Example:

On Jan 1, ABC company borrow $5000 => cash is increased by 5000; note payable is increased by 5000
On Jan 2, ABC company bought $1000 supplies, paid by cash => cash is decreased by 1000, supplie
On Jan 30, ABC collected $2000 from its customer buy selling goods => cash is increased by

Cash Rules:
Jan 1 $5,000 Jan 2 1,000 Cash increases: debit
Jan 30 2,000 Cash decrease: credit
7,000 1000
Bal 6,000

If Debit amounts are greater than credit amounts, the account will have a debit balance
If Credit amounts are greater than debit amounts, the account will have a credit balance

RULES

A s s e ts = L ia b ilitie s
D e b it / D r . C re d it / C r. D e b it / D r. C re

N o rm a l B a la n c e N o rm a

C h a p te r C h a p te r
3 -2 3 3 -2 4
able is increased by 5000
ecreased by 1000, supplies is increased by 1000
=> cash is increased by 2000; revenue is increased by 2000

Stockholders’ Equity
+L i a b i l i t i e s
D e b it / D r. C re d it / C r. Debit / Dr. Credit / Cr.

N o rm a l B a la n c e Normal Balance

Chapter
3-25

Common Stock Retained Earnings

Debit / Dr. Credit / Cr. Debit / Dr. Credit / Cr.

Normal Balance Normal Balance

Chapter Chapter
3-25 3-25
 Revenue - Expense Dividends
-
D e b it / D r. C re d it / C r. Debit / Dr. Credit / Cr. Debit / Dr. Cred

N o rm a l B a la n c e Normal Balance Normal Balance

Chapter Chapter
C h a p te r
3-27 3-23
3 -2 6
gs
/ Cr.

alance
Balance
 Dividends
dit / Cr. Debit / Dr. Credit / Cr.

Normal Balance

Chapter
3-23
 Analy
busine
transactio
GENE
Date
Apr 1

Apr 4

Apr 8

Apr 11

Apr 12

Apr 13

Apr 17

Apr 20

Apr 25

Apr 30

30

assets, liabilities, SE, Dividend

A
Cash

Prepaid insurance
Land

Purposes:
1. Discloses the complet
2. Provides a chronologi
3. Helps to prevent erro
 Analyze
business Journalize
transactions
GENERAL JOURNAL GENE
Account Debit Credit Cash
Cash $50,000 Apr 1 $50,000 Apr 4
Common stock $50,000 20 5,700 11
25 3,000 13
Land $34,000 30 8,900 17
Cash $34,000 30

Advertising expense $1,800 Bal 27,460

Account payable $1,800
Prepaid insurance
Salaries & Wages expense $1,500 Apr 13 $2,400
Cash $1,500
Bal $ 2,400
No entry

Prepaid Insurance $2,400

Cash $2,400 Land
Apr 4 $34,000
Dividends $1,400
Cash $1,400 Bal $ 34,000

Cash $5,700
Service revenue $5,700 Account Payable
Apr 30 $840 Apr 8
Cash $3,000
Unearned service revenue $3,000 Bal

Cash $8,900
Service revenue $8,900
Account Payable $840 Unearned service revenue
Cash $840 Apr 25
$109,540 $109,540
Bal
sets, liabilities, SE, Dividend, Revenue, Expense
 L SE Order:
Account Payable Common stock Assets: liquidity order: cash, account
Unearned rev Dividends Liabilities
epaid insurance Service rev Stockholder's equity
Adv. Exp Dividend
Salaries exp. Revenue
Expense

Discloses the complete effects of a transaction

Provides a chronological record of transactions
Helps to prevent errors
Total debit = Total credit
 Tria
Post
Balan
GENERAL LEDGER
h Common Stock Gra
34,000 Apr 1 50,000 Tri
1,500
2400 Bal $ 50,000
1400
840 Cash
Prepaid insurance
Dividends Land
Apr 17 $1,400 Account Payable
surance Unearned service revenu
Bal $ 1,400 Common Stock
Dividends
Service revenue
Service revenue Advertising expense
Apr 20 5,700 Salaries & Wages expens
30 8,900
d
Bal $ 14,600

Advertising expense Trial balance is

Apr 8 $1,800

Payable Bal $ 1,800

1,800 Limitations

$ 960
Salaries & Wages expense
Apr 11 $1,500

vice revenue Bal $ 1,500

3,000

$ 3,000
order: cash, account receivable, inventory, supplies, equipment,....
 Trial
Balance

Granview Park
Trial Balance
Apr 30

Debit Credit
$ 27,460
epaid insurance $ 2,400
$ 34,000
ccount Payable $ 960
nearned service revenue $ 3,000
ommon Stock $ 50,000
$ 1,400
rvice revenue $ 14,600
dvertising expense $ 1,800
laries & Wages expense $ 1,500
$ 68,560 $ 68,560

ial balance is
A list of account and their balance at a given time
Order: assets, liabilities, SE, dividend, revenue, expenses
Purpose: prove that debits equal to credit
mitations
A transaction is not journalized
A correct journal entry is not posted
A journal entry is posted twice
Incorrect accounts are used in journalizing or posting
Offsetting errors are made in recording the amount of a transaction
 Analyze
business Journalize
transactions
GENERAL JOURNAL
Date Account Debit Credit Cash
May 1 Cash $20,000 May 1 $20,000
common stock $20,000 12 3,500
17 1,200
2 No entry

