank.
  • $10,000 of accounts receivable from last year is received in cash.
  • Why do organizations prepare cash flow statements and operating statements?
  • $7,000 is paid back on the borrowed note.

4.Why do organizations prepare cash flow statements and operating statements?

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