Journal and Adjusting Entries

Rules To Remember• Accounts are not your checking or saving

accounts

• They are storage devices for your financial transactions

• When a Bank “Credits Your Account” for your deposits it is because your money is a Liability to them …. Our transactions are the opposite of the banking transactions

Rules To Remember

• Assets have a Normal Balance of DEBIT– To increase an Asset, make a Debit Entry– To decrease an Asset, make a Credit Entry

• Liabilities have a Normal Balance of Credit– To increase a Liability, make a Credit Entry– To decrease a Liability, make a Debit Entry

Rules To Remember• Equity has a Normal Balance of Credit

– To increase an Equity, make a Credit Entry– To decrease an Equity, make a Debit Entry

• Revenues have a Normal Balance of Credit– To increase a Revenue, make a Credit Entry– To decrease a Revenue, make a Debit Entry

• Expenses have a Normal Balance of DEBIT– To increase an Expense, make a Debit Entry– To decrease an Expense, make a Credit Entry

Rolon Kern Invested $1,200 in cash and $100 in Office Supplies to start Company

Date Description Debit Credit

1-2-04 Cash 1,200

Office Equip 100

Rolo Kern, Capital 1,300

Paid rent 3 months in advance $300

Date Description Debit Credit

1-2-04 Prepaid Rent 300

Cash 300

Purchased Office Equip on Account $50

Date Description Debit Credit

1-4-04 Office Equip 50

Accounts Payable 50

Purchased Office Supplies for Cash $40

Date Description Debit Credit

1-6-04 Office Supply 40

Cash 40

Collected $400 in cash for services Rendered

Date Description Debit Credit

1-8-04 Cash 400

Revenues 400

Paid Home Electric Bill from Company Funds $20

Date Description Debit Credit

1-12-04 Kern, Withdrawl 20

Cash 20

Provides services for $100, client will pay next month

Date Description Debit Credit

1-14-04 Account Receivable

100

Revenues 100

Paid wages $60

Date Description Debit Credit

1-16-04 Wage Expense 60

Cash 60

Placed ad for $70, will pay next month

Date Description Debit Credit

1-18-04 Advertising Expense 70

Accounts Payable 70

Balances as of 1-31-07 (Before Adjustments)

Date Description Debit Credit

1-31-07 Cash 1,180

Accounts Receivable 100

Pre-paid Rent 300

Office Supplies 40

Office Equip 150

Account Payable 120

Kern, Capital 1,300

Kern, Withdrawl 20

Revenues 500

Wage Expense 60

Advertising Expense 70

Totals 1,920 1,920

Balances as of 1-31-07 (Before Adjustments)

Date Description Debit Credit

1-31-07 Revenues 500

Wage Expense 60

Advertising Expense 70

Adjusting EntryOffice Supplies on hand total $6

Date Description Debit Credit

1-31-07 Supply Expense 34

Office Supplies 34

Adjusting EntryRent Expense For Month $100

Date Description Debit Credit

1-31-07 Rent Expense 100

Prepaid Rent 100

Adjusting EntryOffice Equip Depr $20

Date Description Debit Credit

1-31-07 Depreciation Expense 20

Accum Depr - Equip 20

Adjusting EntryOwe Employees $50 at end of month

Date Description Debit Credit

1-31-07 Wage Expense 50

Wages Payable 50

Balances as of 1-31-07 (After Adjustments)

Description TB Debit

TB Credit

ADJ Debit

ADJ Credit

ATB

Debit

ATB Credit

Cash 1,180 1,180

Accounts Receivable 100 100

Pre-paid Rent 300 100 200

Office Supplies 40 34 6

Office Equip 150 150

Accum Depr – Equip 20 20

Account Payable 120 120

Wages Payable 50 50

Kern, Capital 1,300 1300

Kern, Withdrawl 20 20

Revenues 500 500

Wage Expense 60 50 110

Depreciation Exp 20 20

Rent Expense 100 100

Office Supply Expense 34 34

Advertising Expense 70 70

Totals 1,920 1,920 204 204 1,990 1,990

Income Stmt & Balance Sheet as of 1-31-07 (After Adjustments)

Description ATB

Debit

ATB

Credit

INC Debit

Stmt Credit

Balance

Debit

Sheet

Credit

Cash 1,180 1,180

Accounts Receivable 100 100

Pre-paid Rent 200 200

Office Supplies 6 6

Office Equip 150 150

Accum Depr – Equip 20 20

Account Payable 120 120

Wages Payable 50 50

Kern, Capital 1,300 1,300

Kern, Withdrawl 20 20

Revenues 500 500

Wage Expense 110 110

Depreciation Exp 20 20

Rent Expense 100 100

Office Supply Expense 34 34

Advertising Expense 70 70

Totals 1,990 1,990 334 500 1,656 1,490

Net Income 166 166

Totals 1,990 1,990 500 500 1,656 1,656