Journal Entries – lots of transactions…. Judith Paquette Acct 201 Journal Entries – lots of transactions…. Judith Paquette

Objectives Journal Entries T – Accounts Trial Balance Financial Statements Adjustments T-Accounts Final Financial Statements Closing Entries Post Closing Trial Balance

The T Account – one per Account Shows Debits and Credits Debit = LEFT Credit = RIGHT Tracks each account’s activity (increases and decreases) Each transaction must affect two or more accounts to keep the basic accounting equation in balance. Recording done by debiting at least one account and crediting at least one other. DEBITS must equal CREDITS.

Rules of Debit and Credit BALANCE SHEET INCOME STATEMENT RETAINED EARNINGS DEBIT CREDIT To increase Assets = Liab + Stk Equity +Revenue - Expense - Dividends CASH ACCTS PAYABLE COMMON STOCK SERVICE REVENUE SALARY EXPENSE DIVIDENDS ACCTS RECEIV NOTES PAYABLE  SALES ADVERTISING EXPENSE   SUPPLIES UNEARNED REVENUE SUPPLIES EXPENSE PREPAID RENT SALARIES PAYABLE TELEPHONE EXPENSE PREPAID INSURANCE RENT EXPENSE LAND EQUIPMENT DEPRECIATION EXPENSE ACCUMULATED DEPRECIATION INSURANCE EXPENSE INCOME TAX EXPENSE

Let’s take a company A Service Business – Emerald City Graphic Designers The company was formed in 2013 with $75,000 from three investors in exchange for 75,000 shares of $1 common stock. The company will rent a building, purchase art and office supplies, office and computer equipment, and then buy a year’s worth of insurance. Some purchases will be for cash, some on credit. Later, the company will pay some bills. Then, the company will provide graphic design service and be paid for it. It will then pay its employee. One customer will prepay for service to be performed in the future. Another customer will pay for service performed in the current month. It will receive a bill in the mail, but not pay it yet. And finally, it will pay a dividend.

Your Job….should you choose to accept it. Create, with me, the Journal Entries for these transactions. Then go on to complete the Accounting Cycle in the next videos.

#1 Emerald City Graphic Designers was formed in January 2, 2013 with $75,000 from three investors in exchange for 75,000 shares of $1 common stock. # DATE Account Titles AND Description Debit Credit 1

#1 Emerald City Graphic Designers was formed in January 2, 2013 with $75,000 from three investors in exchange for 75,000 shares of $1 common stock. # DATE Account Titles AND Description Debit Credit 1 1/2/14 Cash 75,000 Common Stock To record owners’ investment.

#2 On January 2, 2014, Emerald City Graphic Designers rents an office, paying four (4) months rent in advance. Monthly rent is $1,100 (okay, they are a LONG way from Seattle!) # DATE Account Titles AND Description Debit Credit 2 1/2/14

#2 On January 2, 2014, Emerald City Graphic Designers rents an office, paying four(4) months rent in advance. Monthly rent is $1,100 (okay, they are a LONG way from Seattle!) # DATE Account Titles AND Description Debit Credit 2 1/2/14 Prepaid Rent 4,400 Cash To record payment of rent in advance. Alert: Will require an adjusting JE in future video as rent is used up.

#3 On January 4, Emerald City Graphic Designers purchased computer equipment costing $5,600, with 2,000 cash and the balance to be paid next month. # DATE Account Titles AND Description Debit Credit 3 1/4/14

#3 On January 4, Emerald City Graphic Designers purchased computer equipment costing $5,600, with 2,000 cash and the balance to be paid next month. # DATE Account Titles AND Description Debit Credit 3 1/4/14 Equipment 5,600 Cash 2,000 Accounts Payable 3,600 To purchase computer equipment Alert: Will require an adjusting JE in future video to depreciation equipment

#4 Jan 5: Emerald City Graphic Designers ordered $800 of art supplies and $750 of office supplies. DATE Account Titles AND Description Debit Credit 4 1/5/14

#4 Jan 5: Emerald City Graphic Designers ordered $800 of art supplies and $750 of office supplies. DATE Account Titles AND Description Debit Credit 4 1/5/14 No entry

#5 Jan 5: Emerald City Graphic Designers purchased $800 of art supplies and $750 of office supplies from Dakota Art Stores, on credit. # DATE Account Titles AND Description Debit Credit 5 1/5/14

#5 Jan 5: Emerald City Graphic Designers purchased $800 of art supplies and $750 of office supplies from Dakota Art Stores, on credit. # DATE Account Titles AND Description Debit Credit 5 1/5/14 Supplies 1,550 Accounts Payable Purchased Art Supplies (800) and Office supplies (750). Alert: Will require an adjusting JE in future video as supplies are used up.

