Accounting Lecture Notes: Journal Entries and T Accounts

Overview of Journal Entry Formatting

• Date: Listed on the left side.
• Debit and Credit:
  • Debit (left side) listed first.
  • Credit (right side) indented about half an inch.
  • Software often formats entries automatically, but spacing is important for handwritten notes.
• Explanation: Brief description below the entry, important for clarity and correcting mistakes.

Transactions and Their Journal Entries

1. Sheena's Contribution (Nov 1):

   • Transaction: Sheena contributed $30,000 for stock.
   • Entry:
     • Debit: Cash $30,000 (asset increases on the left).
     • Credit: Common Stock $30,000 (equity increases on the right).
   • Explanation: Issued common stock for cash.

2. Purchase of Land (Nov 2):

   • Transaction: Bought land for $20,000 cash.
   • Entry:
     • Debit: Land $20,000 (asset).
     • Credit: Cash $20,000 (asset decreases on the right).
   • Explanation: Purchased land for cash.

3. Office Supplies on Account (Nov 3):

   • Transaction: Bought $500 of supplies on account.
   • Entry:
     • Debit: Office Supplies $500 (asset).
     • Credit: Accounts Payable $500 (liability).
   • Explanation: Purchased office supplies on account.

4. Service Revenue (Nov 8):

   • Transaction: Earned $5,500 from services.
   • Entry:
     • Debit: Cash $5,500.
     • Credit: Service Revenue $5,500 (equity).
   • Explanation: Provided services.

5. Services on Account (Nov 10):

   • Transaction: Provided $3,000 services on account.
   • Entry:
     • Debit: Accounts Receivable $3,000 (asset).
     • Credit: Service Revenue $3,000 (equity).
   • Explanation: Provided services on account.

6. Expenses Payment (Nov 15):

   • Transaction: Paid $3,200 in expenses.
   • Entry:
     • Debit: Rent Expense $2,000; Salaries Expense $1,200.
     • Credit: Cash $3,200.
   • Explanation: Paid rent and salaries.

7. Payment on Account (Nov 21):

   • Transaction: Paid $300 on account.
   • Entry:
     • Debit: Accounts Payable $300.
     • Credit: Cash $300.
   • Explanation: Paid on account.

8. Collection from Account Receivable (Nov 22):

   • Transaction: Collected $2,000 from previous services.
   • Entry:
     • Debit: Cash $2,000.
     • Credit: Accounts Receivable $2,000.
   • Explanation: Received cash on account.

9. Dividend Payment (Nov 25):

   • Transaction: Paid $5,000 in dividends.
   • Entry:
     • Debit: Dividends $5,000.
     • Credit: Cash $5,000.
   • Explanation: Paid cash dividends.

10. Prepaid Rent (Dec 1):

    • Transaction: Paid $3,000 for prepaid rent.
    • Entry:
      • Debit: Prepaid Rent $3,000.
      • Credit: Cash $3,000.
    • Explanation: Prepaid for three months rent.

11. Salaries Payment (Dec 1):

    • Transaction: Paid $1,200 in salaries.
    • Entry:
      • Debit: Salaries Expense $1,200.
      • Credit: Cash $1,200.
    • Explanation: Paid salaries.

12. Building Purchase (Dec 1):

    • Transaction: Purchased building on note payable.
    • Entry:
      • Debit: Building $60,000.
      • Credit: Notes Payable $60,000.
    • Explanation: Purchased building with notes payable.

13. Furniture for Common Stock (Dec 2):

    • Transaction: Exchanged furniture for stock.
    • Entry:
      • Debit: Furniture $18,000.
      • Credit: Common Stock $18,000.
    • Explanation: Issued common stock for furniture.

14. Telephone Bill (Dec 15):

    • Transaction: Received $100 bill, not paid yet.
    • Entry:
      • Debit: Utilities Expense $100.
      • Credit: Accounts Payable $100.
    • Explanation: Recorded telephone bill.

15. Salaries Payment (Dec 15):

    • Transaction: Paid $1,200 in salaries.
    • Entry:
      • Debit: Salaries Expense $1,200.
      • Credit: Cash $1,200.
    • Explanation: Paid salaries.

16. Customer Prepayment (Dec 21):

    • Transaction: Customer prepaid $600.
    • Entry:
      • Debit: Cash $600.
      • Credit: Unearned Revenue $600.
    • Explanation: Customer paid in advance.

17. Service Revenue (Dec 28):

    • Transaction: Collected $8,000 for services.
    • Entry:
      • Debit: Cash $8,000.
      • Credit: Service Revenue $8,000.
    • Explanation: Performed services.

Posting to T Accounts

• Transfer journal entries to respective T accounts.
• Key Steps:
  • Ensure debits equal credits for each transaction.
  • Balance each account by subtracting the smaller side from the larger side.
  • Normal balance should be on the side where the account increases.

Balancing the Equation

• Total all asset accounts and check against liabilities plus equity.
• Ensure left side (assets) equals right side (liabilities + equity).

Important Concepts

• Chart of Accounts: Essential for knowing what accounts to book transactions to.
• Normal Balance: The side of the account where the balance typically resides (debit or credit).