Journal Entries in Accounting

Examples of Journal Entries
Adjusting Journal Entries

What is a journal entry in Accounting?
Journal entry is an entry to the journal.
Journal is a record that keeps accounting transactions in chronological order, i.e. as they occur.
Ledger is a record that keeps accounting transactions by accounts.
Account is a unit to record and summarize accounting transactions.
All accounting transactions are recorded through journal entries that show account names, amounts, and whether those accounts are recorded in debit or credit side of accounts.

Double-Entry Accounting
To record transactions, accounting system uses double-entry accounting.
Double-entry implies that transactions are always recorded using two sides, debit and credit.
Debit refers to the left-hand side and credit refers to the right-hand side of the journal entry or account.
The sum of debit side amounts should equal to the sum of credit side amounts.
A journal entry is called "balanced" when the sum of debit side amounts equals to the sum of credit side amounts.

T-Account
This form looks like a letter "T", so it is called a T-account. T-account is a convenient form to analyze accounts, because it shows both debit and credit sides of the account.

Account

Debit


Credit

Examples of Journal Entries

Transaction 1: Company A sold its products at $120 and received the full amount in cash.

Steps


Self-Questions


Answers

1
What did Company A receive? Cash.

2
If Company A received cash, how would this affect the cash balance? Receiving cash increases the cash balance of the company.

3
Which side of cash account represents the increase in cash? Debit side (Left side).

4
What is the account name to record the sales of products. Sales.

5
Which side of sales account represents the increase in sales? Credit side (Right side).

6
Does the sum of debit side amounts equal to the sum of credit side amounts? In other words, does this journal entry balance? Yes.
$120 = $120



[Journal entry to record transaction 1]



Debit


Credit
Cash

120

Sales

120

Examples of Journal Entries

Transaction 2: Company A purchased supplies and paid $50 in cash.


Steps


Self-Questions


Answers

1
What did Company A receive? Supplies.

2
If Company A received supplies, how would this affect the supplies balance? It increases supplies balance.

3
Which side of supplies account represents the increase in cash? Debit side (Left side).

4
What did Company A pay? Cash.

5
Which side of cash account represents the decrease in cash? Credit side (Right side).

6
Does the sum of debit side amounts equal to the sum of credit side amounts? In other words, does this journal entry balance? Yes.

$50 = $50

[Journal entry to record transaction 2]


Debit


Credit
Supplies

50

Cash

50


Debits and Credits of Accounts

Debit


Credit

Increase in asset accounts


Decrease in asset accounts

Increase in expense accounts


Decrease in expense accounts


Decrease in liability accounts


Increase in liability accounts

Decrease in equity accounts


Increase in equity accounts

Decrease in revenue accounts


Increase in revenue accounts

Normal Balances of Accounts

Accounts have normal balances on the side where the increases in such accounts are recorded.
Asset accounts have normal balances on debit side.
Expense accounts have normal balances on debit side.
Liability accounts have normal balances on credit side.
Equity accounts have normal balances on credit side.
Revenue accounts have normal balances on credit side.
On the financial statements, accounts are reported on the sides where they have normal balances.
Liability accounts have normal balances on credit side.
Equity accounts have normal balances on credit side.



Balance Sheet

Assets


Liabilities


Owners' Equity




Income Statement

Expenses


Revenues

You haven't really said what you need. Much of this just looks like info that was provided to you from another source, i.e. explanation of journals and ledgers, what a t account is, etc. The questions under transaction 1 and transaction 2 are all correct. Except, please tell me that this:


3
Which side of supplies account represents the increase in cash? Debit side (Left side).

Is a typo. Cause the supplies account doesn't represent anything to do with the cash account. So the question is false to begin with. However, they are both debit accounts, so your answer works either way. (The question should be: which side of supplies represents the increase in supplies.)

Everything that is underneath those transactions I don't get... I don't understand if that is more info being provided to you, or whether there was a question there that you were supposed to answer, but you've provided no question. And the whole section of "Debits and Credits of Accounts" I don't understand. I think you may have been attempting to create columns, but they don't work - so it's impossible to tell what is supposed to be what.


On the financial statements, accounts are reported on the sides where they have normal balances.

That is a false statement. But again, I don't know if you were attempting to answer some question that you didn't include, or if this was info provided to you. But this last is a false statement. Financial statements are not about debits & credits. They are simply a reporting of account balances, certain totals and sub-totals, etc. The columns on a statement are not debit & credit columns. The columns are merely used for organization. There could be 3 or 4 columns. If you will look at the example here:
Multiple-Step Income Statement | AccountingCoach.com (http://www.accountingcoach.com/online-accounting-course/04Xpg04.html#income-statement-multiple-step)
You'll notice that a few expenses are listed to the list (just as a list, not as debits), but all sorts of stuff is listed to the right, including revenues, expenses, sub-totals and totals. That right column is certainly not credits. It's just a reporting of numbers in an organized manner.

Dr Servicetax Collecteable A/c

Dr Education tax collecteable A/c

Cr Serivce tax liablity a/c

Cr Education tax liablity a/c

Step:2

Dr Service tax liability a/c

Dr Education tax liability a/c

Cr Service tax payable A/c
Cr education tax payable a/c


Step:3
Payment of service tax

Dr service tax payable a/c
Dr education tax payable a/c

This is ridiculous, Have you even opened a text book?