href="#ulink_9b4fb058-689d-57eb-8190-fc6d54d0f248">TABLE 2-16 A T-Account of the Inventory Account
| Debit | Credit | |
|---|---|---|
| Beginning balance | $3,000 | |
| Journal Entry 8 | _____ | $3,000 |
| Ending balance | $0 |
Paying off the accounts payable and loan payable accounts is similarly straightforward. Table 2-17 shows the T-account analysis of the accounts payable account. Table 2-18 shows the T-account analysis of the loan payable account. In both cases, the T-account analysis shows that the liability accounts start with a credit beginning balance. (Remember that a liability account would have a credit balance if the firm really owed money.) Then, when the payments are recorded to pay off the accounts payable and loan payable in journal entries 9 and 10, the liability account is debited. The result, in the case of both accounts, is that the liability account balance is reduced to zero.
TABLE 2-17 A T-Account of Accounts Payable
| Debit | Credit | |
|---|---|---|
| Beginning balance | $2,000 | |
| Journal Entry 9 | $2,000 | |
| Ending balance | $0 |
TABLE 2-18 A T-Account of the Loan Payable Account
| Debit | Credit | |
| Beginning balance | $1,000 | |
| Journal Entry 10 | $1,000 | |
| Ending balance | $0 |
I’m not going to show T-account analyses of the other accounts that the preceding journal entries use. In every other case, the only debit or credit to the account comes from the journal entry, which means that the journal entry amount is the account balance. Only one journal entry affects the sales revenue account: Journal Entry 7, which credits sales revenue for $13,000. Because the sales revenue account has no beginning balance, that $13,000 credit equals the sales revenue account balance. The expense accounts work the same way.
Using T-account analysis results
If you construct (or your accounting program constructs) T-accounts for each balance sheet and income statement account, you can easily calculate account balances at a particular point in time by using the T-account analysis results. Table 2-19 shows a trial balance at the end of the day for the hot dog stand. You can calculate each of these account balances by using T-account analysis.
TABLE 2-19 A Trial Balance at End of Day
| Account | Debit | Credit |
|---|---|---|
| Cash | $5,000 | |
| Inventory | 0 | |
| Accounts payable | $0 | |
| Loan payable | 0 | |
| S. Nelson, capital | $1,000 | |
| Sales revenue | 13,000 | |
| Cost of goods sold | 3,000 | |
| Rent | 1,000 | |
| Wages expense | 4,000 | |
| Supplies | 1,000 | _____ |
| Totals | $14,000 | $14,000 |
The first line shown in the trial balance in Table 2-19 is the cash account, with a debit balance of $5,000. This debit account balance comes from the T-account analysis shown in Table 2-15. The account balances for inventory, accounts payable, and loan payable also come from the T-account analyses shown previously in this chapter (Tables 2-16, 2-17, and 2-18).
As I note in the preceding section, you don’t need to perform T-account analyses for the other accounts shown in the trial balance provided in Table 2-19. These other accounts show a single debit or credit.
I need to make one final and perhaps already-obvious point: The information provided in Table 2-19 is the information necessary to construct an income statement for the day and a balance sheet as of the end of the day. If you take sales revenue, cost of goods sold, rent, wages expense, and supplies expense from the trial balance, you have all the information that you need to construct an income statement for the day. In fact, the information shown in Table 2-19 is the information used to construct the income statement shown in Table 2-1.
Similarly, the asset, liability, and owner’s equity
