1st year accounting

Shamim collegiate
Accounting 1st year Test

Jan 1 Bought goods for cash 70,000

2 Sold good to Steve Co.(Credit) 38,000

15 Sold goods for cash 9,000

21 Steve co. paid by cheque 35,000

22 Stationery bill paid by chq 2,000

22 Telephone bill by cash 500

31 Paid rent by cash 2,000

Paid salaries by cash 3,000

Withdrew cash personal use 5,000
Requirement General Journal Ledger T account

Transaction
June 8
An amount of $50,000 was paid for six months of rent.
June 9
Equipment costing $100,000 was purchased using $40,000 cash. The remaining amount of $60,000 is a one year note with an interest rate of 3.4%
June 10
Office supplies were purchased totaling $25,000 on account.
June 16
Received $39,400 in cash for services rendered to customers.
June 16
Paid the account for office supplies purchased June 10.
June 20
$63,900 worth of services were given to customers. Received cash amount of $43,700. Customers promised to pay remaining amount of $20,200.
June 21
Paid employees’ wages for June 8-June 21. Wages totaled $23,500.
June 21
Received $20,200 in cash for services rendered to customers on June 20.
June 22
Received $6,300 in cash as advanced payment from customers.
June 27
Office supplies were purchased totaling $3,500 on account.
June 28
Electricity bill received totaling $1,850.
June 28
Phone bill received totaling $2,650.
June 28
Miscellaneous expenses totaled $4,320.
These events would then be recorded into the accounting journal. The table below records the journal entries for the events above.
Date
Account
Debit
Credit
June 6
Cash
300,000

June 8
Prepaid rent
50,000


     Cash

50,000
June 9
Equipment
100,000


     Cash

40,000

     Notes Payable

60,000
June 10
Office Supplies
25,000


     Accounts Payable

25,000
June 16
Cash
39,400


     Service Revenue

39,400
June 16
Accounts Payable
25,000


     Cash

25,000
June 20
Cash
43,700


     Accounts Receivable
20,200


     Service Revenue

63,900
June 21
Wages Expense
23,500


     Cash

23,500
June 21
Cash
20,200


     Accounts Receivable

20,200
June 22
Cash
6,300


     Unearned Revenue

6,300
June 27
Office Supplies
3,500


     Accounts Payable

3,500
June 28
Electricity Expense
1,850


     Utilities Payable

1,850
June 28
Telephone Expense
2,650


     Utilities Payable

2,650
June 28
Miscellaneous Expense
4,320


     Cash

4,320
The journal is then posted to the ledger accounts at the end of the period. Larger businesses separate their ledgers into different books, one being the general ledger and the other being a subsidiary ledger. The general ledger will include the main accounts and the following categories: assets, liabilities, owner’s equity, revenue, expense, gains, and losses. The subsidiary ledger includes detailed records of some accounts in the general ledger, the three main subsidiary ledgers being accounts receivable, inventory, and accounts payable. When recording the transactions, it is important to know how to record the debits and credits. When working with assets and expenses, an increase is recorded in debit, and a decrease is recorded in credit. When working with liabilities, equities, and revenues, a decrease is recorded in debit, and an increase is recorded in credit.

Second Example

This company was incorporated on March 1, 2013 with a starting of $1,500,000 and 10,000 common stock shares at $50 par value. These are the company’s transactions for the first month:
Date
Transaction
March 3
$300,000 were paid as advanced rent for six months.
March 4
Office supplies were purchased on account totaling $35,000.
March 6
Services were provided to customers, and the company received $54,000 in cash.
March 7
The accounts payable for office supplies purchased on March 4 was paid.
March 7
$200,000 in cash was used to purchase equipment costing $560,000. The remaining $360,000 became a one year note payable with interest rate of 4%.
March 9
Office supplies were purchased on account totaling $13,500.
March 12
Services were provided to customers, and the company received $43,500 in cash.
March 13
The accounts payable for office supplies purchased on March 9 was paid.
March 14
Employees were paid wages for March 3-March 14 totaling $356,000.
March 14
Services were provided to customers totaling $256,720. Customers paid $143,650 with a promise to pay $113,070 remaining balance in the future.
March 20
Office supplies were purchased on account totaling $5,400.
March 21
Customers paid $100,000 toward the $113,070 remaining balance for services rendered March 14.
March 23
The accounts payable for office supplies purchased on March 20 was paid.
March 25
Customers paid $13,070 for services rendered March 14.
March 27
Customers paid $23,000 in advance for services to be received.
March 28
Employees were paid wages for the final weeks of March, totaling $453,600.
March 28
Electricity bill was received totaling $6,750.
March 28
Phone bill was received totaling $8,754.
March 31
Miscellaneous expenses for the month were totaled at $15,450.
As in the example above, these transactions are then recorded into the accounting journal. Below is the table that records the accounting journal for March 2013.
Date
Account
Debit
Credit
March 1
Cash
1,500,000


