Examples of Journal Entries

U.S. GAAP Codification,  Accounting Textbooks

Principles of Accounting,  Intermediate Accounting,  Advanced Accounting

U.S. GAAP by Topic,  Accounting by Topic

Basics of Journal Entries

 
Example 1:  Financing Activities
 
  

   Owner invested $10,000 in the company.

   Analysis of Transaction
  Debit or Credit ?
Steps
1 Increase in Assets (Cash) by $10,000 Debit
2 Increase in Owner's Equity by $10,000 Credit

   Journal Entry
  Debit Credit
Cash 10,000
Owner's Equity 10,000

   Description of Journal Entry

Owner invested $10,000 in the company.

   Results of Journal Entry

Cash balance increases by $10,000.  --> Increase in Assets
Owner's Equity balance increases by $10,000.  -->  Increase in Owner's Equity
  

Example 2:  Financing Activities

 
  

   The company borrowed $20,000 from a bank.

   Analysis of Transaction
  Debit or Credit ?
Steps
1 Increase in Assets (Cash) by $20,000 Debit
2 Increase in Liabilities (Borrowings) by $20,000 Credit

   Journal Entry
Debit Credit
Cash 20,000
 Borrowings 20,000

   Description of Journal Entry

Borrowed $20,000.

   Results of Journal Entry

Cash balance increases by $20,000.  --> Increase in Assets
Borrowings balance increases by $10,000.  -->  Increase in Liabilities
  

Example 3:  Investing Activities

 
  

   The company purchased $12,000 equipment and paid in cash.

   Analysis of Transaction
   Debit or Credit ?
Steps
1 Increase in Assets (Equipment) by $12,000 Debit
2 Decrease in Assets (Cash) by $12,000 Credit

   Journal Entry
  Debit Credit
Equipment 12,000
 Cash 12,000

   Description of Journal Entry

Purchased $12,000 equipment in cash.

   Results of Journal Entry

Equipment balance increases by $12,000.  --> Increase in Assets
Cash balance decreases by $12,000.  -->  Decrease in Assets
  

Example 4:  Operating Activities

 
  

   The company purchased $6,000 merchandise (600 units) on credit.

   Analysis of Transaction
  Debit or Credit ?
Steps
1 Increase in Assets (Merchandise) by $6,000 Debit
2 Increase in Liabilities (Accounts Payable) by $6,000 Credit

   Journal Entry
  Debit Credit
Merchandise 6,000
 Accounts Payable 6,000

   Description of Journal Entry

Purchased $6,000 merchandise on credit.

   Results of Journal Entry

Merchandise balance increases by $6,000.  --> Increase in Assets
Accounts Payable balance increases by $6,000.  -->  Increase in Liabilities
  

Example 5:  Operating Activities

 
  

   The 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 Transaction
   Note:  This transaction includes both "REVENUE" and "EXPENSE" components.

   (1) REVENUE side

  Debit or Credit ?
Steps
1 Increase in Assets (Cash) by $9,000 Debit
2 Increase in Assets (Accounts Receivable) by $2,000 Debit
3 Increase in Revenue (Sales) by $11,000 Credit

   (2) EXPENSE side

  Debit or Credit ?
Steps
1 Increase in Expenses (Cost of Merchandise Sold) by $5,000 Debit
($6,000 / 600 units = $10 per unit)
($10 per unit X 500 units sold = $5,000 cost)
2 Decrease in Assets (Merchandise) by $5,000 Debit
   (1) REVENUE Journal Entry
  Debit Credit
Cash 9,000
Accounts Receivable 9,000
Sales Revenue 11,000
   Description of Journal Entry
Sold merchandise at $11,000 price and received $9,000 in cash.

   Results of Journal 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 Journal Entry
  Debit Credit
Cost of Merchandise Sold 5,000
Merchandise 5,000

   Description of Journal Entry

To record the cost of merchandise sold.

   Results of Journal Entry

Merchandise balance decreases by $5,000. --> Decrease in Assets
Cost of Merchandise Sold account balance increases by $5,000. --> Increase in Expense
 

Example 6:  Operating Activities

 
  

   The company paid $3,500 salaries.

   Analysis of Transaction
  Debit or Credit ?
Steps
1 Increase in Expenses (Salaries Expense) by $3,500 Debit
2 Decrease in Assets (Cash) by $3,500 Credit

   Journal Entry
  Debit Credit
Salaries Expense 3,500
 Cash 3,500

   Description of Journal Entry

Paid $3,500 salaries.

