Lecture 10-11 (Accounting information for service businesses)

Question 1

SERVICE BUSINESS

Answer 1

A business which offers a service based on a personal skill for which other people are willing to pay.

Question 2

Steps for accounting for a service business.

Answer 2

1. Identify the type of transaction taking place.
2. Identify the debit and credit entries.
3. Record the debits and credits in the running balance accounts.
4. Transfer closing balances to the trial balance.
5. Make sure total debits = total credits.
   Prepare IS and SoFP.

Question 3

Debit and credits for a sale.

Answer 3

Dr Bank/trade receivable

Cr Sales