Debits/Credits and Revenue/Expense
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Chapter3PowerPointPresentation.pptx
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The Accounting Information System
Kimmel ● Weygandt ● Kieso
Financial Accounting, Eighth Edition
3
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Explain how accounts, debits, and credits are used to record business transactions.
CHAPTER OUTLINE
Analyze the effect of business transactions on the basic accounting equation.
1
2
LEARNING OBJECTIVES
Indicate how a journal is used in the recording process.
3
Explain how a ledger and posting help in the recording process.
4
Prepare a trial balance.
5
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Accounting Information System
System of
collecting and
processing transaction data and
communicating financial information to decision-makers.
LEARNING OBJECTIVE
Analyze the effect of business transactions on the basic accounting equation.
1
LO 1
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Accounting information systems rely on a process referred to as the accounting cycle.
Accounting Information System
Analyze business transactions
Journalize
Post
Trial Balance
Adjusting Entries
Adjusted Trial Balance
Financial Statements
Closing Entries
Post-Closing Trial Balance
Most businesses use computerized accounting systems.
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Transactions are economic events that require recording in the financial statements.
Not all activities represent transactions.
Assets, liabilities, or stockholders’ equity items change as a result of some economic event.
Dual effect on the accounting equation.
ACCOUNTING TRANSACTIONS
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Question: Are the following events recorded in the accounting records?
Event
Purchase computer
Criterion
Pay rent
Record/ Don’t Record
Discuss guided trip options with potential customer
Illustration 3-1
Transaction identification process
ACCOUNTING TRANSACTIONS
Is the financial position (assets, liabilities, or stockholders’ equity) of the company changed?
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Assets
Liabilities
Stockholders’ Equity
=
+
Basic Accounting Equation
The process of identifying the specific effects of economic events on the accounting equation.
ANALYZING TRANSACTIONS
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Illustration 3-2
Expanded accounting equation
ANALYZING TRANSACTIONS
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Event (1). On October 1, cash of $10,000 is invested in Sierra Corporation by investors in exchange for $10,000 of common stock.
1. +10,000 +10,000
ANALYZING TRANSACTIONS
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Event (2). On October 1, Sierra borrowed $5,000 from Castle Bank by signing a 3-month, 12%, $5,000 note payable.
1. +10,000 +10,000
2. +5,000 +5,000
ANALYZING TRANSACTIONS
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Event (3). On October 2, Sierra purchased equipment by paying $5,000 cash to Superior Equipment Sales Co.
3. -5,000 +5,000
1. +10,000 +10,000
2. +5,000 +5,000
ANALYZING TRANSACTIONS
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Event (4). On October 2, Sierra received a $1,200 cash advance from R. Knox, a client.
4. +1,200 +1,200
3. -5,000 +5,000
1. +10,000 +10,000
2. +5,000 +5,000
ANALYZING TRANSACTIONS
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Event (5). On October 3, Sierra received $10,000 in cash from Copa Company for guide services performed.
4. +1,200 +1,200
5. +10,000 +10,000
3. -5,000 +5,000
1. +10,000 +10,000
2. +5,000 +5,000
ANALYZING TRANSACTIONS
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Event (6). On October 3, Sierra Corporation paid its office rent for the month of October in cash, $900.
4. +1,200 +1,200
5. +10,000 +10,000
6. -900 -900
3. -5,000 +5,000
1. +10,000 +10,000
2. +5,000 +5,000
ANALYZING TRANSACTIONS
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Event (7). On October 4, Sierra paid $600 for a one-year insurance policy that will expire next year on September 30.
4. +1,200 +1,200
5. +10,000 +10,000
6. -900 -900
7. -600 +600
3. -5,000 +5,000
1. +10,000 +10,000
2. +5,000 +5,000
ANALYZING TRANSACTIONS
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Event (8). On October 5, Sierra purchased an estimated three months of supplies on account from Aero Supply for $2,500.
