Accounting Study Guide

U.S. GAAP-Codification IFRS International Standards Accounting Standards, ASC


Accounting Journal Entries
Review and Practice Materials



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U.S. GAAP by Topic,  Accounting by Topic,  U.S. Tax Code by Section



Basics of Journal Entries
 
Example 1:  Financing Activities
 
  

   Owner invested $10,000 in the company.
   Analysis of Transaction

Steps

 

Debit or Credit ?

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

Steps

 

Debit or Credit ?

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

Steps

 

Debit or Credit ?

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

Steps

 

Debit or Credit ?

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

Steps

 

Debit or Credit ?

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

Steps

 

Debit or Credit ?

1

 Increase in Expenses (Cost of Merchandise Sold) by $5,000
($6,000 / 600 units = $10 per unit)
($10 per unit X 500 units sold = $5,000 cost)		 Debit

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

Steps

 

Debit or Credit ?

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

Steps

 

Debit or Credit ?

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
  
  
  Click here for further analysis of these transactions continues on the next file.
 




Principles of Accounting Course: Key Topics
 
Accounting Journal Entry Examples
Accounting Equation - Review and Examples
Double Entry Recording of Accounting Transactions
Debit Accounts
Credit Accounts
Asset Accounts
Liability Accounts
Equity Accounts
Revenue Accounts
Expense Accounts






U.S. GAAP by Topic
International Financial Reporting Standards (IFRS)
 
Accounting Topics
Inventory Valuation Methods
Depreciation Methods
Revenue Recognition Principle
Accrual Basis vs. Cash Basis Accounting
Basics of Journal Entries
Ratios for Financial Statement Analysis
Overview of Financial Statements





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