Journaling

Event Note Dr. Cr.

sells goods w/ purchase n/a cash – 10000 inventory – 2000
price 2000 for 10000 in COGS - 2000 revenues – 10000
cash, goods are delivered
immediately
sells goods w/ purchase n/a COGS – 4000 revenues – 19000
price 4000 for 19000 on a/ receivable – 19000 inventory – 4000
credit, goods are
delivered immediately
sells good w/ purchase n/a cash – 48000 unearned revenues –
price 8000 for 48000 in 48000
cash, goods are not in
stock
sells goods w/ purchase n/a cash – 115000 unearned revenues –
price 23000 for 115000 in COGS – 11500 57500
cash, 50% of goods are inventory – 11500
delivered immediately revenues – 57500
and the rest later
delivers a backorder of n/a COGS – 150 inventory – 150
goods for a cash sale that unearned revenues – 600 revenues – 600
occurred in Feb, sales
value was 600 w/
purchase price 150
sold in cash gift vouchers n/a cash – 50 unearned revenues – 50
w/ value of 50
Jun 1 paid annual record Dec 31 prepayments – 28000 cash - 33600
subscription fee 33600, operating costs – 5600
subscription period (2800*2)
running from Apr 1
pays 270 for cleaning of a n/a operating costs – 270 cash – 270
store
pays 30080 in wages for n/a operating costs - 30080 cash – 30080
labor provided
owner withdraws 7000 n/a owners drawings – 7000 cash – 7000
cash for private use
11200 ordinary shares, at dividend retained earnings – 8960 dividend payable – 8960
declares cash dividend 0.8 declaration
per share
Jan 1 issues 3900 ordinary Jan 31 cash - 54600 share capital – 35100
shares @14 p/s, nominal share premium – 19500
value 9 p/s, paid fully in
cash and trading Jan 31 at 9 * 3900
12 p/s (14-9) * 3900
Jan 31 declares cash Jan 31 retained earnings – 300 dividends payable - 300
dividend 300, paid to
shareholders Feb 10
Jan 1 borrows 84000 for 5 Mar 31 interest expense – 420 interest payable – 420
years @ 2% p/a, interest
accrues on principal and
paid Jan 1
Jun 1 ’13 borrows 960000 Jun 1 ’20, loan is interest payable – 28000 cash - 988000
for 7 years @ 7% p/a, being covered in full bank loan - 960000
principal paid Jan 1
(960000*0.07) / (12*5)
Sep 1 ’15 issues short- Sep 1 ‘15 cash – 7700 short-term note payable
term zero-interest note – 7700
payable for 7700,
promising to pay 8140 in
11 months on Aug 1 ‘16
record interest interest expense – 160 short-term note payable
expense Dec 1 ‘15 – 160
(8140-7700) / (11*4)
record repayment of short-term note payable – cash – 8140
note Aug 1 ‘16 8140
received 5300 cash n/a cash - 5300 accounts receivable -
payment in full from a 5300
customer for a past credit
transaction
buys 200000 merch on n/a inventory – 186000 accounts payable -
credit w/ terms 7/10, 186000
n/20, all gross liability less
100000 paid within the
discount period and the
remainder within 20 day
term
37200 ending balance on COGS method cost of sale – 37200 allowance to reduce
allowance to reduce inventory to NRV - 37200
inventory to NRV
loss method loss due to decline of allowance to reduce
inventory to NRV - 37200 inventory to NRV - 37200
purchased merch on record return a/ payable – 22080 purchase returns /
account for 80000, terms allowances – 22080
4/5 n/30 and later 23000*0.96
returned part of the 23000*0.96
purchase for 230000,
receiving credit on
 account
adjusting journal purchase discounts lost - a/ payable - 2280
entry 2280
total sale of 50000, terms record under net a/ receivable – 49000 sales revenue – 49000
2/10, n/30, cost of sale method cost of sales – 40000 inventories – 40000
40000
receives payment of cash – 50000 a/ receivable – 49000
50000 out of term sales discounts forfeited
window – 1000

recovery of written off recognize cash cash – 12200 a/ receivable – 12200

accounts 12200 collection from
previously written off
accounts
write off allowance for a/ receivable - 48000
uncollectible uncollectible accounts -
receivables 48000
recovery of written write off allowance for a/ receivable – 33000
accounts 0, a / receivable uncollectible uncollectible accounts –
over 180 days 33000 receivables 33000
impairment loss 21000 record impairment impairment loss – 21000 accum. depreciation –
21000
spends 32400 cash on a record replacement PPE – new machine – PPE – old machine –
new machine replacing an of old packaging 32400 36900
old one with a cost of machine accum. depreciation – old cash – new machine –
36900, accumulated – 20500 32400
depreciation of 20500 and loss of disposal – old –
a residual value of 0 16400

Exam Style

On Jan 5 2019, purchases equipment on account for 3500, payment due within the month

Journal
Date Account Dr. Cr.
Jan 5, 2019 equipment 3500
acc. payable 3500
to recognize purchase of
equipment on account

On Jan 9 2019, receives 4000 cash in advance for services not yet rendered

Journal
Date Account Dr. Cr.
Jan 9, 2019 cash 4000
unearned 4000
revenue
to recognize the receipt
of customer advanced
payments for services
yet to be rendered
Journal entry April 1 under FIFO;

Dr. Cr.
COGS – 8200 inventories – 8200
accounts receivable - 16400 sales revenue – 16400

Journal entry April 6;