4. +1,200 +1,200
5. +10,000 +10,000
6. -900 -900
7. -600 +600
8. +2,500 +2,500
3. -5,000 +5,000
1. +10,000 +10,000
2. +5,000 +5,000
ANALYZING TRANSACTIONS
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Event (9). On October 9, Sierra hired four new employees to begin work on October 15.
4. +1,200 +1,200
5. +10,000 +10,000
6. -900 -900
7. -600 +600
8. +2,500 +2,500
3. -5,000 +5,000
1. +10,000 +10,000
2. +5,000 +5,000
An accounting transaction has not occurred.
ANALYZING TRANSACTIONS
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Event (10). On October 20, Sierra paid a $500 dividend.
4. +1,200 +1,200
5. +10,000 +10,000
6. -900 -900
7. -600 +600
8. +2,500 +2,500
10. -500 -500
3. -5,000 +5,000
1. +10,000 +10,000
2. +5,000 +5,000
ANALYZING TRANSACTIONS
LO 1
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Event (11). Employees have worked two weeks, earning $4,000 in salaries, which were paid on October 26.
4. +1,200 +1,200
5. +10,000 +10,000
6. -900 -900
7. -600 +600
8. +2,500 +2,500
10. -500 -500
11. -4,000 -4,000
3. -5,000 +5,000
1. +10,000 +10,000
2. +5,000 +5,000
ANALYZING TRANSACTIONS
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INVESTOR INSIGHT
Why Accuracy Matters
While most companies record transactions very carefully, the reality is that mistakes still happen. For example, bank regulators fi ned Bank One Corporation (now JPMorgan Chase) $1.8 million because they felt that the unreliability of the bank’s accounting system caused it to violate regulatory requirements. Also, in recent years Fannie Mae, the government chartered mortgage association, announced a series of large accounting errors. These announcements caused alarm among investors, regulators, and politicians because they feared that the errors might suggest larger, undetected problems. This was important because the home-mortgage market depends on Fannie Mae to buy hundreds of billions of dollars of mortgages each year from banks, thus enabling the banks to issue new mortgages. Finally, before a major overhaul of its accounting system, the financial records of Waste Management Company were in such disarray that of the company’s 57,000 employees, 10,000 were receiving pay slips that were in error. The Sarbanes-Oxley Act was created to minimize the occurrence of errors like these by increasing every employee’s responsibility for accurate financial reporting.
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Transaction Analysis
A tabular analysis of the transactions for the month of August is shown below. Describe each transaction.
DO IT!
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LO 1
1. Company issued shares of stock for $25,000 cash.
2. Company purchased $7,000 of equipment on account.
3. Company received $8,000 cash in exchange for services performed.
4. Company paid $850 for this month’s rent.
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Double-entry system
Each transaction must affect two or more accounts to keep the basic accounting equation in balance.
Recording done by debiting at least one account and crediting another.
DEBITS must equal CREDITS.
Debit and Credit Procedures
LEARNING OBJECTIVE
Explain how accounts, debits, and credits are used to record business transactions.
2
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If Debits are greater than Credits, the account will have a debit balance.
$10,000
Transaction #2
$3,000
$15,000
8,000
Transaction #3
Balance
Transaction #1
DEBIT AND CREDIT PROCEDURES
LO 2
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$10,000
Transaction #2
$3,000
Balance
Transaction #1
$1,000
8,000
Transaction #3
DEBIT AND CREDIT PROCEDURES
If Credits are greater than Debits, the account will have a credit balance.
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Assets - Debits should exceed credits.
Liabilities – Credits should exceed debits.
Procedures for Assets and Liabilities
▼ HELPFUL HINT
The normal balance is the side where increases in the account are recorded.
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Investments by stockholders and revenues increase stockholders’ equity (credit).
Dividends and expenses decrease stockholder’s equity (debit).
Procedures for Stockholders’ Equity
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Revenues increase stockholder’s equity.
Expenses have the opposite effect: expenses decrease stockholders’ equity.
The effect of debits and credits on revenue and expense accounts is the same as their effect on stockholders’ equity.
