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When a business transaction requires a journal entry, we must follow these rules: 

The entry must have at least 2 accounts with 1 DEBIT amount and at least 1 CREDIT amount.



The DEBITS are listed first and then the CREDITS.



The DEBIT amounts will always equal the CREDIT amounts.

For another example, let’s look at the transaction analysis we did in the previous chapter for Metro Courier (click Transaction analysis): 1. The owner invested $30,000 cash in the corporation. We analyzed this transaction by increasing both cash (an asset) and common stock (an equity) for $30,000. We learned you increase an asset with a DEBIT and increase an equity with a CREDIT. The journal entry would look like this: Debit Cash

30,000

Common Stock

2. Purchased $5,500 of equipment with cash. We analyzed this transaction as increasing the asset Equipment and decreasing the asset Cash. To increase an asset, we debit and to decrease an asset, use credit. This journal entry would be: Debit Equipment

Cred

5,500

Cash

5,500

3. Purchased a new truck for $8,500 cash. We analyzed this transaction as increasing the asset Truck and decreasing the asset Cash. To increase an asset, we debit and to decrease an asset, use credit. This journal entry would be: Debit Truck Cash

Credit

8,500 8,500

4. Purchased $500 in supplies on account. We analyzed this transaction as increasing the asset Supplies and the liability Accounts Payable. To increase an asset, we debit and to increase a liability, use credit. This journal entry would be: Debit Supplies

500

Accounts Payable

5. Paid $300 for supplies previously purchased. Since we previously purchased the supplies and are not buying any new ones, we analyzed this to decrease the liability accounts payable and the asset cash. To decrease a liability, use debit and to decrease and asset, use debit. Debit Accounts Payable

300

Cash

6. Paid February and March Rent in advance for $1,800. When we pay for an expense in advance, it is an asset. We want to increase the asset Prepaid Rent and decrease Cash. To increase an asset, we debit and to decrease an asset, use credit. Debit Prepaid Rent

1,800

Cash

7. Performed work for customers and received $50,000 cash. We analyzed this transaction to increase the asset cash and increase the revenue Service Revenue. To increase an asset, use debit and to increase a revenue, use credit. Debit Cash

50,000

Services Revenue

8. Performed work for customers and billed them $10,000. We analyzed this transaction to increase the asset accounts receivable (since we have not gotten paid

but will receive it later) and increase revenue. To increase an asset, use debit and to increase a revenue, use credit. Debit Accounts Receivable

10,000

Services Revenue

9. Received $5,000 from customers from work previously billed. We analyzed this transaction to increase cash since we are receiving cash and we want to decrease accounts receivable since we are receiving money from customers who we billed previously and not new work we are doing. To increase an asset, we debit and to decrease an asset, use credit. Debit Cash

5,000

Accounts Receivable

10. Paid office salaries $900. We analyzed this transaction to increase salaries expense and decrease cash since we paid cash. To increase an expense, we debit and to decrease an asset, use credit.

Salaries Expense Cash

Debit 900

11. Paid utility bill $1,200. We analyzed this transaction to increase utilities expense and decrease cash since we paid cash. To increase an expense, we debit and to decrease an asset, use credit. Debit Utilities Expense

1,200

Cash

All the journal entries illustrated so far have involved one debit and one credit; these journal entries are called simple journal entries. Many business transactions, however, affect more than two accounts. The journal entry for these transactions involves more than one debit and/or credit. Such journal entries are called compound journal entries.

If you would like to watch another video about journal entries, click Journal Entries. How do we prepare financial statements from these journal entries? The journal entries just allowed us to capture the activity of the business. In the next section we will organize the information to make it easier to prepare financial statements.

Ques t i on:Dr=debit , Cr= credit QUESTION 1 Julian Co. paid $ 20,000 in advance for advertising services for... Dr =debi t,Cr =cr edi t QUESTI ON1 Jul i anCo.pai d$20, 000i nadvancef oradv er t i s i ngser vi c esf ort henext5mont hs .Ent r yi s :

a.

b.

c.

d.

Dr .Adv er t i si ngExpense20000 Cr .Cash20000 Dr .Pr epai dAdver t i si ng20000 Cr .Cash20000 Dr .Adv er t i si ngExpense4000 Cr .Cash4000 Dr .Pr epai dAdver t i si ng4000 Cr .Cash4000

9poi nt s QUESTI ON2 Mar kCo.pr ovi ded$60000i nser vi cesonacc ount .Theent r yi s :

a.

b.

c.

d.

