Journal Entries
On January 1, the company sold services for $500 cash.
Jan 1 Cash 500
Service Revenue 500
What is the classification, normal balance, and financial statement for cash?
Asset, debit, and balance sheet.
On March 1, the business purchases $800 of merchandise inventory for cash.
Mar 1 Merchandise Inventory 800
Cash 800
On June 1, a customer who owes $1,000 on account agrees to sign a 60-day, 6% note to replace the accounts receivable.
Jun 1 Notes Receivable 1,000
Accounts Receivable 1,000
What does GAAP stand for?
Generally Accepted Accounting Principles.
On January 3, the business bought $300 of office supplies on account.
Jan 3 Office Supplies 300
Accounts Payable 300
What is the classification, normal balance, and financial statement for accounts payable?
Liability, credit, and balance sheet.
On March 4, the business purchases $1,200 of merchandise inventory on account, credit terms 2/10, n/30.
Mar 4 Merchandise Inventory 1,200
Accounts Payable 1,200
Using the note from Question 1:
The customer pays the note in full at maturity (60 days later).
Record the collection of the note.
Jul 31 Cash 1,010
Notes Receivable 1,000
Interest Revenue 10
What is the matching principle?
a core concept requiring expenses to be recognized in the same accounting period as the revenues they helped generate.
On January 5, the company paid $200 for utilities.
Jan 5 Utilities Expense 200
Cash 200
What is the classification, normal balance, and financial statement for supplies expense?
Expense, debit, and income statement.
The company pays the amount owed from the March 4 purchase within the discount period.
*On March 4, the business purchases $1,200 of merchandise inventory on account, credit terms 2/10, n/30.*
Mar 10 Accounts Payable 1,200
Merchandise Inventory 24
Cash 1,176
On May 1, the company determines that a customer’s $150 account is uncollectible and writes it off using the direct write-off method.
May 1 Bad Debt Expense 150
Accounts Receivable 150
What is the book value of an asset?
The difference between the cost of a fixed asset and its accumulated depreciation.
On January 10, the company paid $150 toward the amount owed to suppliers.
Jan 10 Accounts Payable 150
Cash 150
What is the classification, normal balance, and financial statement for sales?
Revenue, credit, and income statement.
On March 12, the company sells inventory for $700 cash.
The cost of the inventory sold was $400.
Mar 12 Cash 700
Sales Revenue 700
Cost of Goods 400
Merchandise Inventory 400
On May 4, the company writes off a $320 account that is deemed uncollectible. The company uses the allowance method.
May 4 Allowance for Doubtful Accounts 320
Accounts Receivable 320
What is the accounting cycle?
The process that begins with analyzing and journalizing transactions and ends with the post-closing trial balance.
At month-end (January 31), the company earned $600 of service revenue that has not yet been billed to customers.
Jan 31 Accounts Receivable 600
Service Revenue 600
What is the classification, normal balance, and financial statement for prepaid rent?
Assets, debit, and balance sheet.
On March 22, the customer returns merchandise that had a selling price of $300 and a cost of $180.
Mar 22 Sales Returns & Allowances 300
Accounts Receivable 300
Merchandise Inventory 180
Cost of Goods Sold 180
On August 1, Greenfield Company determines that customer Sam Harper’s $600 account is uncollectible.
Greenfield uses the allowance method, and the write-off is recorded. On September 10, Sam unexpectedly pays the full $600.
Sept 10 Accounts Receivable – Sam 600
Allowance for Doubtful Accounts 600
Cash 600
Accounts Receivable – Sam 600
What is the difference between FOB shipping point and FOB destination?
Shipping point is when the buyer is responsible for the costs, and destination is when the seller is responsible for the costs.