Procedures for Stockholders’ Equity
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INVESTOR INSIGHT
Keeping Score
The Chicago Cubs baseball team has these major revenue and expense accounts:
Revenues Expenses
Admissions (ticket sales) Players’ salaries
Concessions Administrative salaries
Television and radio Travel
Advertising Ballpark maintenance
Chicago Cubs
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STOCKHOLDERS’ EQUITY RELATIONSHIPS
ILLUSTRATION 3-15
Stockholders’ equity
relationships
LO 2
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LO 2
Normal Balance Credit
Normal Balance Debit
DEBIT/CREDIT RULES
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Balance Sheet Income Statement
=
+
=
-
Asset
Liability
Equity
Revenue
Expense
Debit
Credit
SUMMARY OF DEBIT/CREDIT RULES
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Relationship among the assets, liabilities and stockholders’ equity of a business:
The equation must be in balance after every transaction. For every Debit there must be a Credit.
ILLUSTRATION 3-16
Assets
Liabilities
=
Stockholders’ Equity
Basic Equation
Expanded Basic Equation
+
SUMMARY OF DEBIT/CREDIT RULES
LO 2
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SUMMARY OF DEBIT/CREDIT RULES
Review Question
Debits:
increase both assets and liabilities.
decrease both assets and liabilities.
increase assets and decrease liabilities.
decrease assets and increase liabilities.
LO 2
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SUMMARY OF DEBIT/CREDIT RULES
Review Question
Accounts that normally have debit balances are:
assets, expenses, and revenues.
assets, expenses, and equity.
assets, liabilities, and dividends.
assets, dividends, and expenses.
LO 2
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The Recording Process
LEARNING OBJECTIVE
Indicate how a journal is used in the recording process.
3
LO 3
Analyze business transactions
Journalize the transaction
Post to ledger accounts
Analyze each transaction in terms of its effect on the accounts.
Enter the transaction information in a journal.
Transfer the journal information to the appropriate accounts in the ledger.
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THE RECORDING PROCESS
Analyze business transactions
Journalize the transaction
Post to ledger accounts
Analyze transaction
Enter
transaction
Transfer from journal to ledger
ILLUSTRATION 3-17
The recording process
LO 3
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Transactions recorded in chronological order in a journal before they are transferred to the accounts.
Contributions to the recording process:
Discloses the complete effects of a transaction.
Provides a chronological record of transactions.
Helps to prevent or locate errors because the debit and credit amounts can be easily compared.
THE JOURNAL
LO 3
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Journalizing - Entering transaction data in the journal.
Illustration: Presented below is information related to Sierra Corporation.
Oct. 1 Sierra issued common stock in exchange for $10,000 cash.
1 Sierra borrowed $5,000 by signing a note.
2 Sierra purchased equipment for $5,000.
Instructions - Journalize these transactions.
THE JOURNAL
LO 3
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THE JOURNAL
Oct. 1 Sierra issued common stock in exchange for $10,000 cash.
General Journal
Cash
Common Stock
10,000
10,000
Oct. 1
LO 3
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THE JOURNAL
Oct. 1 Sierra borrowed $5,000 by signing a note.
General Journal
Cash
Notes Payable
5,000
5,000
Oct. 1
LO 3
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THE JOURNAL
Oct. 2 Sierra purchased equipment for $5,000.
General Journal
Equipment
Cash
5,000
5,000
Oct. 2
LO 3
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THE JOURNAL
ILLUSTRATION 3-18
Recording transactions in
journal form
LO 3
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ACCOUNTING ACROSS THE ORGANIZATION
Boosting Profits
Microsoft originally designed the Xbox 360 to have 256 megabytes of memory. But the design department said that amount of memory wouldn’t support the best special effects. The purchasing department said that adding more memory would cost $30—which was 10% of the estimated selling price of $300. The marketing department, however, “determined that adding the memory would let Microsoft reduce marketing costs and attract more game developers, boosting royalty revenue. It would also extend the life of the console, generating more sales.” As a result of these changes, Xbox enjoyed great success. But, it does have competitors. Its newest video game console, Xbox One, is now in a battle with Sony’s Playstation4 for market share. How to compete? First, Microsoft bundled the critically acclaimed Titan fall with its Xbox One. By including the game most Xbox One buyers were going to purchase anyway, Microsoft was making its console more attractive. In addition, retailers are also discounting the Xbox, which should get the momentum going for increased sales. What Microsoft is doing is making sure that Xbox One is the center of the home entertainment system in the long run.