3 Supplies $1,500
Account Payable $1,500 Bal 21,200

7 Rent expense $900 Supplies

Cash $900 May 3 $1,500

11 Account receivable $2,800 Bal $ 1,500

Service revenue $2,800

12 Cash $3,500
Unearned Service revenue $3,500 Account receivable
May 11 $2,800
17 Cash $1,200
Service revenue $1,200 Bal $ 2,800

31 Salaries & Wages expense $2,000

Cash $2,000 Account Payable
May 31 $600
31 Account Payable $600
Cash $600

Unearned Service Revenue

assets, liabilities, SE, Dividend, Revenue, Expense

A L SE
Cash AP common stock
supplies Unearned Rev rent expense
AR Rev
Salary expens
 Post
GENERAL LEDGER
Cash Common stock
May 7 900 May 1 20,000
31 2,000
31 600 Bal $ 20,000

Service revenue
May 11 2,800
Supplies 17 1,200
Bal $ 4,000

Rent expense
May 7 $900

Account receivable Bal 900

Salaries & Wages expense

May 31 $2,000

Account Payable Bal $ 2,000

May 3 1,500

Bal $ 900

earned Service Revenue

May 12 3,500

Bal $ 3,500
 Trial
Balance

Granview Park
Trial Balance
Apr 30

Debit Credit
Cash $ 21,200
Supplies $ 1,500
Account receivable $ 2,800
Account Payable $ 900
Unearned Service Revenue $ 3,500
Common stock $ 20,000
Service revenue $ 4,000
Rent expense $ 900
Salaries & Wages expense $ 2,000

$ 28,400 $ 28,400
 Analy
busine
transactio
GENE
Date
1

A
Cash
Supplíe
AR
 Analyze
business Journalize Pos
transactions
GENERAL JOURNAL GENERA
Account Debit Credit Cash
Advertising exp $1,000 Jan 1 $8,000 1
Cash $1,000 4 13,000 3
6 5,000 5
Supplies $3,600 7
Account payable $3,600 8

Miscellaneous expense $1,700 Bal $4,300

Cash $1,700
Account receivable
Cash $13,000 Jan 1 $15,000 4
Account receivable $13,000 6 9,000

Account payable $14,400 Bal $ 11,000

Cash $14,400
Supplies
Cash $5,000 Jan 1 $11,000
Account receivable $9,000 1 3,600
Service revenue $14,000
bal $ 14,600
Salaries & Wages expense $3,000
Cash $3,000 Prepaid rent
Jan 1 $3,000
Dividend $1,600
Cash $1,600 Bal $ 3,000

Equipment
L SE + others jan 1 $21,000
Account Payable
Div Bal $ 21,000
Ser. Revenue
Adv. Exp Account Payable
Miscellaneous expense 5 $14,400 Jan 1
Salaries & Wages expense 2

Bal
 Trial
Post
Balance
GENERAL LEDGER
h Common stock Tablette Repair S
1,000 jan 1 $ 30,000 Trial Bala
1,700 Jan 1, 20
14400 Bal $ 30,000
3000 Cash
1600 Account receivable
Retained earnings Supplies
Jan 1 11,000 Prepaid rent
Equipment
ceivable Bal $ 11,000 Account Payable
13,000 Common stock
Dividends Retained earnings
8 $1,600 Dividends
Service revenue
Bal 1,600 Advertising exp
lies Miscellaneous expense
Service revenue Salaries & Wages expense
6 14,000

Bal 14000

d rent Advertising exp

1 $1,000

Bal $ 1,000

ment Miscellaneous expense

3 $1,700

Bal $ 1,700

Payable
17,000 Salaries & Wages expense
3,600 7 $3,000

$ 6,200 Bal $ 3,000

 Trial
Balance
PREPAID ASSETS
Tablette Repair Service, INC Prepaid rent, Prepaid insurance
Trial Balance ABC company rent office at F
Jan 1, 2015 1-Jan Paid in advance for 120mil fo
Debit Credit
$ 4,300
ccount receivable $ 11,000
$ 14,600 Cash
epaid rent $ 3,000
$ 21,000
ccount Payable $ 6,200
ommon stock $ 30,000
etained earnings $ 11,000
$ 1,600
rvice revenue $ 14,000
dvertising exp $ 1,000
iscellaneous expense $ 1,700
laries & Wages expense $ 3,000

$ 61,200 $ 61,200
Prepaid insurance
ABC company rent office at FTU for 10mil/month
Paid in advance for 120mil for 12 months from Jan to Dec

Cash Prepaid Rent

Jan 1 120 Jan 1 $120 Jan 31 10
Feb 28 10
.....
Dec 31 10
Bal 0

Rent expense
jan 31 $10
Feb 28 10
...
Dec 31 10
120