Description of Journal Entry
| Owner invested $10,000 in the company. |
Results of Journal Entry
| Cash balance increases by $10,000. --> Increase in Assets Owner's Equity balance increases by $10,000. --> Increase in Owner's Equity |
| Example 2: Financing Activities |
| The company borrowed $20,000 from a bank. Analysis of Transaction |
Journal Entry
Description of Journal Entry
| Borrowed $20,000. |
Results of Journal Entry
| Cash balance increases by $20,000. --> Increase in Assets Borrowings balance increases by $10,000. --> Increase in Liabilities |
| Example 3: Investing Activities |
| The company purchased $12,000 equipment and paid in cash. Analysis of Transaction |
Journal Entry
Description of Journal Entry
| Purchased $12,000 equipment in cash. |
Results of Journal Entry
| Equipment balance increases by $12,000. --> Increase in Assets Cash balance decreases by $12,000. --> Decrease in Assets |
| Example 4: Operating Activities |
| The company purchased $6,000 merchandise (600 units) on credit. Analysis of Transaction |
Journal Entry
Description of Journal Entry
| Purchased $6,000 merchandise on credit. |
Results of Journal Entry
| Merchandise balance increases by $6,000. --> Increase in Assets Accounts Payable balance increases by $6,000. --> Increase in Liabilities |
| Example 5: Operating Activities |
| The company sold 500 units of merchandise at the price of $11,000. Customer paid $9,000 in cash at the time of sale. Analysis of Transaction Note: This transaction includes both "REVENUE" and "EXPENSE" components. |
(1) REVENUE side
(2) EXPENSE side
(1) REVENUE Journal Entry
Description of Journal Entry
| Sold merchandise at $11,000 price and received $9,000 in cash. |
Results of Journal Entry
| Cash balance increases by $9,000. --> Increase in Assets Accounts Receivable balance increases by $2,000. --> Increase in Assets Sales Revenue account balance increases by $11,000. --> Increase in Revenue |
Description of Journal Entry
| To record the cost of merchandise sold. |
Results of Journal Entry
| Merchandise balance decreases by $5,000. --> Decrease in Assets Cost of Merchandise Sold account balance increases by $5,000. --> Increase in Expense |
| Example 6: Operating Activities |
| The company paid $3,500 salaries. Analysis of Transaction |
Journal Entry