Professional Documents
Culture Documents
Example 2 - Introduction 2 Journals
Example 2 - Introduction 2 Journals
/012-3/,(++
Transaction #1: Cash contribution
Assets ... Equity
Contributed
Cash ...
Capital
Beginning Balances $0 $0
1) Cash Contribution +6,000 +6,000
Ending Balances 6,000 6,000
! #!
Receivable
Beginning Balances $0 $100
8) Interest Receivable Accrual +50 +50
Ending Balances 50 150
Note that Event No.5 and Event No.7 in 20X7 (salary expense) both decrease Retained Earnings. However, they
act differently as to their second corresponding accounts. When we pay cash for salary expenses (Event No.5),
assets (Cash) decrease, but when we record an accrual for salary expenses (Event No.7), liabilities (Salaries
Payable) increase.
For Event No.8 in 20X7 Fored Company recognized interest revenue on the certificate of deposit for 20X7, that is
for the 3 months (from October to December). The formula to calculate the interest accrual is as follows: $2,500
x 8% x (3 / 12) = $50.
! $!
Beginning Balances $5,100 $0
5) Land Purchase -5,000 +5,000
Ending Balances 100 5,000
Fored Services
Income Statement
! %!
For the Period Ended For the Period Ended
20X7 20X8
Services Revenue $2,000 $4,000
Interest Revenue 50 150
Total Revenue $2,050 $4,150
Salary Expense (1,500) $0
Rent Expense (400) 0
Interest Expense 0 (133)
Total Expenses (1,900) (133)
Net Income $150 $4,017
Fored Services
Balance Sheet
For the Period Ended For the Period Ended
20X7 20X8
Assets
Cash $4,300 $4,800
Accounts receivable 500 1,000
Interest Receivable 50 0
Certificate of Deposit 2,500 0
Land 0 5,000
Total Assets $7,350 $10,800
Liabilities
Salaries Payable $1,200 $0
Interest Payable 0 133
Note payable 0 2,000
Total Liabilities $1,200 $2,133
Equity
Contributed Capital $6,000 $6,000
Retained Earnings 150 2,667
Total Equity $6,150 $8,667
Fored Services
Statement of Cash Flows
! &!
For the Period Ended For the Period Ended
20X7 20X8
! '!