Dr .Cash60000 Cr .Rev enue60000 Dr .Acc ount sPay abl e60000 Cr .Rev enue60000 Dr .Acc ount sRecei vabl e60000 Cr .Rev enue60000 Dr .Unear nedRev enue60000 Cr .Rev enue60000

9poi nt s QUESTI ON3 Cl ayCo.col l ect ed$50000i nadv ancef orf ut ur er evenue.Theent r yi s :

a.

Dr .Cash50000

Cr .Rev enue50000

b.

c.

d.

Dr .Acc ount sRecei vabl e50000 Cr .Rev enue50000 Dr .Cash50000 Cr .Unear nedRev enue50000 Dr .Unear nedRev enue50000 Cr .Rev enue50000

9poi nt s QUESTI ON4 ShawCo.usedut i l i t i esonaccountf or$7000.

a.

b.

c.

d.

Dr .Account sRecei v abl e7000 Cr .Ut i l i t i esExpense7000 Dr .Ut i l i t i esExpense7000 Cr .Cash7000 Dr .Ut i l i t i esExpense7000 Cr .Account sPay abl e7000 Dr .Account sPay abl e7000 Cr .Ut i l i t i esExpense7000

9poi nt s QUESTI ON5 I fTat eCo.pai d$15000i nadv ancef ori nsur anceser vi cesf orafiv emont hper i od,r ecor dt heexpi r ed i nsur anceusedatendofaquar t er( 3mont hs) .

a.

b.

c.

d.

Dr . I nsur anceExpense15000 Cr .Cash15000 Dr .I nsur anceExpense15000 Cr .Pr epai dI nsur ance15000 Dr .I nsur anceExpense9000 Cr .Cash9000 Dr .I nsur anceExpense9000 Cr .Pr epai dI nsur ance9000

9poi nt s QUESTI ON6 Bet t yCo.hadsuppl i esonhandof$22000att hebegi nni ngoft heper i odandsuppl i esonhandof$ 16000att heendoft heper i od.Whatwast heent r yt or ecor dexpi r edsuppl i esusedf ort heper i od?

a.

b.

c.

d.

Dr .Suppl i es16000 Cr .Suppl i es16000 Dr .Suppl i es16000 Cr .Suppl i esExpense16000 Dr .Suppl i esExpense6000 Cr .Cash6000 Dr .Suppl i esExpense6000 Cr .Suppl i es6000

9poi nt s QUESTI ON7 Car ol Co.payswor k er s$20000f orafiv e( 5)dayweekoneachFr i day .Theendoft heper i odi son Wednesday .Recor dent r yf orendofper i od.

a.

b.

c.

d.

Dr .Sal ar yExpense20000 Cr .Cash20000 Dr .Sal ar yExpense12000 Cr .Sal ar yPay abl e12000 Dr .Sal ar yExpense8000 Cr .Sal ar yPay abl e8000 Dr .Sal ar yExpense12000 Cr .Cash12000

9poi nt s QUESTI ON8 Gl or yCo.col l ect edi nadv ance$8000f orf ut ur eser vi ces .Att heendoft heper i od$5000i nser vi ces wer es t i l lowed.Whati st heent r yf ors er vi cesear nedandgi ven?

a.

b.

Dr .Ear nedRev enue3000 Cr .Unear nedRevenue3000 Dr .Unear nedRevenue3000 Cr .Ear nedRev enue3000

c.

d.

Dr .Unear nedRevenue5000 Cr .Ear nedRev enue5000 Dr .Unear nedRevenue8000 Cr .Ear nedRev enue8000

9poi nt s QUESTI ON9 OnWednesdayt heendoft heper i odFr anci sCo.owedt hei rwor k er s$3000f ort hr ee( 3)day swor k . Wor k er sar epai deachFr i dayf orafiv e( 5)dayweek .Whati st heent r yont hefir stFr i dayaf t ert he endoft heper i od?

a.

b.

c.

d.