LO 3
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Journal Entries
The following events occurred during the first month of business of Hair It Is Inc., Kate Browne’s beauty salon:
Issued common stock to shareholders in exchange for $20,000 cash.
Purchased $4,800 of equipment on account (to be paid in 30 days).
Interviewed three people for the position of stylist.
The three activities are recorded as follows:
DO IT!
3
1. Cash 20,000
Common Stock 20,000
2. Equipment 4,800
Accounts Payable 4,800
3. No entry because no transaction occurred.
LO 3
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The Accounting Cycle
LEARNING OBJECTIVE
Explain how a ledger and posting help in the recording process.
4
LO 4
Analyze business transactions
Post to ledger accounts
Journalize the transaction
Trial Balance
Adjusting Entries
Adjusted Trial Balance
Financial Statements
Closing Entries
Post-Closing Trial Balance
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The Ledger is comprised of the entire group of accounts maintained by a company.
THE LEDGER
ILLUSTRATION 3-19
The general ledger
LO 4
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Listing of accounts used by a company to record transactions.
CHART OF ACCOUNTS
ILLUSTRATION 3-20
Chart of accounts for Sierra
Corporation
LO 4
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General Ledger
J1
The process of transferring journal entry amounts to ledger accounts.
POSTING
General Journal
Cash
Common Stock
10,000
10,000
Oct. 1
J1
Oct. 1
Stock issued
10,000
10,000
101
LO 4
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POSTING
Review Question
Posting:
normally occurs before journalizing.
transfers ledger transaction data to the journal.
is an optional step in the recording process.
transfers journal entries to ledger accounts.
LO 4
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ETHICS INSIGHT
A Convenient Overstatement
Sometimes a company’s investment securities suffer a permanent decline in value below their original cost. When this occurs, the company is supposed to reduce the recorded value of the securities on its balance sheet (“write them down” in common financial lingo) and record a loss. It appears, however, that during the financial crisis of 2008, employees at some financial institutions chose to look the other way as the value of their investments skidded. A number of Wall Street traders that worked for the investment bank Credit Suisse Group were charged with intentionally overstating the value of securities that had suffered declines of approximately $2.85 billion. One reason that they may have been reluctant to record the losses is out of fear that the company’s shareholders and clients would panic if they saw the magnitude of the losses. However, personal self-interest might have been equally to blame—the bonuses of the traders were tied to the value of the investment securities.
Source: S. Pulliam, J. Eaglesham, and M. Siconolfi , “U.S. Plans Changes on Bond Fraud,” Wall Street Journal Online (February 1, 2012).
Credit Suisse Group
LO 4
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Follow these steps:
1. Determine what type of account is involved.
2. Determine what items increased or decreased and by how much.
3. Translate the increases and decreases into debits and credits.
RECORDING PROCESS ILLUSTRATED
ILLUSTRATION 3-21
Investment of cash by
stockholders
LO 4
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LO 4
ILLUSTRATION 3-22
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LO 4
ILLUSTRATION 3-23
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ILLUSTRATION 3-24
LO 4
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ILLUSTRATION 3-25
LO 4
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ILLUSTRATION 3-26
LO 4
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ILLUSTRATION 3-27
LO 4
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LO 4
ILLUSTRATION 3-28
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ILLUSTRATION 3-29
LO 4
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ILLUSTRATION 3-30
LO 4
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ILLUSTRATION 3-31
LO 4
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LO 4
JOURNALIZING SUMMARY
ILLUSTRATION 3-32
General journal for Sierra Corporation
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LO 4
Illustration 3-32
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ILLUSTRATION 3-33
General ledger for Sierra Corporation
POSTING SUMMARY
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Selected transactions from the journal of Faital Inc. during its first month of operations are presented below. Post these transactions to T-accounts.
