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This problem continues the Draper Consulting situation from Problem 4-37 of Chapter 4. Draper performs systems consulting. Draper has also begun selling accounting software. During January, Draper Consulting completed the following transactions: Jan 2. Completed a consulting engagement and received cash of $7,800. 2. Prepaid three months office rent,$1,650. 7. Purchased 80 units software inventory on account, $1,680, plus freight in,$80. 18.Sold 40 software units on account, $3,500 (Cost$880 ). 19. Consulted with a client for a fee of $1,000 on account. 20. Paid employee salary,$2,055. 21. Paid on account, $1,760. 22. Purchased 240 units software inventory on account,$6,240. 24. Paid utilities, $250. 28. Sold 120 units software for cash,(cost$2,960 ). 31. Recorded the following adjusting entries: Accrued salary expense, $685 Depreciation,$100 (Equipment, $30; Furniture,$70) Expiration of prepaid rent, $550 Physical count of inventory, 145 units,$3,770 Requirements
- Open the following selected T-accounts in the ledger: Cash; Accounts receivable; Software inventory; Prepaid rent; Accumulated depreciation; Accounts payable; Salary payable; Draper, capital; Draper, drawing; Income summary, Service revenue; Sales revenue; Cost of goods sold; Salary expense; Rent expense; Utilities expense; and Depreciation expense.
- Journalize and post the January transactions. Key all items by date. Compute each account balance, and denote the balance as Bal.
- Journalize and post the closing entries. Denote each closing amount as Clo. After posting all closing entries, prove the equality of debits and credits in the ledger.
- Prepare the January income statement of Draper Consulting. Use the single step forma
Five thousand years before the appearance of double-entry accounting, Mesopotamian scribes were among the few people who could read and write. These scribes became the equivalent of today's accountants.
Public scribes would meet business partners at the gates of the city. The scribe would listen as the partners described their agreement. The scribe would then record the contract on moist clay tablets. The business partners would sign their names by pressing their seals into the clay. The tablets were then dried in the sun or a kiln. The development of accounting in Egypt was similar, except that the Egyptians used papyrus rather than clay tablets, allowing for more details to be recorded.
The major problem with these systems was the lack of a single unit of valuation to use in measuring the value of each transaction. This issue was solved when the Greeks introduced coined money about 600 BC. Although it took many years for the usage of coins to spread, this is often identified as a major event in the development of accounting records.
The Babylonians in Asia Minor used an early form of banking. They transferred funds with a system resembling our checking accounts, one of the first uses of business documents.
These early practices provided the foundation for today's financial system and recordkeeping methods.
- Estimate how many transactions might occur in a single day in a mid-sized bank.