The financial statements of Reitmans (Canada) Limited for 2012 are shown in Appendix A at the back of this textbook. They contain the following selected accounts:
Administrative expenses Long-term debt
Cash and cash equivalents Prepaid expenses
Finance costs Sales
Inventories Trade and other payables
Instructions
(a) Answer the following questions:
1. In which financial statement is the account included?
2. Is it an asset, liability, revenue, or expense?
3. What is the normal balance (debit or credit) for each of these accounts?
4.What are the increase side and decrease side (debit or credit) for each of these accounts?
(b) Identify the probable other account(s) in the transaction, and the effect on that account(s), when:
1. Trade and other payables are decreased.
2. Long-term debt is increased.
3. Sales are increased.
4. Inventory is increased.
5. Prepaid expenses are increased.