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Examples of Journal Entries

Examples of Journal Entries

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Examples of Journal Entries
U.S. GAAPCodification, AccountingTextbooks
 
Principlesof Accounting,IntermediateAccounting,AdvancedAccounting  U.S. GAAP by Topic, Accounting by Topic 
 
Basics of Journal Entries
 
Example 1: Financing Activities
Ow
ner invested $10,000 in the company.Analysis of Transaction
 Steps
 
D
ebit or Credit ?
 
1
 
Increase in Assets (Cash) by $10,000
 
D
ebit
 
2
 
Increase in Owner's Equity by $10,000
 
Credit
 
J
ournal Entry
 
D
ebit
 
Credit
 
Cash
 
10,000
 
Owner's Equity
 
10,000
 
D
escription of 
J
ournal Entry
 Owner invested $10,000 in the company.
 
Results of 
J
ournal Entry
 
Cash balance increases by $10,000. --> Increase in AssetsOwner's Equity balance increases by $10,000. --> Increase in Owner's Equity
 
Example 2: Financing ActivitiesThe company borro
w
ed $20,000 from a bank.Analysis of Transaction
 Steps
 
D
ebit or Credit ?
 
1
 
Increase in Assets (Cash) by $20,000
 
D
ebit
 
2
 
Increase in Liabilities (Borrowings) by $20,000
 
Credit
 
J
ournal Entry
 
D
ebit
 
Credit
 
Cash
 
2
0,000
 
Borrowings
 
2
0,000
 
D
escription of 
J
ournal Entry
 
Borrowed $20,000.
 
Results of 
J
ournal Entry
 
Cash balance increases by $20,000. --> Increase in AssetsBorrowings balance increases by $10,000. --> Increase in Liabilities
 
Example 3: Investing ActivitiesThe company purchased $12,000 equipment and paid in cash.Analysis of Transaction
 Steps
 
D
ebit or Credit ?
 
1
 
Increase in Assets (Equipment) by $12,000
 
D
ebit
 
2
 
Decrease in Assets
(Cash) by $12,000
 
Credit
 
J
ournal Entry
 
D
ebit
 
Credit
 
Equipment
 
12
,000
 
Cash
 
12,000
 
 
 
D
escription of 
J
ournal Entry
 
Purchased $12,000 equipment in cash.
 
Results of 
J
ournal Entry
 
Equipment balance increases by $12,000. --> Increase in AssetsCash balance decreases by $12,000. --> Decrease in Assets
 
Example 4:
O
perating ActivitiesThe company purchased $6,000 merchandise (600 units) on credit.Analysis of Transaction
 Steps
 
D
ebit or Credit ?
 
1
 
Increase in Assets (Merchandise) by $6,000
 
D
ebit
 
2
 
Increase in Liabilities (Accounts Payable) by $6,000
 
Credit
 
J
ournal Entry
 
D
ebit
 
Credit
 
Merchandise
 
6,000
 
Accounts Payable
 
6,000
 
D
escription of 
J
ournal Entry
 
Purchased $6,000 merchandise on credit.
 
Results of 
J
ournal Entry
 
Merchandise balance increases by $6,000. --> Increase in AssetsAccounts Payable balance increases by $6,000. --> Increase in Liabilities
 
Example 5:
O
perating ActivitiesThe company sold 500 units of merchandise at the price of $11,000. Customer paid $9,000 in cash at the time of sale.Analysis of TransactionNote: This transaction includes both "REVENUE" and "EXPENSE" components.(1) REVENUE side
 Steps
 
D
ebit or Credit ?
 
1
 
Increase in Assets (Cash) by $9,000
 
D
ebit
 
2
 
Increase in Assets (Accounts Receivable) by $2,000
 
D
ebit
 
3
 
Increase in Revenue (Sales) by $11,000
 
Credit
 
(2) EXPENSE side
 Steps
 
D
ebit or Credit ?
 
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)
 
D
ebit
 
2
 
Decrease
in Assets (Merchandise) by $5,000
 
D
ebit
 
(1) REVENUE
J
ournal Entry
 
D
ebit
 
Credit
 
Cash
 
9,000
 
Accounts Receivable
 
9,000
 
Sales Revenue
 
11,000
 
D
escription of 
J
ournal Entry
 
Sold merchandise at $11,000 price and received $9,000 in cash.
 
Results of 
J
ournal Entry
 
Cash balance increases by $9,000. --> Increase in Assets
Accounts Receivable balance increases by $2,000. --> Increase in Assets
 Sales Revenue account balance increases by $11,000. --> Increase in Revenue
 
(2) EXPENSE
J
ournal Entry
 
D
ebit
 
Credit
 
Cost of Merchandise Sold
 
5
,000
 
Merchandise
 
5
,000
 
 
 
D
escription of 
J
ournal Entry
 
To record the cost of merchandise sold.
 
Results of 
J
ournal Entry
 
Merchandise balance decreases by $5,000. --> Decrease in AssetsCost of Merchandise Sold account balance increases by $5,000. --> Increase in Expense
 
Example 6:
O
perating ActivitiesThe company paid $3,500 salaries.Analysis of Transaction
 Steps
 
D
ebit or Credit ?
 
1
 
Increase in Expenses (Salaries Expense) by $3,500
 
D
ebit
 
2
 
Decrease
in Assets (Cash) by $3,500
 
Credit
 
J
ournal Entry
 
D
ebit
 
Credit
 
Salaries Expense
 
3,500
 
Cash
 
3,500
 
D
escription of 
J
ournal Entry
 
Paid $3,500 salaries.
 
Results of 
J
ournal Entry
 
Cash balance decreases by $3,500. --> Decrease in AssetsSalaries Expense account balance increases by $3,500. --> Increase in Expenses
 
Example 7:
O
perating ActivitiesThe company paid $1,500 rent.Analysis of Transaction
 Steps
 
D
ebit or Credit ?
 
1
 
Increase in Expenses (Rent Expense) by $1,500
 
D
ebit
 
2
 
Decrease
in Assets (Cash) by $1,500
 
Credit
 
J
ournal Entry
 
D
ebit
 
Credit
 
Rent Expense
 
1
,500
 
Cash
 
1
,500
 
D
escription of 
J
ournal Entry
 
Paid $1,500 rent.
 
Results of 
J
ournal Entry
 
Cash balance decreases by $1,500. --> Decrease in AssetsRent Expense account balance increases by $1,500. --> Increase in Expenses
 
Further Analysis of Transactions
U.S. GAAPCodification, AccountingTextbooks
 
Principlesof Accounting,IntermediateAccounting,AdvancedAccounting  U.S. GAAP by Topic, Accounting by Topic 
 
Summary of Transactions from previous file.
 
 
No.
 
D
ate
 
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.
 

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