   Results of Journal Entry

Cash balance decreases by $3,500.  --> Decrease in Assets
Salaries Expense account balance increases by $3,500.  -->  Increase in Expenses
  

Example 7:  Operating Activities

 
  

   The company paid $1,500 rent.

   Analysis of Transaction
  Debit or Credit ?
Steps
1 Increase in Expenses (Rent Expense) by $1,500 Debit
2 Decrease in Assets (Cash) by $1,500 Credit

   Journal Entry
  Debit Credit
Rent Expense 1,500
 Cash 1,500
   Description of Journal Entry
Paid $1,500 rent.

   Results of Journal Entry

Cash balance decreases by $1,500.  --> Decrease in Assets
Rent Expense account balance increases by $1,500.  -->  Increase in Expenses
  
  

Further Analysis of Transactions

 

U.S. GAAP Codification,  Accounting Textbooks

Principles of Accounting,  Intermediate Accounting,  Advanced Accounting

U.S. GAAP by Topic,  Accounting by Topic

Summary of Transactions from previous file.

 
No. Date   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.
(4) May 8   Purchased $9,000 merchandise (900 units) on credit.
  Sold 500 units of merchandise at the price of $11,000.  
(5) May 15
    Customer paid $8,000 in cash at the time of sale.
(6) May 25   Paid $2,500 salaries.
(7) May 26   Paid $1,500 rent.
 

Summary of Journal Entries from previous file.

 
No. Journal Entries Debit Credit
     
(1) Cash 10,000  
(1)   Owner's Equity   10,000
Owner invested $10,000 in the company.     
     
(2) Cash 20,000  
(2)   Borrowings   20,000
Borrowed $20,000.    
     
(3) Equipment 12,000  
(3)   Cash   12,000
Purchased $12,000 equipment in cash.    
     
(4) Merchandise 6,000  
(4)   Accounts Payable   6,000
Purchased $6,000 merchandise on credit.    
     
(5)-1 Cash 9,000  
(5)-1 Accounts Receivable 2,000  
(5)-1   Sales   11,000
Sold merchandise at $11,000 price and received $9,000 in cash.    
     
(5)-2 Cost of Goods Sold 5,000  
(5)-2   Merchandise   5,000
To record the cost of goods sold ($5,000 merchandise).    
      
(6) Salaries Expense 2,500  
(6)   Cash   3,500
Paid $2,500 salaries.    
     
(7) Rent Expense 1,500  
(7)   Cash   1,500
Paid $1,500 rent.    

 
Calculating Accounting Balances
 
Cash

Credit
Debit
(1) 10,000 (3) 12,000
(2) 20,000 (6) 2,500
(5)-1 9,000 (7) 1,500
         
Balance 23,000    
       
 

Accounts Receivable

Credit
Debit
(5)-1 2,000     
         
Balance 2,000    
       
 

Merchandise

Credit
Debit
(4) 6,000 (5)-2 5,000
       
Balance 1,000    
       
 

Equipment

Credit
Debit
(3) 12,000    
         
Balance 12,000    
       
 

Accounts Payable

Credit
Debit
     (4) 6,000
         
        Balance  6,000
       
 

Sales
 Credit
Debit
       (5)-1 11,000
         
          Balance  11,000
          
 

Cost of Goods Sold

Credit
Debit
(5)-2 5,000    
           
Balance 5,000       
        
 

Salaries Expense

Credit
Debit
(6) 2,500     
         
Balance 2,500    
       
 

Rent Expense

Credit
Debit
(7) 1,500     
         
Balance 1,500    
       

Balance Sheet and Income Statement

 

Balance Sheet
As of May 31, 20XX

Liabilities and Owner's Equity

Assets
Cash $ 23,000   Accounts Payable  $  6,000
Accounts Receivable  2,000   Borrowings   20,000
Merchandise 1,000  
Equipment  12,000   Owner's Equity 12,000 (*1)
          
 
Total Assets $ 38,000     Total Liabilities and Owner's Equity  $ 38,000  
 
 

Income Statement
For the Period from May 1 to May 31, 20XX
Revenue
      Sales $ 11,000
Total Revenue $ 11,000
   
Expenses  
      Cost of Goods Sold $ 5,000
      Salaries Expense 2,500
      Rent Expense 1,500
Total Expenses 9,000
   
  Net Income $ 2,000 (*2)
 
(*1) Owner's Equity=Investment by Owner+Net Income=$10,000+$2,000=$12,000
(*2)  Net Income = Total Revenue - Total Expenses = $11,000 - $9,000 = $2,000