#6 January 5: Emerald City Graphic Designers takes out a 12% Note Payable in cash, at 12% interest. DATE Account Titles AND Description Debit Credit 6 1/5/14

#6 January 5: Emerald City Graphic Designers takes out a 12% Note Payable in cash, at 12% interest. DATE Account Titles AND Description Debit Credit 6 1/5/14 Cash 5,000 Notes Payable To record receipt of cash for note. Alert: Will require an adjusting JE in future video as supplies are used up.

#7 January 10: Emerald City Graphic Designers pays Dakota Art Stores for $800 of the money owed. DATE Account Titles AND Description Debit Credit 7 1/10/14

#7 January 10: Emerald City Graphic Designers pays Dakota Art Stores for $800 of the money owed. DATE Account Titles AND Description Debit Credit 7 1/10/14 Accounts Payable 800 Cash To pay money owed from transaction #6

#8 January 11: Emerald City Graphic Designers creates an advertisement for auto repair shop, which runs in the newspaper. They are paid $1,300 in cash. # DATE Account Titles AND Description Debit Credit 8 1/11/13

#8 January 11: Emerald City Graphic Designers creates an advertisement for auto repair shop, which runs in the newspaper. They are paid $1,300 in cash. # DATE Account Titles AND Description Debit Credit 8 1/11/13 Cash 1,300 Service Revenue To record advertisement revenue

#9 January 15: Emerald City Graphic Designers accepts an advance of $900 for design work to be done for Joe’s Organic Groceries by the next month or sooner. # DATE Account Titles AND Description Debit Credit 9 1/15/14

#9 January 15: Emerald City Graphic Designers accepts an advance of $900 for design work to be done for Joe’s Organic Groceries by the next month or sooner. # DATE Account Titles AND Description Debit Credit 8 1/15/14 Cash 900 Unearned Revenue Advance from a customer for Joe’s Organic Groceries by January 31 Alert: Will require an adjusting JE in future video after service is completed.

#10 January 19: Emerald City Graphic Designers creates and delivers advertising posters to Gengki Sushi. The fee, $4,700 is billed but not paid. # DATE Account Titles AND Description Debit Credit 10 1/19/14

#10 January 19: Emerald City Graphic Designers creates and delivers advertising posters to Gengki Sushi. The fee, $4,700 is billed but not paid. # DATE Account Titles AND Description Debit Credit 10 1/19/14 Accounts Receivable 4,700 Service Revenue To record service provided and billed.

#11 January 29: Emerald City Graphic Designers pays its administrative assistant $3,600 for his four weeks’ salary. # DATE Account Titles AND Description Debit Credit 11 1/29/14

#11 January 29: Emerald City Graphic Designers pays its administrative assistant $3,600 for his four weeks’ salary. # DATE Account Titles AND Description Debit Credit 11 1/29/14 Salary Expense 3,600 Cash To record payment of salary.

#12 January 30: Emerald City Graphic Designers receives, but does not pay, the telephone bill of $250. The bill is for service provided in January. # DATE Account Titles AND Description Debit Credit 12 1/30/14

#12 January 30: Emerald City Graphic Designers receives, but does not pay, the telephone bill of $250. The bill is for service provided in January. # DATE Account Titles AND Description Debit Credit 12 1/30/14 Telephone Expense 250 Cash To record phone bill expense incurred.

#13 January 31: Emerald City Graphic Designers declared and paid a $600 dividend. DATE Account Titles AND Description Debit Credit 13 1/31/14

#13 January 31: Emerald City Graphic Designers declared and paid a $600 dividend. DATE Account Titles AND Description Debit Credit 13 1/31/14 Dividends 600 Cash To pay dividend.

Here are some of the T accounts Emerald City Graphic Designers T accounts for Big Problem T Accounts Jan 1-31, 2014 CASH Accounts Receivable Supplies 1 75,000 4,400 2 10 4,700 5 1,550 8 1,300 2,000 3   9 900 6 5,000 800 7 3,600 11 250 12 600 13 70,550 Prepaid Rent 2 Equipment Accumlated Deprec. 5,600 Notes Payable Accounts Payable Interest Payable 6 7 4,350 Unearned Revenue Salaries Payable

Here are the rest of the T accounts Common Stock Retained Earnings Dividends   75,000 1 12 600 Service Revenue Salaries Expense Telephone Exp 1,300 7 10 3,600 11 250 4,700 9 6,000

Accumulated Depreciation Notes Payable Accounts Payable Emerald City Graphic Designers TRIAL BALANCE - before adjustments As of: January 31, 2014 Account Debit Credit Cash $70,550   Accounts Receivable 4,700 Advertising Supplies 1,550 Prepaid Rent 4400 Prepaid Insurance Equipment 5,600 Accumulated Depreciation Notes Payable 5,000  Accounts Payable 4,350 Interest Payable Unearned Revenue 900 Salaries Payable Common Stock 75,000 Retained Earnings Dividends 600 Service Revenue 6,000 Salaries Expense 3,600 Telephone Expense 250 Supplies Expense Rent Expense Insurance Expense Interest Expense Depreciation Expense $91,250

End of Journal Entries Next video: ADJUSTMENTS!