Posting
DO IT!
4
LO 4
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The Accounting Cycle
LEARNING OBJECTIVE
Prepare a trial balance.
5
LO 5
Analyze business transactions
Post to ledger accounts
Journalize the transaction
Prepare a Trial Balance
Adjusting Entries
Adjusted Trial Balance
Financial Statements
Closing Entries
Post-Closing Trial Balance
3-‹#›
A list of accounts and their balances at a given time.
Accounts are listed in the order in which they appear in the ledger.
Purpose is to prove that debits equal credits.
May also uncover errors in journalizing and posting.
Useful in the preparation of financial statements.
TRIAL BALANCE
▼ HELPFUL HINT
Note that the order of
presentation in the trial balance is:
Assets
Liabilities
Stockholders’ equity
Revenues
Expenses
LO 5
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TRIAL BALANCE
ILLUSTRATION 3-34
Sierra Corporation
trial balance
LO 5
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The trial balance may balance even when
a transaction is not journalized,
a correct journal entry is not posted,
a journal entry is posted twice,
incorrect accounts are used in journalizing or posting, or
offsetting errors are made in recording the amount of a transaction.
ETHICS NOTE An error is the result of an unintentional mistake. It is neither ethical nor unethical. An irregularity is an intentional misstatement, which is viewed as unethical.
LIMITATIONS OF A TRIAL BALANCE
LO 5
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Review Question
A trial balance will not balance if:
a correct journal entry is posted twice.
the purchase of supplies on account is debited to Supplies and credited to Cash.
a $100 cash dividends is debited to the Dividends account for $1,000 and credited to Cash for $100.
a $450 payment on account is debited to Accounts Payable for $45 and credited to Cash for $45.
TRIAL BALANCE
LO 5
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Trial Balance
DO IT!
5
The following accounts come from the ledger of SnowGo Corporation at December 31, 2017.
Equipment $88,000
Dividends 8,000
Accounts Payable 22,000
Salaries and Wages
Expense 42,000
Accounts Receivable 4,000
Service Revenue 95,000
Common Stock $20,000
Salaries and Wages
Payable 2,000
Notes Payable (due in
3 months) 19,000
Utilities Expense 3,000
Prepaid Insurance 6,000
Cash 7,000
Prepare a trial balance in good form.
LO 5
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LO 5
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KEY POINTS
A Look at IFRS
LEARNING OBJECTIVE
Compare the procedures for the recording process under GAAP and IFRS.
6
Similarities
Transaction analysis is the same under IFRS and GAAP.
Both the IASB and the FASB go beyond the basic definitions provided in the textbook for the key elements of financial statements, that is assets, liabilities, equity, revenues, and expenses. The implications of the expanded definitions are discussed in more advanced accounting courses.
LO 6
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A Look at IFRS
KEY POINTS
Similarities
As shown in the textbook, dollar signs are typically used only in the trial balance and the financial statements. The same practice is followed under IFRS, using the currency of the country where the reporting company is headquartered.
A trial balance under IFRS follows the same format as shown in the textbook.
LO 6
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A Look at IFRS
KEY POINTS
Differences
IFRS relies less on historical cost and more on fair value than do FASB standards.
Internal controls are a system of checks and balances designed to prevent and detect fraud and errors. While most public U.S. companies have these systems in place, many non-U.S. companies have never completely documented the controls nor had an independent auditor attest to their effectiveness.
LO 6
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A Look at IFRS
LOOKING TO THE FUTURE
The basic recording process shown in this textbook is followed by companies around the globe. It is unlikely to change in the future. The definitional structure of assets, liabilities, equity, revenues, and expenses may change over time as the IASB and FASB evaluate their overall conceptual framework for establishing accounting standards.
LO 6
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IFRS Practice
Which statement is correct regarding IFRS?
IFRS reverses the rules of debits and credits, that is, debits are on the right and credits are on the left.
IFRS uses the same process for recording transactions as GAAP.
