Journalizing Transactions
Created 2009
By Michael Worthington
Elizabeth City State University
Problem 2-2b
Lela Peterson transferred cash from a personal bank account to the
account used for the business
Look for clue words that identify the accounts
Cash Account is involved
Entity ___________ states that the business and owner are
separate, so anything personal goes through the Capital
Account
Double-entry Bookkeeping means that at two accounts are
involved in each transaction:
In this case, CASH & CAPITAL
Debit Cash
Cash increased
Cash is an ______ with a normal debit balance
Post to the normal balance side to increase an account
Post a debit to cash
Cash
Debit
$9,000
Credit
1
Every journal entry must contain at least one debit & one credit
Since Cash was debited, the other account must be credited
Debit
$9,000
Cash
Capital, Lela Peterson
Credit
$9,000
Lela Peterson invested money in the business, so the
Capital Account increased
Capital has a normal ___________ balance,
so credit the account to increase it
Problem 2-2b
Paid rent on office and equipment for month, $2,000
Look for clue words that identify the accounts
Cash Account is involved
Paying rent means Rent Expense
Double-entry Bookkeeping means that at two accounts
are involved in each transaction:
In this case, CASH and _________ EXPENSE
Credit Cash when paid
Cash decreased
Cash is an asset with a normal debit balance
To decrease an account, post to the side opposite the normal
balance side
So post a __________ to cash
Debit
Cash
Credit
$2,000
2
Every journal entry must contain at least one debit & one credit
Since Cash was credited, the other account must be debited
Debit
$2,000
Rent Expense
Cash
Credit
$2,000
Always debit __________ so debit Rent Expense
Problem 2-2b
Purchased supplies on account, $700
Look for clue words that identify the accounts
_____________ Account is involved
“on account” means on credit, so it involves Accounts Payable
or Accounts Receivable
Will the business receive or pay money?
If they will eventually receive money it is Accounts Receivable
If they will eventually pay money, it is Accounts Payable
Credit Accounts Payable
Accounts Payable because they must eventually pay for supplies
Accounts Payable is a liability with a normal credit balance
To increase an account, post to the normal balance side
So post a credit to Accounts ____________
Debit
Accounts Payable
Credit
$2,000
3
Every journal entry must contain at least one debit & one credit
Since Accounts Payable was credited, the other
account must be ___________
Supplies
Accounts Payable
Debit
$ 700
Credit
$ 700
Supplies increased, and Supplies is an asset with a normal debit
balance, so debit Supplies to increase its balance
Problem 2-2b
Paid creditor on account, $290
Look for clue words that identify the accounts
__________ Account is involved
“on account” means on credit, so it involves Accounts Payable
or Accounts Receivable
Did the business receive or pay money?
If they receive money, Accounts Receivable
If they pay money, it is Accounts Payable
Credit Cash when paid
When the business pays for something, cash decreases
Cash is an asset with a normal _________ balance
To decrease an account, post to the side opposite of the
normal balance
So credit Cash to decrease the balance
Debit
Cash
Credit
$290
4
Every journal entry must contain at least one debit & one credit
Since Cash was ________, the other account must be debited
Accounts Payable
Cash
Debit
$ 290
Credit
$ 290
Payment on account reduces the amount due to the creditor
Accounts Payable is a liability, with a normal credit balance
To decrease an account, post to the side opposite of the normal
balance side
Problem 2-2b
Earned sales commissions, receiving cash, $10,750
Look for clue words that identify the accounts
Cash Account is involved
“Sales Commissions” is the name of one of the accounts listed
in the problem
When a realty company receives sales commission, it’s revenue
Revenue should always be ___________
Debit
Sales Commissions
Credit
$10,750
Every journal entry must contain at least one debit & one credit
Since ______ Commissions was credited, the other account
must be debited
Debit
$10,750
Cash
Sales Commissions
Credit
$10,750
Receipt of cash increases the balance of cash
Cash is a asset, with a normal debit balance
To increase an account, post to the normal balance
side, so debit cash for an increase
5
Problem 2-2b
Paid automobile expenses, $1,400 and
miscellaneous expenses, $580
Look for clue words that identify the accounts
_________ Account is involved
“Automobile Expense” and “Miscellaneous Expenses” are
listed as account titles
Credit Cash when paid
When the business pays for something, cash decreases
Cash is an asset with a normal debit balance
To decrease an account, post to the side opposite of the
normal balance
So _________ Cash to decrease the balance
Debit
Cash
Credit
$1,880
($1,400 + $480 = $1,880)
Two different expense accounts were listed
Since Cash was credited the expense accounts must be debited
Automobile Expense
Miscellaneous Expenses
Cash
Debit
$1,400
$ 480
Credit
$1,880
ALWAYS ________ expense accounts
6
Problem 2-2b
Paid office salaries, $2,500
Look for clue words that identify accounts
Cash Account is involved
“Office Salaries ___________” is listed as an account title
Credit Cash when paid
When the business pays for something, cash ____________
Cash is an asset with a normal debit balance
To decrease an account, post to the side opposite of the
normal balance
So credit Cash to decrease the balance
Debit
Cash
Credit
$2,500
“Office Salaries” Expense was listed
Since Cash was credited, the expense account must be debited
Office Salaries Expense
Cash
Debit
$2,500
Credit
$2,500
ALWAYS __________ expense accounts
7
Problem 2-2b
Determined the cost of supplies used was $575
Look for clue words that identify the accounts
The Supplies Account is involved
Word “used” means an _____________
Always debit expenses
DebitCredit
Supplies Expense
$ 575
“Supplies Account” was indicated
Since Supplies Expense was ________,
the Supplies Account must be credited
Debit
Supplies Expense
$ 575
Supplies
Credit
$ 575
When supplies are used the amount decreases
Supplies is an asset with normal debit balance
Post to opposite side to decrease account
So post to credit side to decrease Supplies
Problem 2-2b
Withdrew cash for personal use, $1,000
Look for clue words that identify the accounts
Cash Account is involved
“Withdrew” indicates the ___________ Account
8
Always credit cash to decrease the balance
“Drawing Account” was indicated
Since Cash was _______ the Drawing Account must be debited
Cash
$1,000
Supplies
9000 2000 700
10750 290
1880
2500
1000
19750
Credit
Debit
$1,000
Drawing
Cash
T Accounts
Acct Pay
575
Capital
700
290
Drawing
9000 1000
7670
Sales
Commissions
10750
Supplies
Expense
Misc Exp
575
480
Salaries
Expense
Rent
Expense
2500
2000
Auto
Expense
1400
Trial Balance
Cash
Supplies
Acct Payable
Capital
Drawing
Sales Commissions
Offices Expense
Rent Expense
Auto Expense
Supplies Expense
Misc Expense
TOTALS
DEBIT
$12080
125
CREDIT
$ 410
9000
1000
10750
2500
2000
1400
575
480
$20,160
$20,160
NET INCOME
EXPENSES
REVENUES
$10,750 MINUS $6,955 EQUALS $3,795
9