Journal Entries | Problem & Solution-02
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| Journal Entries | Problem & Solution-02 |
Here you will learn how to record the transaction in the journal book. I will analyze individual journal entries step by step so that you can learn the journal entries quickly.
Let’s Start
Journal Entries: Problem-02
Mr. Mark is a licensed CPA. The following transactions occurred during the first month of operations of his business.
July 1: Mark invested $30,000 cash in his business
July 2: Open a bank account with Citi Bank N.A by depositing $ 6,000
July 4: Appointed a receptionist at a salary of $ 4,000 per Month
July 7: Loan was taken from the bank $12,000
July 9: Purchased a building for cash $ 13,000
July 11: Incurred advertising expense of $1,800 on account
July 14: Withdrew $1,000 cash for personal use
July 19: Received $5,500 advance on a consulting engagement
July 20: Purchased $1,500 of supplies on account from Yellow Company
July 22: Provided Consulting service to the clients on credit $ 17,000
July 24: Received $1,800 cash from “White Printers” for services completed.
July 26: Paid 60% of balance due to Yellow Company
July 28: Cheque received against the service provided on July 22
July 31: Paid receptionist $4,000 salary for the month
July 31: Paid $ 600 cash for bank interest.
Journalize the July transactions.
Solution:
Before starting to solve this problem just remember this formula for better understanding of journal entries
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Accounts Types
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Increase/Decrease
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Debit/Credit
|
|
Expenses
|
Increase
|
Debit
|
|
Expenses
|
Decrease
|
Credit
|
|
Revenues
|
Increase
|
Credit
|
|
Revenues
|
Decrease
|
Debit
|
|
Owner’s Equity
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Increase
|
Credit
|
|
Owner’s Equity
|
Decrease
|
Debit
|
|
Liabilities
|
Increase
|
Credit
|
|
Liabilities
|
Decrease
|
Debit
|
|
Assets
|
Increase
|
Debit
|
|
Assets
|
Decrease
|
Credit
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July 1: Mark invested $30,000 cash in his business
Here involve 2 accounts
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Account Titles
|
Account Type
|
Increase/Decrease
|
Debit /Credit
|
|
Cash
|
Asset
|
Increase
|
Debit
|
|
Owner’s Capital
|
Owner’s Equity
|
Increase
|
Credit
|
Journal entry for this transaction
|
Date
|
Account Titles and Explanation
|
Ref.
|
Debit
|
Credit
|
|
2019
July 1
|
Cash
Owner’s Capital
(To record owner’s investment of cash in business)
|
|
30,000
|
30,000
|
July 2: Open a bank account with Citi Bank N.A by depositing $ 6,000
Here involve 2 accounts
|
Account Titles
|
Account Type
|
Increase/Decrease
|
Debit /Credit
|
|
Bank
|
Asset
|
Increase
|
Debit
|
|
Cash
|
Asset
|
Decrease
|
Credit
|
Journal entry for this transaction
|
Date
|
Account Titles and Explanation
|
Ref.
|
Debit
|
Credit
|
|
2019
July 2
|
Citi Bank N.A
Cash
(To record open a bank account with Citi Bank N.A)
|
|
6,000
|
6,000
|
July 4: Appointed a receptionist at a salary of $ 4,000 per Month
Here involve 0 accounts
|
Account Titles
|
Account Type
|
Increase/Decrease
|
Debit /Credit
|
|
|
|
|
|
|
|
|
|
|
Journal entry for this transaction
|
Date
|
Account Titles and Explanation
|
Ref.
|
Debit
|
Credit
|
|
2019
July 4
|
It is not a transaction. It will not be recorded in the journal book.
