Accounting for a Service
Business
Unit 1.7
The Journal
The Journal
All business transactions are first recorded
in a journal. The journal is a
chronological record of the business’s
business transactions.
The process of recording transactions in a
journal (making journal entries) is called
journalizing.
The Journal
Page 110 of your text shows you a sample
general journal.
Notice:
how the date is set up
how the debit is listed first and is flush with the left-hand
margin
how the credit it listed second and is indented several
spaces
the explanation following the entry - don’t leave anything up
to your memory
how we skip a space between journal entries: this lends
itself to readability
the reference column. We will refer to this later.
The Journal
What is the difference between a
compound entry and a simple entry?
A simple entry has only one account debited
and one account credited.
A compound entry has one or more accounts
debited and one or more accounts credited.
Journal Entries
Peg deposits $15,000 in a bank account in
the name of Kline Consulting (KC)
Cash (an asset) will increase, therefore a debit
Capital (capital account) will increase, a credit
Nov. 1 Cash
15,000
Kline, Capital
15,000
(owner’s investment of cash in the business)
Journal Entries
Peg buys equipment for $10,000 cash to
operate her business.
Equipment (an asset) will increase…debit
Cash (an asset) will decrease…credit
Nov.2 Equipment
10,000
Cash
10,000
(purchase of equipment for cash)
Journal Entries
Peg buys supplies for $1,350, agreeing to
pay the supplier in the near future.
Supplies (an asset) will increase…debit
Accounts Payable (a liability) will increase…credit
Nov.3Supplies
1,350
Accounts Payable
1,350
(purchase of supplies on account)
Journal Entries
KC earns fees of $7,500 and receives the
amount in cash.
Cash (an asset) will increase…debit
Fees Earned (a revenue) will increase…credit
Nov.4Cash
7,500
Fees Earned
7,500
(received cash for services provided)
Journal Entries
KC receives a bill for $300 for advertising.
KC will pay this bill at a later date.
Advertising Expense (an expense) will increase
Accounts Payable (a liability) will increase
Nov. 5
Advertising Expense 300
Accounts Payable
(purchased advertising on account)
300
Journal Entries
 KC earns fees of $12,000. KC receives 4,000 in
cash and 8,000 is billed to customers on account.
Cash(an asset) will increase
Accounts receivable (an asset) will increase
Fees Earned (revenue) will increase
Nov. 6 Cash
4,000
Accounts Receivable 8,000
Fees Earned
12,000
(customer paid cash and account receivable for
services provided)
Journal Entries
 KC pays expenses of $500 for rent, $200 for
insurance, and $175 for utilities.
Rent expense, insurance expense, and utilities
expense (all expenses) will increase
Cash (an asset) will decrease
Nov. 7
Rent Expense
Insurance Expense
Utilities Expense
Cash
(paid monthly expenses)
500
200
175
875
Journal Entries
KC pays it advertising bill of $1,350 in cash.
Accounts Payable (a liability) will decrease
Cash (an asset) will decrease
Nov. 8
Accounts Payable
1,350
Cash
1,350
(made a payment on account)
Journal Entries
 KC receives $1,750 cash from customers on
account.
Cash (an asset) will increase
Accounts Receivable (an asset) will decrease
Nov.9Cash
1,750
Accounts Receivable 1,750
(received payment from a customer
on account)
Journal Entries
Peg Kline withdraws $1,500 in cash from the
business for her personal use.
Owner’s withdrawals (drawing) will increase…debit
Cash (an asset) will decrease…credit
10 Kline, Drawing
1,500
Cash
1,500
(withdrew cash for personal use)