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1 - Journal Entries - Format & Examples

Step one in accounting cycle

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78 views1 page

1 - Journal Entries - Format & Examples

Step one in accounting cycle

Uploaded by

Shahbaz Syed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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ACCOUNTING FINANCE ECONOMICS MORE

Home » Business » Accounting » Accounting Cycle » Journal Entries


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Analyzing transactions and recording them as journal entries is the first step in the Accounting
accounting cycle. It begins at the start of an accounting period and continues throughout the
period. Transaction analysis is a process that determines whether a particular business event has Finance

an economic effect on the assets, liabilities or equity of the business. It also involves ascertaining Economics
the magnitude of the transaction i.e. its currency value.
Audit
After analyzing transactions, accountants classify and record the events having an economic
Management
effect via journal entries according to debit-credit rules. Frequent journal entries are usually
recorded in specialized journals, for example, sales journal and purchases journal. The rest are Statistics
recorded in a general journal.

The following example illustrates how to record journal entries: Current Chapter
Accounting Cycle
Example
Journal Entries
Company A was incorporated on January 1, 20X0 with an initial capital of 5,000 shares of Ledger Accounts
common stock having $20 par value. During the first month of its operations, the company Trial Balance
engaged in the following transactions: Accounting Errors
Unadjusted Trial Balance
Date Transaction
Adjusting Entries
Jan 2 An amount of $36,000 was paid as advance rent for three months.
Adjusted Trial Balance
Jan 3 Paid $60,000 cash on the purchase of equipment costing $80,000. The remaining
Closing Entries
amount was recognized as a one year note payable with an interest rate of 9%.
Post-Closing Trial Balance
Jan 4 Purchased office supplies costing $17,600 on account.
Income Summary Account
Jan 13 Provided services to its customers and received $28,500 in cash.
Reversing Entries
Jan 13 Paid the accounts payable on the office supplies purchased on January 4.
Compound Entries
Jan 14 Paid wages to its employees for the first two weeks of January, aggregating
Accounting Worksheet
$19,100.
Accruals and Prepayments
Jan 18 Provided $54,100 worth of services to its customers. They paid $32,900 and
promised to pay the remaining amount.
Jan 23 Received $15,300 from customers for the services provided on January 18.
Jan 25 Received $4,000 as an advance payment from customers.
Jan 26 Purchased office supplies costing $5,200 on account.
Jan 28 Paid wages to its employees for the third and fourth week of January: $19,100.
Jan 31 Paid $5,000 as dividends.
Jan 31 Received an electricity bill of $2,470.
Jan 31 Received a telephone bill of $1,494.
Jan 31 Miscellaneous expenses paid during the month totaled $3,470

The following table shows the journal entries for the above transactions.

Date Account Debit Credit


Jan 1 Cash 100,000
Common Stock 100,000
Jan 2 Prepaid Rent 36,000
Cash 36,000
Jan 3 Equipment 80,000
Cash 60,000
Notes Payable 20,000
Jan 4 Office Supplies 17,600
Accounts Payable 17,600
Jan 13 Cash 28,500
Service Revenue 28,500
Jan 13 Accounts Payable 17,600
Cash 17,600
Jan 14 Wages Expense 19,100
Cash 19,100
Jan 18 Cash 32,900
Accounts Receivable 21,200
Service Revenue 54,100
Jan 23 Cash 15,300
Accounts Receivable 15,300
Jan 25 Cash 4,000
Unearned Revenue 4,000
Jan 26 Office Supplies 5,200
Accounts Payable 5,200
Jan 28 Wages Expense 19,100
Cash 19,100
Jan 31 Dividends 5,000
Cash 5,000
Jan 31 Electricity Expense 2,470
Utilities Payable 2,470
Jan 31 Telephone Expense 1,494
Utilities Payable 1,494
Jan 31 Miscellaneous Expense 3,470
Cash 3,470

At the end of the period, all the journal for the period are posted to the ledger accounts.

Written by Irfanullah Jan and last modified on May 22, 2019

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Related Topics
Debit Credit Rules
Accounting Cycle
Ledger Accounts
Accounting Equation
Business Transaction
Double Entry Accounting

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