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|
|
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July 7: Loan was taken from the bank $12,000
Here involve 2 accounts
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Account Titles
|
Account Type
|
Increase/Decrease
|
Debit /Credit
|
|
Cash
|
Asset
|
Increase
|
Debit
|
|
Bank Loan
|
Liabilities
|
Increase
|
Credit
|
Journal entry for this transaction
|
Date
|
Account Titles and Explanation
|
Ref.
|
Debit
|
Credit
|
|
2019
July 7
|
Cash
Bank Loan
(To record Loan taken from the bank)
|
|
12,000
|
12,000
|
July 9: Purchased a building for cash $ 13,000
Here involve 2 accounts
|
Account Titles
|
Account Type
|
Increase/Decrease
|
Debit /Credit
|
|
Building
|
Asset
|
Increase
|
Debit
|
|
Cash
|
Asset
|
Decrease
|
Credit
|
Journal entry for this transaction
|
Date
|
Account Titles and Explanation
|
Ref.
|
Debit
|
Credit
|
|
2019
July 9
|
Building
Cash
(To record Purchased a building)
|
|
13,000
|
13,000
|
July 11: Incurred advertising expense of $1,800 on account
Here involve 2 accounts
|
Account Titles
|
Account Type
|
Increase/Decrease
|
Debit /Credit
|
|
Advertising expense
|
Expense
|
Increase
|
Debit
|
|
A/c Payable
|
Liabilities
|
Increase
|
Credit
|
Journal entry for this transaction
|
Date
|
Account Titles and Explanation
|
Ref.
|
Debit
|
Credit
|
|
2019
July 11
|
Advertising expense
A/c Payable
(To record Incurred advertising expense on account)
|
|
1,800
|
1,800
|
July 14: Withdrew $1,000 cash for personal use
Here involve 2 accounts
|
Account Titles
|
Account Type
|
Increase/Decrease
|
Debit /Credit
|
|
Owner’s Drawing
|
Owner’s Equity
|
Decrease
|
Debit
|
|
Cash
|
Asset
|
Decrease
|
Credit
|
Journal entry for this transaction
|
Date
|
Account Titles and Explanation
|
Ref.
|
Debit
|
Credit
|
|
2019
July 14
|
Owner’s Drawing
Cash
(To record withdrew cash for personal use))
|
|
1,000
|
1,000
|
July 19: Received $5,500 advance on a consulting engagement
Here involve 2 accounts
|
Account Titles
|
Account Type
|
Increase/Decrease
|
Debit /Credit
|
|
Cash
|
Asset
|
Increase
|
Debit
|
|
Accounts Receivable
|
Asset
|
Decrease
|
Credit
|
Journal entry for this transaction
|
Date
|
Account Titles and Explanation
|
Ref.
|
Debit
|
Credit
|
|
2019
July 19
|
Cash
Accounts Receivable
(To record cash received an advance on a management consulting engagement )
|
|
5,500
|
5,500
|
July 20: Purchased $1,500 of supplies on account from Yellow Company
Here involve 2 accounts
|
Account Titles
|
Account Type
|
Increase/Decrease
|
Debit /Credit
|
|
Supplies
|
Expenses
|
increase
|
Debit
|
|
Yellow Company
|
Liabilities
|
Increase
|
Credit
|
Journal entry for this transaction
|
Date
|
Account Titles and Explanation
|
Ref.
|
Debit
|
Credit
|
|
2019
July 20
|
Supplies
Yellow Company
(To record Purchased of supplies on account
|
|
1,500
|
1,500
|
July 22: Provided Consulting service to the clients on credit $ 17,000
Here involve 2 accounts
|
Account Titles
|
Account Type
|
Increase/Decrease
|
Debit /Credit
|
|
Accounts Receivable
|
Asset
|
Increase
|
Debit
|
|
Service Revenue
|
Revenue
|
Increase
|
Credit
|
Journal entry for this transaction
|
Date
|
Account Titles and Explanation
|
Ref.
|
Debit
|
Credit
|
|
2019
July 22
|
Accounts Receivable
Service Revenue
(To record Goods purchased by signing Note Payable)
|
|
17,000
|
17,000
|
July 24: Received $1,800 cash from “White Printers” for services completed.
Here involve 2 accounts
|
Account Titles
|
Account Type
|
Increase/Decrease
|
Debit /Credit
|
|
Cash
|
Asset
|
Increase
|
Debit
|
|
Service Revenue
|
Revenue
|
Increase
|
Credit
|
Journal entry for this transaction
|
Date
|
Account Titles and Explanation
|
Ref.
|
Debit
|
Credit
|
|
2019
July 24
|
Cash
Service Revenue
(To record Cash paid for electricity bill)
|
|
1,800
|
1,800
|
July 26: Paid 60% of the balance due to Yellow Company
Here involve 2 accounts
|
Account Titles
|
Account Type
|
Increase/Decrease
|
Debit /Credit
|
|
Yellow Company
|
Liabilities
|
Decrease
|
Debit
|
|
Cash
|
Asset
|
Decrease
|
Credit
|
Journal entry for this transaction
|
Date
|
Account Titles and Explanation
|
Ref.