Dr .WageExpense5000 Cr .Cash5000 Dr .WageExpense3000 Cr .Cash3000 Dr .WageExpense3000 Dr .WagePay abl e2000 Cr .Cash5000 Dr .WageExpense2000 Dr .WagePay abl e3000 Cr .Cash5000

9poi nt s QUESTI ON10 Comput ercost$5500wi t hnosal vageval ueandusef ul l i f eoffiv e( 5)y ear s.Ent r yf ordepr eci at i on f oraf ul l y ear :

a.

b.

c.

d. 9poi nt s QUESTI ON11

Dr .Depr eci at i onExpense5500 Cr .Cash5500 Dr .Depr eci at i onExpense5500 Cr .Acc umul at edDepr eci at i on5500 Dr .Depr eci at i onExpense1100 Cr .Cash1100 Dr .Depr eci at i onExpense1100 Cr .Acc umul at edDepr eci at i on1100

Val ar i eCo.bor r owed$30000i ssui nga8% Not edueandpay abl ei n90day s.Theadj ust i ngent r y f orI nt er estatt heendoft hefir stmont hor30day si s: Dr .I nt er es tExpense600 Cr .Cash600

a.

Dr .I nt er es tExpense600 Cr .I nt er es tPayabl e600

b.

Dr .I nt er es tExpense200 Cr .Cash200

c.

Dr .I nt er es tExpense200 Cr .I nt er es tPayabl e200

d. 9poi nt s QUESTI ON12

Car ol Co.i st hel enderof$20000r ecei vi nga9% Not edueandpay abl ei n60days .Theadj us t i ng ent r yf ori nt er es tatt heendoft hefi r s tmont hor30day si s :

a. b .

c. d .

Dr .Cash1500 Cr .I nt er es tRev enue1500 Dr .I nt er es tRec ei v abl e1500 Cr .I nt er es tRev enue1500 Dr .Cash3000 Cr .I nt er es tRev enue3000 Dr .I nt er es tRec ei v abl e3000 Cr .I nt er es tRev enue3000 QUESTI ON1 Unear nedFeesappear sont he:

a. b. c. d. 6poi nt s

bal ancesheet s t at ementofowner ' sequi t y i ncomest at ement s t at ementofcashflows

QUESTI ON2 Accumul at edDepr eci at i onappear sont he:

a. b. c. d.

bal ancesheet s t at ementofowner ' sequi t y i ncomest at ement s t at ementofcashflows

6poi nt s QUESTI ON3 Sal ar i esPay abl eappear sont he:

a. b. c. d.

Bal ancesheet s t at emntofowner ' sequi t y i ncomest at ement s t at ementofcashflows

6poi nt s QUESTI ON4 Depr eci at i onExpenseappear sont he:

a. b. c. d.

bal ancesheet s t at ementofowner ' sequi t y i ncomest at ement s t at ementofcahsflows

6poi nt s QUESTI ON5 Longt er m Li abi l i t i esappear sont he:

a.

bal ancesheet

s t at emntowner ' sequi t y

b.

i ncomest at ement

c.

s t at ementofcashflows

d. 6poi nt s QUESTI ON6

Account sRecei vabl eappear sont he: bal ancesheet

a.

s t at ementowner ' sequi t y

b.

i ncomes t at ement

c.

s t at ementofcashflows

d. 6poi nt s QUESTI ON7

Accumul at edDepr eci at i onappear sont he:

a. b. c. d.

bal ancesheeti nt hecur r entass et ssect i on bal ances heeti nt hefix edass et ssect i on bal ancesheeti nt hel ongt er ml i abi l i t i essect i on i ncomest at emntasanaoper at i ngexpense

6poi nt s QUESTI ON8 Not esRecei vabl eduei n350dy asappear sont he:

a. b. c.

bal ancesheeti nt hecur r entass et ssect i on bal ances heeti nt hefix edass et ssect i on bal ancesheeti nt hecur r entl i abi l i i t essect i on

i ncomest at ementasanexpense

d. 6poi nt s

QUESTI ON9 Unear nedFeesappear sont he: bal ancesheeti nt hecur r entass et ssect i on

a.

bal ances heetasacur r entl i abi l i t y

b.

bal ancesheeti nt heowner ' sequi t ysect i on

c.

i ncomest at ementasr ev enue

d. 6poi nt s

QUESTI ON10 Whi choneoft hefix edass etaccount sl i s t edbel owwi l lnothav ear el at edcont r aassetaccount ? officeequi pment

a.

l and

b.