The chart of accounts under IFRS is different because revenues follow assets.
None of the above statements are correct.
A Look at IFRS
LO 6
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IFRS Practice
A trial balance:
is the same under IFRS and GAAP.
proves that transactions are recorded correctly.
proves that all transactions have been recorded.
will not balance if a correct journal entry is posted twice.
A Look at IFRS
LO 6
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IFRS Practice
One difference between IFRS and GAAP is that:
GAAP uses accrual-accounting concepts and IFRS uses primarily the cash basis of accounting.
IFRS uses a different posting process than GAAP.
IFRS uses more fair value measurements than GAAP.
the limitations of a trial balance are different between IFRS and GAAP.
A Look at IFRS
LO 6
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COPYRIGHT
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Account Name
Debit / Dr.
Credit / Cr.
Account Name
Debit / Dr.
Credit / Cr.
Account Name
Debit / Dr.
Credit / Cr.
Chapter
3-23
Assets
Assets
Debit / Dr.
Credit / Cr.
Normal Balance
Normal Balance
Chapter
3-24
Liabilities
Liabilities
Debit / Dr.
Credit / Cr.
Normal Balance
Normal Balance
Chapter 3-*
Assets
Debit / Dr.
Credit / Cr.
Normal Balance
Chapter 3-*
Liabilities
Debit / Dr.
Credit / Cr.
Normal Balance
Chapter
3-25
Debit / Dr.
Credit / Cr.
Normal Balance
Normal Balance
Common Stock
Common Stock
Chapter
3-23
Dividends
Dividends
Debit / Dr.
Credit / Cr.
Normal Balance
Normal Balance
Chapter
3-25
Debit / Dr.
Credit / Cr.
Normal Balance
Normal Balance
Stockholders
Stockholders
’
’
Equity
Equity
Chapter
3-25
Debit / Dr.
Credit / Cr.
Normal Balance
Normal Balance
Retained Earnings
Retained Earnings
Chapter 3-*
Debit / Dr.
Credit / Cr.
Normal Balance
Retained Earnings
Chapter 3-*
Debit / Dr.
Credit / Cr.
Normal Balance
Common Stock
Chapter 3-*
Dividends
Debit / Dr.
Credit / Cr.
Normal Balance
Chapter 3-*
Debit / Dr.
Credit / Cr.
Normal Balance
Stockholders’ Equity
Chapter
3-27
Debit / Dr.
Credit / Cr.
Normal Balance
Normal Balance
Expense
Expense
Chapter
3-26
Debit / Dr.
Credit / Cr.
Normal Balance
Normal Balance
Revenue
Revenue
Chapter 3-*
Debit / Dr.
Credit / Cr.
Normal Balance
Expense
Chapter 3-*
Debit / Dr.
Credit / Cr.
Normal Balance
Revenue
Chapter
3-23
Assets
Assets
Debit / Dr.
Credit / Cr.
Normal Balance
Normal Balance
Chapter
3-27
Debit / Dr.
Credit / Cr.
Normal Balance
Normal Balance
Expense
Expense
Chapter
3-24
Liabilities
Liabilities
Debit / Dr.
Credit / Cr.
Normal Balance
Normal Balance
Chapter
3-25
Debit / Dr.
Credit / Cr.
Normal Balance
Normal Balance
Stockholders
Stockholders
’
’
Equity
Equity
Chapter
3-26
Debit / Dr.
Credit / Cr.
Normal Balance
Normal Balance
Revenue
Revenue
Chapter 3-*
Debit / Dr.
Credit / Cr.
Normal Balance
Stockholders’ Equity
Chapter 3-*
Debit / Dr.
Credit / Cr.
Normal Balance
Revenue
Chapter 3-*
Assets
Debit / Dr.
Credit / Cr.
Normal Balance
Chapter 3-*
Debit / Dr.
Credit / Cr.
Normal Balance
Expense
Chapter 3-*
Liabilities
Debit / Dr.
Credit / Cr.
