Journal Entries | Problem & Solution-02


Journal Entries | Problem & Solution-02
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

Accounts Types
Increase/Decrease
Debit/Credit
Expenses
Increase
Debit
Expenses
Decrease
Credit
Revenues
Increase
Credit
Revenues
Decrease
Debit
Owner’s Equity
Increase
Credit
Owner’s Equity
Decrease
Debit
Liabilities
Increase
Credit
Liabilities
Decrease
Debit
Assets
Increase
Debit
Assets
Decrease
Credit
July 1: Mark invested $30,000 cash in his business

Here involve 2 accounts

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.




July 7: Loan was taken from the bank $12,000

Here involve 2 accounts

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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