Sample Journal Entry Exercises

Week 1-Supplemental Information

Debits Credits

Asset accounts……. Increase (+) Decrease (-)

Liability accounts.… Decrease (-) Increase (+)

Owner’s equity (capital) accounts… Decrease (-) Increase (+)

Balance Sheet Accounts

Credit for increases

(+)

Debit for decreases

(–)

Owner’s Equity Accounts

Credit for decreases

(–)

Debit for increases

(+)

Asset AccountsCredit for increases

(+)

Debit for decreases

(–)

Liability Accounts

Balance Sheet Accounts

Debits Credits

Revenue accounts… Decrease (-) Increase (+)

Expense accounts… Increase (+) Decrease (-)

Income Statement Accounts

Credit for increases

(+)

Debit for decreases

(–)

Revenue Accounts

Income Statement Accounts

Credit for decreases

(–)

Debit for increases

(+)

Expense AccountsLess

Equals

Net Income (credit > debits) increases owners’ equity (capital)

Net Loss (debits > credits) decreases owners’ equity (capital)

Increase(Normal Bal.) Decreases

Balance sheet accounts:AssetDebit CreditLiability Credit DebitOwner’s Equity:

Capital Credit DebitDrawing Debit

CreditIncome statement accounts:

Revenue Credit DebitExpense DebitCredit

Prepare a journal entry for the purchase of a truck on June 3 for $42,500, paying $8,500 cash and the remainder on account.

June 3 Truck 42,500Cash 8,500Accounts Payable 34,000

Sample Exercise 1

Prepare a journal entry on August 7 for the fees earned on account, $115,000.

Aug. 7 Accounts Receivable 115,000Fees Earned

115,000

Sample Exercise 2

The owner of a proprietorship may withdraw cash from the business for

personal use. Such withdrawals have the effect of decreasing owner’s equity.

Drawing Account

Prepare a journal entry on December 29 for the payment of $12,000 to the owner of Smartstaff Consulting Services, Dominique Walsh, for personal use.

Dec. 29 Dominique Walsh, Drawing 12,000Cash 12,000

Sample Exercise 3

State for each account whether it is likely to have (a) debit entries only, (b) credit entries only, or (c) both debit and credit entries. Also, indicate its normal balance.

1. Amber Saunders, Drawing2. Accounts Payable3. Cash4. Fees Earned5. Supplies6. Utilities Expense

Sample Exercise 4

1. Debit entries only; normal debit balance2. Debit and credit entries; normal credit balance3. Debit and credit entries; normal debit balance4. Credit entries only; normal credit balance5. Debit and credit entries; normal debit balance6. Debit entries only; normal debit balance

Solution for Sample Exercise 4

On March 1, the cash account balance was $22,350. During March, cash receipts totaled $241,880 and the March 31 balance was $19,125. Determine the cash payments made during March.

Sample Exercise 5

Using the following T-account solve for the amount of cash payment (indicated by ? below).

Cash

Mar. 1 Bal 22,350 ? Cash paymentsCash receipts 241,880Mar. 31 Bal. 19,125

$19,125 = $22,350 + $241,880 – Cash paymentsCash payments = $22,350 + $241,880 –$19,125 = $245,105

Solution for Sample Exercise 5

NetSolutions received an offer from a local retailer to rent the land purchased on November 5. The retailer plans to use the land as a parking lot for its employees and customers. NetSolutions agreed to rent the land to the retailer for three months, with the rent payable in advance.

Dec. 1 NetSolutions receives $360 for three month’s rent for use of its land beginning December 1.

1 Cash 11 360 00

Unearned Rent 23 360 00

Received advance

payment for three

months’ rent on land.

Dec. 4 NetSolutions purchased office equipment on account from Executive Supply Co. for $1,800.

4 Office Equipment 18 1 800 00

Accounts Payable 21 1 800 00

Purchased office

equipment on account.

The equality of debits and credits for each transaction is built into the

accounting equation: Assets = Liabilities + Owner’s Equity.

Because of this double equality, this system is called the double-

entry accounting system.

ReferenceWarren, C., Reeve, J., & Duchac, J., (2007). Accounting (22nd ed.). Mason, Ohio: Thomson South-Western

Note: all the content information on these slides has been extracted from the above text.

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