Accounting Journal Entries

Accounting Study Guide by AccountingInfo.com

Accounting Journal Entries
Review and Practice Materials

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.

Review of Accounting Topics

Principles of Accounting:

This section provides study guides for students in the principles of accounting courses or introduction to financial accounting courses.

U.S. GAAP Codification of Accounting Standards
GAAP Codification Updates

Sources of U.S. GAAP
U.S. GAAP by Topic
Hierarchy of U.S. GAAP

Principles of Accounting Course Review
Intermediate Accounting Course Review
Advanced Accounting Course Review

Financial Statements
Examples of Financial Statements
Balance Sheet: Examples

Ratios for Financial Statement Analysis

Liquidity Analysis Ratios

Profitability Analysis Ratios Activity Analysis Ratios

Cash Flow Analysis Ratios

Capital Structure Analysis Ratios

Capital Market Analysis Ratios

Balance Sheet
Income Statement
Statement of Cash Flows

Basics of Journal Entries
Accounting Journal Entry Examples

More Examples of Journal Entries

Accounting Equation
Double Entry Recording of Accounting Transactions
Debit Accounts
Credit Accounts

Asset Accounts
Liability Accounts
Equity Accounts
Revenue Accounts
Expense Accounts

Accounting Cycle

Journals and Ledgers

Adjusting Journal Entries

Trial Balance

Accrual Basis vs. Cash Basis Accounting
Accrual Basis Accounting

Cash Basis Accounting

Accrual Basis Accounting

Revenue recognition

Expense recognition

Bank Reconciliation
Accounts Receivable
Inventory Accounting
Depreciation Methods

Present Value, Future Value (PV, FV Conversion Tables)

Simple and Compound Interest Calculations

Accounting for General Users:

A guide to accounting for users who are interested in understanding accounting reports. This section explains what users need to know to understand and analyze accounting information provided in the financial statements. No prerequisite is required to read this section.

CPA and Accounting Profession

How to become a Certified Public Accountant (CPA)

Accounting is an information system.

Users of accounting information

Financial accounting for external users

Managerial accounting for internal users

Examples of Financial Statements
Financial Statements Index

Balance Sheet: Examples
Balance Sheet

Income Statement

Statement of Cash Flows

Statement of Stockholders' Equity

Annual Report Project Resources

Elements of Financial Statements (SFAC No. 6)

Balance Sheet provides information about financial position of a company.

Examples of Asset Accounts

Examples of Liability Accounts

Examples of Stockholders' Equity Accounts

Income Statement provides information about the performance of a company.

Earnings Per Share (EPS)
Revenue Recognition Principle
Examples of Revenue and Gain Accounts
Examples of Expense and Loss Accounts

Statement of Cash Flows provides information about the cash flow of a company.

Cash flow from operating activities

Cash flow from investing activities

Cash flow from financing activities

Intermediate Accounting:

This section provides study guides for students in the intermediate accounting courses. Following topics are discussed in this section.

Accounting Courses Online

Accounting for Cash and Receivables

Cash and bank deposits

Accounts receivable

Notes receivable

Allowance for doubtful accounts
Impairment of a Loan

Accounting for Inventories

First In First Out (FIFO)

Last In First Out (LIFO)

Dollar Value LIFO

Retail Inventory Method

Gross Profit Method

Lower of Cost or Market (LCM)

Investments in Debt and Equity Securities

Trading securities

Available for sale securities

Debt securities

Property, Plant, and Equipment (PP&E)

Acquisition costs of noncurrent operating assets

Retirement of noncurrent operating assets
Capitalization of interest cost
Impairment of Long-Lived Assets

Goodwill and Other Intangible Assets

Loss and Gain Contingencies
Extraordinary Gains and Losses
Discontinued Operations

Earnings per Share (Basic and Diluted EPS)

Depreciation Methods

Straight Line Depreciation

Declining Balance Method

Sum-of-the-years-digits Method

Accounting for Bonds Payable

Price of bonds payable

Discount on bonds payable

Premium on bonds payable

Amortization of discount and premium

Early extinguishment of debts

Stockholders' Equity

Common stock

Preferred stock

Par value

Additional paid-in capital

Retained earnings

Treasury stock (Cost method, par value method)

Dividends (Cash dividend, Stock dividend)

Stock split

Initial Public Offering (IPO)
Subsequent Events

Code of Professional Conduct for Accountants

Advanced Accounting:

This section provides study guides for students in the advanced accounting courses. Following topics are discussed in this section.

Consolidated Financial Statements
Business Combinations
Accounting for Leases

U.S. GAAP by Codification Topic

105 GAAP Hierarchy
105 GAAP History

205 Presentation of Financial Statements
205-20 Discontinued Operations
210 Balance Sheet
210-20 Offsetting
220 Comprehensive Income
225 Income Statement
225-20 Extraordinary and Unusual Items
230 Statement of Cash Flows
250 Accounting Changes and Error Corrections
260 Earnings per Share
270 Interim Reporting

310 Impairment of a Loan
320 Investment Securities
320 Other-Than-Temporary Impairments, FSP FAS 115-2
320-10-05 Overview of Investments in Other Entities
320-10-35 Reclassification of Investments in Securities
323-10 Equity Method Investments
323-30 Investments in Partnerships and Joint Ventures
325-20 Cost Method Investments
330 Inventory

340-20 Capitalized Advertising Costs
350-20 Goodwill
350-30 Intangibles Other than Goodwill
350-40 Internal-Use Software
350-50 Website Development Costs
360 Property, Plant and Equipment
360-20 Real Estate Sales

410 Asset Retirement and Environmental Obligations
420 Exit or Disposal Cost Obligations
450 Contingencies
450-20 Loss Contingencies
450-30 Gain Contingencies
480 Redeemable Financial Instruments

505-20 Stock Dividends, Stock Splits
505-30 Treasury Stock

605 SEC Staff Accounting Bulletin, Topic 13
605-25 Revenue Recognition - Multiple Element Arrangements

715-30 Defined Benefit Plans - Pension
718 Share-Based Payment
730 Research and Development
730-20 Research and Development Arrangements

805 Business Combinations
810 Consolidation
810 Noncontrolling Interests
810 Consolidation of Variable Interest Entities, SFAS 167

815 Derivatives and Hedging Overview

820 Fair Value Measurements
820 Fair value when the markets are not active, FSP FAS 157-4
825 Fair Value Option

830 Foreign Currency Matters
830-20 Foreign Currency Transactions
830-30 Translation of Financial Statements
835 Interest
835-20 Capitalization of Interest
835-30 Imputation of Interest

840 Leases
840-20 Operating Leases
840-30 Capital Leases
840-40 Sale-Leaseback Transactions
845 Nonmonetary Transactions

855 Subsequent Events
860-20 Sale of Financial Assets, SFAS 166
860-50 Servicing Assets and Liabilities, SFAS 156

985-20 Costs of software to be sold