Journal and Adjusting Entries
Rules To Remember
• Accounts are not your checking or saving
accounts
• They are storage devices for your financial
transactions
• When a Bank “Credits Your Account” for
your deposits it is because your money is
a Liability to them …. Our transactions are
the opposite of the banking transactions
Rules To Remember
• Assets have a Normal Balance of DEBIT
– To increase an Asset, make a Debit Entry
– To decrease an Asset, make a Credit Entry
• Liabilities have a Normal Balance of Credit
– To increase a Liability, make a Credit Entry
– To decrease a Liability, make a Debit Entry
Rules To Remember
• Equity has a Normal Balance of Credit
– To increase an Equity, make a Credit Entry
– To decrease an Equity, make a Debit Entry
• Revenues have a Normal Balance of Credit
– To increase a Revenue, make a Credit Entry
– To decrease a Revenue, make a Debit Entry
• Expenses have a Normal Balance of DEBIT
– To increase an Expense, make a Debit Entry
– To decrease an Expense, make a Credit Entry
Rolon Kern Invested $1,200 in cash and
$100 in Office Supplies to start Company
Date
Description
1-2-04 Cash
Office Equip
Rolo Kern, Capital
Debit
Credit
1,200
100
1,300
Paid rent 3 months in advance $300
Date
Description
1-2-04 Prepaid Rent
Cash
Debit
Credit
300
300
Purchased Office Equip on Account $50
Date
Description
1-4-04 Office Equip
Accounts Payable
Debit
Credit
50
50
Purchased Office Supplies for Cash $40
Date
Description
1-6-04 Office Supply
Cash
Debit
Credit
40
40
Collected $400 in cash for services
Rendered
Date
Description
1-8-04 Cash
Revenues
Debit
Credit
400
400
Paid Home Electric Bill from Company
Funds $20
Date
Description
1-12-04 Kern, Withdrawl
Cash
Debit
Credit
20
20
Provides services for $100, client will pay
next month
Date
Description
1-14-04 Account
Receivable
Revenues
Debit
Credit
100
100
Paid wages $60
Date
1-16-04
Description
Wage Expense
Cash
Debit
Credit
60
60
Placed ad for $70, will pay next month
Date
Description
1-18-04 Advertising Expense
Accounts Payable
Debit
Credit
70
70
Balances as of 1-31-07
(Before Adjustments)
Date
1-31-07
Description
Cash
Debit
1,180
Accounts Receivable
100
Pre-paid Rent
300
Office Supplies
40
Office Equip
150
Account Payable
120
Kern, Capital
Kern, Withdrawl
1,300
20
Revenues
500
Wage Expense
60
Advertising Expense
70
Totals
Credit
1,920
1,920
Balances as of 1-31-07
(Before Adjustments)
Date
Description
Debit
1-31-07 Revenues
Wage Expense
Advertising Expense
Credit
500
60
70
Adjusting Entry
Office Supplies on hand total $6
Date
Description
1-31-07 Supply Expense
Office Supplies
Debit
Credit
34
34
Adjusting Entry
Rent Expense For Month $100
Date
Description
1-31-07 Rent Expense
Prepaid Rent
Debit
Credit
100
100
Adjusting Entry
Office Equip Depr $20
Date
Description
1-31-07 Depreciation Expense
Accum Depr - Equip
Debit
Credit
20
20
Adjusting Entry
Owe Employees $50 at end of month
Date
Description
1-31-07 Wage Expense
Wages Payable
Debit
Credit
50
50
Balances as of 1-31-07
Description
Cash
TB
Debit
(After Adjustments)
TB
Credit
ADJ
Debit
ADJ
Credit
ATB
Debit
ATB
Credit
1,180
1,180
Accounts Receivable
100
100
Pre-paid Rent
300
100
200
Office Supplies
40
34
6
Office Equip
150
150
Accum Depr – Equip
20
Account Payable
120
120
Wages Payable
50
Kern, Capital
Kern, Withdrawl
20
500
60
Rent Expense
Office Supply Expense
Totals
1300
20
Depreciation Exp
Advertising Expense
50
1,300
Revenues
Wage Expense
20
500
50
110
20
20
100
100
34
34
70
1,920
70
1,920
204
204
1,990
1,990
Income Stmt & Balance Sheet as of 1-31-07
Description
Cash
ATB
Debit
ATB
Credit
(After Adjustments)
INC
Debit
Stmt
Credit
Balance
Debit
Sheet
Credit
1,180
1,180
Accounts Receivable
100
100
Pre-paid Rent
200
200
6
6
150
150
Office Supplies
Office Equip
Accum Depr – Equip
20
20
Account Payable
120
120
Wages Payable
50
50
1,300
1,300
Kern, Capital
Kern, Withdrawl
20
Revenues
Wage Expense
20
500
500
110
110
20
20
100
100
Office Supply Expense
34
34
Advertising Expense
70
70
Depreciation Exp
Rent Expense
Totals
1,990
1,990
Net Income
Totals
334
500
1,656
166
1,990
1,990
500
1,490
166
500
1,656
1,656