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Austin Stephens
5 years ago
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1 qwertyuiopasdfghjklzxcvbnmqwertyui opasdfghjklzxcvbnmqwertyuiopasdfgh jklzxcvbnmqwertyuiopasdfghjklzxcvb nmqwertyuiopasdfghjklzxcvbnmqwer GENARAL JOURNAL tyuiopasdfghjklzxcvbnmqwertyuiopas PRACTICE BOOK dfghjklzxcvbnmqwertyuiopasdfghjklzx 8/23/2012 ASIM cvbnmqwertyuiopasdfghjklzxcvbnmq wertyuiopasdfghjklzxcvbnmqwertyuio pasdfghjklzxcvbnmqwertyuiopasdfghj klzxcvbnmqwertyuiopasdfghjklzxcvbn mqwertyuiopasdfghjklzxcvbnmqwerty uiopasdfghjklzxcvbnmqwertyuiopasdf ghjklzxcvbnmqwertyuiopasdfghjklzxc vbnmqwertyuiopasdfghjklzxcvbnmrty uiopasdfghjklzxcvbnmqwertyuiopasdf ghjklzxcvbnmqwertyuiopasdfghjklzxc

2 Basics of Journal Entries Example 1: Financing Activities Owner invested $10,000 in the company. Steps or? 1 Increase in Assets (Cash) by $10,000 2 Increase in Owner's Equity by $10,000 Cash 10,000 Owner's Equity 10,000 Owner invested $10,000 in the company. Cash balance increases by $10, > Increase in Assets Owner's Equity balance increases by $10, > Increase in Owner's Equity Example 2: Financing Activities The company borrowed $20,000 from a bank. Steps or? 1 Increase in Assets (Cash) by $20,000 2 Increase in Liabilities (Borrowings) by $20,000 Cash 20,000 Borrowings 20,000

3 Borrowed $20,000. Cash balance increases by $20, > Increase in Assets Borrowings balance increases by $10, > Increase in Liabilities Example 3: Investing Activities The company purchased $12,000 equipment and paid in cash. Steps or? 1 Increase in Assets (Equipment) by $12,000 2 Decrease in Assets (Cash) by $12,000 Equipment 12,000 Cash 12,000 Purchased $12,000 equipment in cash. Equipment balance increases by $12, > Increase in Assets Cash balance decreases by $12, > Decrease in Assets Example 4: Operating Activities The company purchased $6,000 merchandise (600 units) on credit. Steps or? 1 Increase in Assets (Merchandise) by $6,000 2 Increase in Liabilities (Accounts Payable) by $6,000 Merchandise 6,000 Accounts Payable 6,000 Purchased $6,000 merchandise on credit. Merchandise balance increases by $6, > Increase in Assets Accounts Payable balance increases by $6, > Increase in Liabilities

4 Example 5: Operating Activities The company sold 500 units of merchandise at the price of $11,000. Customer paid $9,000 in cash at the time of sale. Note: This transaction includes both "REVENUE" and "EXPENSE" components. (1) REVENUE side Steps or? 1 Increase in Assets (Cash) by $9,000 2 Increase in Assets (Accounts Receivable) by $2,000 3 Increase in Revenue (Sales) by $11,000 (2) EXPENSE side Steps or? 1 Increase in Expenses (Cost of Merchandise Sold) by $5,000 ($6,000 / 600 units = $10 per unit) ($10 per unit X 500 units sold = $5,000 cost) 2 Decrease in Assets (Merchandise) by $5,000 (1) REVENUE Cash 9,000 Accounts Receivable 9,000 Sales Revenue 11,000 Sold merchandise at $11,000 price and received $9,000 in cash. Cash balance increases by $9, > Increase in Assets Accounts Receivable balance increases by $2, > Increase in Assets Sales Revenue account balance increases by $11, > Increase in Revenue (2) EXPENSE Cost of Merchandise Sold 5,000 Merchandise 5,000 To record the cost of merchandise sold. Merchandise balance decreases by $5, > Decrease in Assets Cost of Merchandise Sold account balance increases by $5, > Increase in Expense

5 Example 6: Operating Activities The company paid $3,500 salaries. Steps or? 1 Increase in Expenses (Salaries Expense) by $3,500 2 Decrease in Assets (Cash) by $3,500 Salaries Expense 3,500 Cash 3,500 Paid $3,500 salaries. Cash balance decreases by $3, > Decrease in Assets Salaries Expense account balance increases by $3, > Increase in Expenses Example 7: Operating Activities The company paid $1,500 rent. Steps or 1 Increase in Expenses (Rent Expense) by $1,500 2 Decrease in Assets (Cash) by $1,500 Rent Expense 1,500 Cash 1,500 Paid $1,500 rent. Cash balance decreases by $1, > Decrease in Assets

6 Rent Expense account balance increases by $1, > Increase in Expenses Summary of Transactions from previous file. No. Date Transactions (1) May 1 Owner invested $20,000 in the company. (2) May 3 Borrowed $10,000 from a bank. (3) May 6 Purchased $15,000 equipment in cash. (4) May 8 Purchased $9,000 merchandise (900 units) on credit. Sold 500 units of merchandise at the price of $11,000. (5) May 15 Customer paid $8,000 in cash at the time of sale. (6) May 25 Paid $2,500 salaries. (7) May 26 Paid $1,500 rent. Summary of Journal Entries from previous file. No. Journal Entries (1) Cash 10,000 (1) Owner's Equity 10,000 Owner invested $10,000 in the company. (2) Cash 20,000 (2) Borrowings 20,000 Borrowed $20,000. (3) Equipment 12,000 (3) Cash 12,000 Purchased $12,000 equipment in cash. (4) Merchandise 6,000 (4) Accounts Payable 6,000 Purchased $6,000 merchandise on credit. (5)-1 Cash 9,000 (5)-1 Accounts Receivable 2,000 (5)-1 Sales 11,000 Sold merchandise at $11,000 price and received $9,000 in cash. (5)-2 Cost of Goods Sold 5,000 (5)-2 Merchandise 5,000 To record the cost of goods sold ($5,000 merchandise).

7 (6) Salaries Expense 2,500 (6) Cash 3,500 Paid $2,500 salaries. (7) Rent Expense 1,500 (7) Cash 1,500 Paid $1,500 rent. Calculating Accounting Balances

8 Cash (1) 10,000 (3) 12,000 (2) 20,000 (6) 2,500 (5)-1 9,000 (7) 1,500 Balance 23,000 Accounts Receivable (5)-1 2,000 Balance 2,000 Merchandise (4) 6,000 (5)-2 5,000 Balance 1,000 Equipment (3) 12,000 Balance 12,000 Accounts Payable (4) 6,000 Balance 6,000 Sales (5)-1 11,000 Balance 11,000 Cost of Goods Sold (5)-2 5,000 Balance 5,000 Salaries Expense

9 (6) 2,500 Balance 2,500 Rent Expense (7) 1,500 Balance 1,500

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