|
Debit
|
Credit
|
|
2019
July 26
|
Yellow Company
Cash
(To record paid 60% of the balance due Yellow Company )
|
|
750
|
750
|
July 28: Cheque received against the service provided on July 22
Here involve 2 accounts
|
Account Titles
|
Account Type
|
Increase/Decrease
|
Debit /Credit
|
|
Bank
|
Asset
|
Increase
|
Debit
|
|
A/C Receivable
|
Asset
|
Decrease
|
Credit
|
Journal entry for this transaction
|
Date
|
Account Titles and Explanation
|
Ref.
|
Debit
|
Credit
|
|
2019
July 28
|
Bank
A/C Receivable
(To record Cheque received against the service provided on July 22)
|
|
17,000
|
17,000
|
July 31: Paid receptionist $4,000 salary for the month
Here involve 2 accounts
|
Account Titles
|
Account Type
|
Increase/Decrease
|
Debit /Credit
|
|
Salary Expense
|
Expense
|
Increase
|
Debit
|
|
Cash
|
Asset
|
Decrease
|
Credit
|
Journal entry for this transaction
|
Date
|
Account Titles and Explanation
|
Ref.
|
Debit
|
Credit
|
|
2019
July 31
|
Salary expense
Cash
(To record paid receptionist salary for the month of July)
|
|
4,000
|
4,000
|
July 31: Paid $ 600 cash for bank interest
Here involve 2 accounts
|
Account Titles
|
Account Type
|
Increase/Decrease
|
Debit /Credit
|
|
Interest Expense
|
Expense
|
Increase
|
Debit
|
|
Cash
|
Asset
|
Decrease
|
Credit
|
Journal entry for this transaction
|
Date
|
Account Titles and Explanation
|
Ref.
|
Debit
|
Credit
|
|
2019
July 31
|
Interest Expense
Cash
(To record cash payment for bank interest)
|
|
600
|
600
|
Journal Book
|
Date
|
Account Titles and Explanation
|
Ref.
|
Debit
|
Credit
|
|
2019
July 1
|
Cash
Owner’s Capital
(To record owner’s investment of cash in business)
|
|
30,000
|
30,000
|
|
July 2
|
Citi Bank N.A
Cash
(To record open a bank account with Citi Bank N.A)
|
|
6,000
|
6,000
|
|
July 4
|
It is not a transaction. It will not be recorded in the journal book.
|
|
|
|
|
July 7
|
Cash
Bank Loan
(To record Loan taken from the bank)
|
|
12,000
|
12,000
|
|
July 9
|
Building
Cash
(To record Purchased a building)
|
|
13,000
|
13,000
|
|
July 11
|
Advertising expense
A/c Payable
(To record Incurred advertising expense on account)
|
|
1,800
|
1,800
|
|
July 14
|
Owner’s Drawing
Cash
(To record withdrew cash for personal use))
|
|
1,000
|
1,000
|
|
July 19
|
Cash
Accounts Receivable
(To record cash received an advance on a consulting engagement )
|
|
5,500
|
5,500
|
|
July 20
|
Supplies
Yellow Company
(To record Purchased of supplies on account
|
|
1,500
|
1,500
|
|
July 22
|
Accounts Receivable
Service Revenue
(To record Goods purchased by signing Note Payable)
|
|
17,000
|
17,000
|
|
July 24
|
Cash
Service Revenue
(To record Cash paid for electricity bill)
|
|
1,800
|
1,800
|
|
July 19
|
Yellow Company
Cash
(To record paid 60% of the balance due Yellow Company )
|
|
750
|
750
|
|
July 28
|
Bank
A/C Receivable
(To record Cheque received against the service provided on July 22)
|
|
17,000
|
17,000
|
|
July 31
|
Salary expense
Cash
(To record paid receptionist salary for the month of July)
|
|
4,000
|
4,000
|
|
July 31
|
Interest Expense
Cash
(To record cash payment for bank interest)
|
|
600
|
600
|
|
|
Total
|
|
1,11,950
|
1,11,950
|
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