Normal Balance
Account TitleRef.DebitCreditDate
Sheet1
| Date | Account Title | Ref. | Debit | Credit |
Sheet1
| Date | Account Title | Ref. | Debit | Credit |
Sheet1
| Date | Account Title | Ref. | Debit | Credit |
Cash
Acct. No. 101
ExplanationRef.DebitCreditBalanceDate
Account TitleRef.DebitCreditDate
Chart of Accounts
| Chart of Accounts | |||
| Acct. No. | Account | ||
| 100 | Cash | ||
| 105 | Accounts receivable | ||
| 110 | Inventory | ||
| 130 | Building | ||
| 200 | Accounts payable | ||
| 220 | Note payable | ||
| 300 | Common stock | ||
| 330 | Retained earnings | ||
| 400 | Sales | ||
| 500 | Cost of goods sold |
General Ledger
| General Journal | |||||||
| Date | Account Title | Ref. | Debit | Credit | |||
| Jan. | 3 | Cash | 100 | 100,000 | |||
| Common stock | 300 | 100,000 | |||||
| 10 | Building | 130 | 150,000 | ||||
| Note payable | 220 | 150,000 | |||||
| 15 | Inventory | 110 | 60,000 | ||||
| Accounts payable | 200 | 60,000 | |||||
| 20 | Accounts receivable | 105 | 75,000 | ||||
| Sales | 400 | 75,000 | |||||
| 20 | Cost of goods sold | 500 | 30,000 | ||||
| Inventory | 110 | 30,000 | |||||
| 29 | Cash | 100 | 40,000 | ||||
| Accounts receivable | 105 | 40,000 | |||||
| General Ledger | |||||||
| Cash | Acct. No. 100 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| Jan. | 3 | Sale of common stock | GJ | 100,000 | 100,000 | ||
| 20 | GJ | 40,000 | 140,000 | ||||
| Accounts Receivable | Acct. No. 105 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| Jan. | 20 | GJ | 75,000 | 75,000 | |||
| GJ | 40,000 | 35,000 | |||||
| Inventory | Acct. No. 110 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| Jan. | 15 | GJ | 60,000 | 60,000 | |||
| 20 | GJ | 30,000 | 30,000 | ||||
| Building | Acct. No. 130 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| Jan. | 10 | GJ | 150,000 | 150,000 | |||
| Accounts payable | Acct. No. 200 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| Jan. | 15 | GJ | 60,000 | (60,000) | |||
| Notes payable | Acct. No. 220 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| Jan. | 10 | GJ | 150,000 | (150,000) | |||
| Common stock | Acct. No. 300 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| Jan. | 3 | Sale for cash | GJ | 100,000 | (100,000) | ||
| Retained Earnings | Acct. No. 330 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| - 0 | |||||||
| Sales | Acct. No. 400 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| Jan. | 20 | GJ | 75,000 | (75,000) | |||
| Cost of Goods Sold | Acct. No. 500 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance | ||
| Jan. | 20 | GJ | 30,000 | 30,000 |
Trial Balance
| Trial Balance | ||||
| Acct. No. | Account | Debit | Credit | |
| 100 | Cash | 140,000 | ||
| 105 | Accounts receivable | 35,000 | ||
| 110 | Inventory | 30,000 | ||
| 130 | Building | 150,000 | ||
| 200 | Accounts payable | 60,000 | ||
| 220 | Note payable | 150,000 | ||
| 300 | Common stock | 100,000 | ||
| 330 | Retained earnings | |||
| 400 | Sales | 75,000 | ||
| 500 | Cost of goods sold | 30,000 | ||
| 385,000 | 385,000 |
Journal Entry
| No. | Account | Debit | Credit | |||||
| 1 | 10,000 |
Sheet1 (2)
| Date | Account Title | Ref. | Debit | Credit | |||
| Jan. | 3 | Cash | 100 | 100,000 | |||
| Common stock | 300 | 100,000 | |||||
| Cash | Acct. No. 101 | ||||||
| Date | Explanation | Ref. | Debit | Credit | Balance |
Sheet1
| Date | Account Title | Ref. | Debit | Credit |
