Sample Journal Entries Chapter Ten
1. Company X purchases $5,000 of Company Ys bonds and plans to hold them to maturity
Investments Heldto Maturity
2. Interest payment on bonds from previous examp
A merchandiser is a business that sells merchandise, or goods, to customers. The
merchandise that this type of business sells is called merchandise inventory. A
wholesaler is a merchandiser that buys goods from a manufacture
A corporation is a business organized under state law that is a separate legal entity. A corporation has many unique
1. Separate legal entity a corporation is a separate legal entity. It is organized indepe
A key responsibility of a business manager is to control operations. Internal control is the
organizational plan and all the related measures designed to accomplish the following:
1. Safeguard assets
2. Encourage employees t
Liabilities are debts that are owed to creditors. Liabilities have three main characteristics:
1. They occur because of a past transaction or event.
2. They create a present obligation for future payment of cash or services
Sample Journal Entries Chapter 13
1. The company issued 30,000 shares of $10 par value stock at par value.
2. The company issued 30,000 shares of $10 par value stock for $12 per share (issu
Journal Entries Chapter 12
1. Company borrowed $50,000 for 5 years with an interest rate of 5 percent. The company
will pay back the principal in 5 equal amounts each year plus any interest that is due.
To record the long-term note payable:
Plant assets, also referred to as Property, Plant, and Equipment or
Fixed Assets, include computers, land, buildings, equipment, and
furniture. Plant assets are long-lived, tangible assets used in the
operation of a business
Journal Entries of Sample Accounts Receivable Problems Chapter 8
1. Sale $2,000 of goods on account.
Receivable - Name
2. Customer paid previous sale from September 1
Examples of Journal Entries
1. Purchase land for $150,000 on June 1. Pay $25,000 down and finance the balance with
a long-term note payable
2. Paid $75,000 for fencing, paving
1.) Straight-line method of depreciation allocates an equal amount of depreciation to each
Formula = (Cost residual value)/useful life of asset
Useful life is how long the company expects to use the asset.
Residual value or salvage valu
Businesses can invest in other companies stocks and bonds. The owner of a bond or
stock of a corporation is referred to as the investor. The corporation that issued the bond
or stock is referred to as the investee.
Disposing of a Plant Asset
To account for any type of disposal of a plant asset (sell, exchange, or retire) follow these four
1. Record depreciation up to the date of disposal and bring the accumulated depreciation
account up to date.
2. Remove the
You have a receivable when you sell goods or services to another party on
credit. You also have a receivable when you loan money to another party. A
receivable is the right to receive cash in the future from a current transa
Journal Entries Chapter 10
1. Buy $1,000 of inventory on account. Terms 3/10,n/30
Pay the accounts payable within the credit period.
$1,000 X .03 = $30 discount
A balance sheet reports financial position; and balance sheets for two periods
(comparative balance sheet) show whether cash increased or decreased. The statement of
cash flows reports cash flows, cash receipts and cash pay
Most long-term notes payable are paid in installments. The current portion of notes
payable is the principal amount that will be paid within one year. The remaining portion
See page 688 for example of recordin
Sample Journal Entries Chapter Seven
1. Journal entry to start a Petty Cash Fund with $200
June 1, 201X
2. Journal entry to replenish Petty cash fund at the end of the month.
Office supplies purchased wit
Examples of Journal Entries Chapter Five
1. Company purchased $1,000 of goods for resell from supplier on account. The terms of
the purchase are 2/10,N/60 (This means the company can take a 2 percent discount if
the goods are paid within
Several accounting principles affect inventories:
1. The Consistency Principle states that businesses should use the same accounting
methods from period to period. Consistency helps investors compare a
companys financial sta
Differences Between Perpetual Inventory and Periodic Inventory
The periodic method of accounting for inventory was the method used before computers. Some
small companies still use the periodic method. Under the periodic method, new purchas
The bank reconciliation reconciles on a specific date the difference between the Cash account
on the companys books and the cash according to the banks records. Several items can
cause the two balances to be different. The bank stateme
Example of Journal Entries to Close Accounts
Taking the examples of from chapter 2 and 3, the balances in our accounts are as follows:
1. Cash $18,550 (debit)
2. Accounts Receivable - $2,000 (debit)
3. Supplies - $10,500 (debit)
4. Prepaid Insurance - $3,
Accounting is the information system that measures business activities, processes the information into
reports, and communicates the results to decision makers. Accounting is the language of business.
There are two major fie
Explanation of Debits and Credits
A debit simply means that the transaction amount goes on the left-hand side of the account, and
a credit simply means the transaction amount goes on the right hand side of the account.
In accounting we use a two-step proc
Example of Adjusting Journal Entries
1. The prepaid insurance was in the amount of $3,600 and is for a two year period (see
Dec 15 from chapter 2). Coverage began on December 1. At the end of the month, one
month of insurance has expired.
Divide $3,600 by
The financial statements are prepared from the adjusted trial balance. The financial
statements should be prepared in the following order:
Income statement reports revenues and expenses and calculates net
income or net
Cash basis accounting records revenues when cash is received and expenses are recorded only when cash is
paid. The cash basis of accounting is not allowed under Generally Accepted Accounting Principles
(GAAP.) Some small
Examples of Journal Entries
On December 1, Thomas Doe forms a company. He sets it up as a corporation. Thomas
personally invests $40,000 cash in the new company in exchange for common stock.