Since there are so many different types of business transactions, accountants usually categorize them and record them in separate journal to help keep track of business events. For instance, cash was used to purchase this vehicle, so this transaction would most likely be recorded in the cash disbursements journal. There are numerous other journals like the sales journal, purchases journal, and accounts receivable journal. Example
We are following Paul around for the first year as he starts his guitar store called Paul’s Guitar Shop, Inc. Here are the events that take place. Entry #1 — Paul forms the corporation by purchasing 10,000 shares of $1 par stock. Entry #2 — Paul finds a nice retail storefront in the local mall and signs a lease for $500 a month. Entry #3 — PGS takes out a bank loan to renovate the new store location for $100,000 and agrees to pay $1,000 a month. He spends all of the money on improving and updating the store’s fixtures and looks. Entry #4 — PGS purchases $50,000 worth of inventory to sell to customers on account with its vendors. He agrees to pay $1,000 a month.
Entry #5 — PGS’s first rent payment is due. Entry #6 — PGS has a grand opening and makes it first sale. It sells a guitar for $500 that cost $100. Entry #7 — PGS sells another guitar to a customer on account for $300. The cost of this guitar was $100.
Entry #8 — PGS pays electric bill for $200. Entry #9 — PGS purchases supplies to use around the store. Entry #10 — Paul is getting so busy that he decides to hire an employee for $500 a week. Pay makes his first payroll payment.
Entry #11 — PGS’s first vendor inventory payment is due of $1,000. Entry #12 — Paul starts giving guitar lessons and receives $2,000 in lesson income. Entry #13 — PGS’s first bank loan payment is due.
Entry #14 — PGS has more cash sales of $25,000 with cost of goods of $10,000. Entry #15 — In lieu of paying himself, Paul decides to declare a $1,000 dividend for the year. Now that these transactions are recorded in their journals, they must be posted to the T-accounts or ledger accounts in the next step of the accounting cycle . Here is an additional list of the most common business transactions and the journal entry examples to go with them. Sale Entry Depreciation Expense Entry Accumulated Depreciation Entry Accrued Expense Entry
Common Journal Entry Questions What is a manual Journal Entry? Manual journal entries were used before modern, computerized accounting systems were invented. The entries above would be manually written in a journal throughout the year as business transactions occurred. These entries would then be totaled at the end of the period and transferred to the ledger. Today, accounting systems do this automatically with computer systems. What is a general journal entry in accounting?
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