Del i ver yEqui pment

c.

Bui l di ng

d. 6poi nt s QUESTI ON11

t hecos tofofficesuppl i est obeusedi nf ut ur eper i odsi sor di nar i l yshownont hebal ancesheetas a:

a. b. c. d. 6poi nt s QUESTI ON12

fix edass et cur r entasset cont r aass et cur r entl i abi l i t y

Pr epai di nsur ancei sr epor t edont hebal ancesheetasa:

a. b. c. d.

cur r entasset fi xedasset cur r entl i abi l i t y l ongt er ml i abi l i t y

6poi nt s QUESTI ON13 Att heendofanaccount i ngy ear ,i nwhatst at emntwoul dabal ancei nt hepr epai di nsur ance acc ountappear ?

a. b. c. d.

bal ancesheet i ncomest at ement s t at ementofcashflows s t at emntofowner ' sequi t y

6poi nt s QUESTI ON14 Whi choft hef ol l owi ngaccountshoul dbecl osedt oI ncomeSummar yatt heendoft hefisc al y ear ?

a. b. c. d.

Suppl i esExpense Accumul at edDepr eci at i on Pr epai dExpenses Unear nedRev enues

6poi nt s QUESTI ON15 Whi choft hef ol l owi ngaccount swi l lnotbecl osedt oI ncomeSummar yatt heendoft hefiscal y ear ?

a.

Sal ar i esExpense

FeesEar ned

b.

Unear nedRent

c.

Depr eci at i onEx pense

d. 6poi nt s QUESTI ON16

Whi choft hef ol l owi ngaccount swi l lbecl osedt oRet ai nEar ni ngst heendoft hefisc aly ear ? RentExpense

a.

Feesear ned

b.

I ncomeSummar y

c.

Depr eci at i onEx pense

d. 6poi nt s QUESTI ON17

Theent r yt ocl oset heappr opr i at ei nsur anceaccountatt heendoft heaccount i ngper i odi sdebi t :

a. b. c. d.

I ncomeSummar y ;cr edi tPr epai dI nsur ance Pr epai dI nsur ance;cr edi tI ncomeSummar y I nsur anceExpense;cr edi tI ncomeSummar y I ncomeSummar y ;cr edi tI nsur anceExpense

A(n) ___________ system is the methods and procedures for collecting, classifying, summarizing and reporting a business's financial and operating information. accounting Which of the following is not one of the three phases needed when changing an accounting system, either in its entirety or in part? review The goal of systems analysis is to determine information needs After an accounting system has been set up, what is the next step?

Feedback Every controlling account must have its own subsidiary ledger At the end of the month, the total of the amount column of the revenue journal is posted as a debit to Accounts Receivable and a credit to Fees Earned Upgrade to remove ads Only $1/month The controlling account in the general ledger that summarizes the debits and credits to the individual customers accounts in the subsidiary ledger is entitled Accounts Receivable A purchase of supplies for cash is recorded in the Cash Payments journal A purchase of supplies on account is recorded in the Purchases journal Which of the following transactions is recorded in the purchases journal? purchase of store supplies on account When posting a column total in the purchases journal, a credit should be posted to Accounts Payable In which journal would an adjustment for an overcharge by a creditor be recorded? General journal Which of the following is always recorded in the general journal? correction of error in billing client Which of the following is recorded in the cash payments journal? payment of employees' salaries In which journal is the return of supplies purchased on account recorded? General journal When posting the column totals of a cash payments journal, a debit should be posted to Accounts Payable A cash investment made by the owner should be recorded on the cash receipts journal In which journal would you find cash revenues recorded? cash receipts journal Upgrade to remove ads Only $1/month Which transaction is normally recorded in a special journal? purchases on account If a company uses special journals he quantity and design depend on the needs of the company Computerized accounting systems record and post transactions at the same time Beachside Coffee Shop, in an effort to stream line its accounting system, has decided to utilize a Cash Receipts Journal in its operation. If the company is to record the cash sale of food for $18 which is the correct entry? Cash Dr. $18, Food Revenue Cr. $18 A computerized accounting system will not allow which of the following type of journalizing error?

Processing a transaction that has unequal debits and credits. What is meant by the term B2C? Business to consumer Using horizontal analysis, determine the percentage change in revenues for the South region. Round to one decimal place. 30.0%...