Dr. Cr.
inventories – 43200 inventories – 43200
144090*3
Journal entry April 9;

Dr. Cr.
COGS - inventories – 43200

T Accounts

Dec 31, ’05: cost of sale (37200), allowance to reduce NRV (37200 credit)
(100200) – (80000-8000-9000) = 37200

Dec 31, ’06: allowance to reduce to NRV (26000 credit)

Allowance to reduce inventory to NRV

 Dr. Cr.
decrease in inventory loss – 11200 opening balance (Jan 1) – 37200
closing balance – 26000

Prepare a t-account for uncollectible accounts showing all movements in May;

Allowance for uncollectible accounts

Dr. Cr.
uncollectible accounts written off in May – 33000 beginning balance – 129000
bad debt expense April – 50300
ending balance May 31 – 146300

Adjusting Entries
Event Note Dr. Cr.
Aug 1 paid annual adjust for Dec 31 operating costs – 10750 prepayments - 10750
subscription fee 25800,
subscription period
running Jun 1 to Jun 1st
loan 14000 @ 10.80% p/a, adjust for Dec 31 interest expenses – 378 accounts payable - 378
each year paying interest
for preceding 12 months (14000*0.1080) / (12*3)
 on Oct 1st
Dec 23 pays salary to 7 adjust for Dec 31 operating costs – 10640 accounts payable –
employees, for labor 10640
provided up to and incl. (152*7) * 10
Dec 21 – remaining days of
Dec are provided with a
value 152 p/d p/ employee
Jan 31, took inventory of adjust for Jan 31 supplies expense - 100 supplies – 100
supplies and discovered
100 supplies had been
used during the month
Jan 5 equipment purchase adjust for Jan 31 depreciation - 75 accumulated
depreciated 75 during the depreciation – 75
month
acc. depreciation = asset
discovers 140 interest adjust for Jan 31 interest receivable - 140 interest revenue – 140
earned during Jan was
previously uncollected and
unrecorded
LCNRV = 63000, historical adjusting journal entry cost of sale – 37200 allowance to reduce to
cost = 100200 NRV – 37200

Prepaid Expenses

On Oct 5 2021 purchased supplies for 25000 – show journal entry

Oct 5 Dr. Cr.

supplies 25000
cash 25000

On Oct 31 discovered 10000 of supplies are still on hand – prepare adjusting entry for Oct 31

Oct 31 Dr. Cr.

supplies expense 15000
supplies 15000

Depreciation

Oct 1 purchased equipment for 50000 and estimates the depreciation of this equipment to be 4800 p/y –
record the monthly depreciation

Oct 31 Dr. Cr.

depreciation expense 400
accumulated depreciation 400

Unearned Revenue

Oct 2 received 12000 for services expected to be completed Dec 31 – show journal entry

Oct 2 Dr. Cr.

cash 12000
unearned sales revenue 12000

Evaluation reveals 4000 should be recognized in Oct

Oct 31 Dr. Cr.

 unearned sales revenue 4000
service revenue 4000

Accrued Revenue

In Oct performed services worth 2000 that weren’t billed on or before Oct 31 – prepare adjusting entry for Oct
31

Oct 31 Dr. Cr.

accounts receivable 2000
service revenue 2000

Accrued Expenses

Oct 1 signed a 3 month 50000 note payable @ 12% p/a – prepare adjusting entry for Oct 31

Oct 31 Dr. Cr.

interest expense 500
interest payable 500

Correcting Entries
After making a credit purchase for supplies worth 500 on April 5, accidentally crediting accounts receivable
instead of accounts payable

Dr. Cr.
supplies original entry 500
accounts receivable 500
supplies correction 500
accounts receivable 500
supplies correction 500
accounts payable 500

Closing Entries
Sole proprietorship Corporation
1. dr. revenue acc for balance, cr. income 1. dr. revenue acc for balance, cr. income
summary for total revenues summary for total revenues
2. dr. income summary for total expenses, cr. 2. dr. income summary for total expenses, cr.
each expense acc for balance each expense acc for balance
3. dr. income summary and cr. owners capital 3. dr. income summary and cr. retained
for amount of net income earnings for amount of net income
4. dr. owners capital, cr. owners drawings for 4. dr. retained earnings, cr. dividends for
same amount same amount
 Account Dr. Cr.
interest revenue 140
service revenue 10100
income summary 10240
income summary 5575
supplies expense 100
depreciation expense 75
salaries expense 5100
utilities expense 300
income summary 4665
retained earnings 4665
retained earnings 100
dividends 100

Prepare a t-account for expenses (example values) and close it to the corresponding t-account;

Expenses Income summary

Dr. Cr. Dr. Cr.
general, admin – 10110 to income summary – expenses incurred -
selling exp – 5100 278600 278600
COGS – 235260
insurance exp – 1200
salary exp – 12000
other non-cash exp –
12230
interest exp – 400
tax exp – 2300

Prepare a t-account for sales revenue of 342900 and close it to the corresponding t-account;

Sales revenue Income summary

Dr. Cr. Dr. Cr.
to income summary - revenue recognized - revenue recognized -
342900 342900 342900

Prepare a t-account for retained earnings and close it to the corresponding t-account;

Income summary Retained earnings

Dr. Cr. Dr. Cr.
expenses incurred Jan revenue recognized Jan beginning balance (Jan
’20 – 278600 ’20 - 342900 1) – 328680
to retained earnings acc from income summary
– 64300 acc – 64300
ending balance (Jan 31)
– 392980