     Common Stock

500,000
March 3
Prepaid Rent
300,000


     Cash

300,000
March 4
Office Supplies
35,000


     Accounts Payable

35,000
March 6
Cash
54,000


     Service Revenue

54,000
March 7
Accounts Payable
35,000


     Cash

35,000
March 7
Equipment
560,000


     Cash

200,000

     Notes Payable

360,000
March 9
Office Supplies
13,500


     Accounts Payable

13,500
March 12
Cash
43,500


     Services Revenue

43,500
March 13
Accounts Payable
13,500


     Cash

13,500
March 14
Wages Expense
356,000


     Cash

356,000
March 14
Cash
143,650


     Accounts Receivable
113,070


     Services Revenue

256,720
March 20
Office Supplies
5,400


     Accounts Payable

5,400
March 21
Cash
100,000


     Accounts Receivable

100,000
March 23
Accounts Payable
5,400


     Cash

5,400
March 25
Cash
13,070


     Accounts Receivable

13,070
March 27
Cash
23,000


     Unearned Revenue

23,000
March 28
Wages Expense
453,600


     Cash

453,600
March 28
Electricity Expense
6,750


     Utilities Payable

6,750
March 28
Phone Expense
8,754


     Utilities Payable

8,754
March 31
Miscellaneous Expense
15,450


     Cash

15,450
You can see why a larger company might have multiple journals instead of one general journal. This was only a short list of transactions that could occur in a large business, but there are usually many more. Looking at a table like this with sales and purchases mixed together could get confusing when there is so much of it going on. It is easier for accountants to record sales and purchases separately so they do not end up mixed.

Third Example

For this last example, transactions will be recorded in three separate tables to represent four separate journals – purchases journal, sales journal, cash receipts journal, and cash disbursements journal. This example should give you a greater understanding of the debit-credit rules.
This company was incorporated January 1, 2014. They started out with a cash value of $2,350,000, and they have 25,000 stock at $200 par value. These are their transactions for the first month:
Date
Transaction
January 2
Rent was paid in advance for a full year totaling $750,000.
January 3
Equipment costing $830,000 was purchased. $310,000 was paid in cash, and the remaining amount of $520,000 was a one year note payable with an interest rate of 4.6%.
January 3
Office supplies were purchased on account totaling $340,000.
January 4
Services were provided to customers, and the company received $570,000 in cash.
January 5
Sales were made, and the company received $350,000 in cash.
January 6
The accounts payable for office supplies purchased on January 3 was paid.
January 7
Sales were made totaling $475,000. Customers paid $235,000 in cash and promised to pay the remaining $240,000 in the future.
January 8
Services were provided to customers totaling $654,000. Customers paid $300,000 in cash and promised to pay the remaining $354,000 in the future.
January 9
Office supplies were purchased on account totaling $115,000.
January 10
Customers paid $25,000 for sales made on January 7 leaving a balance of $215,000.
January 11
Employees were paid wages totaling $457,000 for the first two weeks of January 2014.
January 12
The accounts payable for office supplies purchased on January 9 was paid.
January 13
Customers paid $65,000 for services rendered on January 8 leaving a balance of $289,000.
January 14
The company paid $35,000 to the note payable for equipment purchased January 3 leaving a balance of $485,000.
Janaury 15
Customers paid $53,000 for sales made on January 7 leaving a balance of $162,000.
January 16
Customers paid $43,000 for services rendered on January 8 leaving a balance of $246,000.
January 17
Office supplies were purchased on account for $75,000.
January 18
Customers paid $35,000 for services rendered on January 8 leaving a balance of $211,000.
January 19
The company paid $75,000 for equipment purchased January 3 leaving a balance of $410,000.
January 20
The accounts payable for office supplies purchased on January 17 was paid.
January 21
Customers paid $100,000 for sales made on January 7 leaving a balance of $62,000.
January 22
Sales were made, and the company received $235,000 in cash.
January 23
Customers paid $211,000 for services rendered on January 8.
January 24
Customers paid $65,000 in advance for services to be rendered.
January 25
Employees were paid wages totaling $545,000 for the third and fourth weeks of January 2014.
January 26
Customers paid $62,000 for sales made on January 7.
January 27
Sales were made, and the company received $345,000 in cash.
January 28
Office supplies were purchased on account totaling $215,000.
January 29
The accounts payable for office supplies purchased on January 28 was paid.
January 30
Services were provided to customers, and the company received $765,000 in cash.
January 31
Dividends were paid totaling $1,000,000.
January 31
Electricity bill totaling $15,450 was received.
January 31
Phone bill totaling $17,850 was received.
January 31
Miscellaneous expenses for the month totaled to $650,000.
You can see that such a long list of transactions would be quite confusing if kept in one single journal. Some companies use QuickBooks to keep track of transactions and journals. If you are interested in using QuickBooks, you might want to consider learning how to use it with an online course. Below is the table representing the purchases journal.

Purchases Journal

Date
Account
Debit
Credit
Janaury 3
Equipment
830,000


     Notes Payable

520,000
January 3
Office Supplies
340,000


     Accounts Payable

340,000
January 9
Office Supplies
115,000


     Accounts Payable

115,000
January 17
Office Supplies
75,000


     Accounts Payable

75,000
January 27
Office Supplies
215,000


      Accounts Payable

215,000
It is obvious that a journal written as such is a lot easier to read than a longer, larger general journal keeping track of everything. Notice that this table only recorded purchases on account, not payments for the purchases or cash payments for purchases.

Sales Journal

Date
Account
Debit
Credit
January 7
Accounts Receivable
240,000


     Sales

240,000
January 8
Accounts Receivable
354,000


     Service Revenue

354,000
Again, this journal does not record payments of sales or services purchased by customers on credit, and it does not record sales or services paid with cash. This only records the credit.

Cash Disbursements

Cash 457,000
Date
Account
Debit
Credit
Janaury 2
Prepaid Rent
750,000


     Cash

750,000
January 3
Equipment
310,000


     Cash

310,000
January 6
Accounts Payable
340,000


     Cash

340,000
January 11
Wages Expense
457,000


     Cash

457,000
January 12
Accounts Payable
115,000


     Cash

115,000
January 14
Notes Payable
35,000


     Cash

35,000
January 19
Notes Payable
75,000


     Cash

75,000
January 20
Accounts Payable
75,000


     Cash

75,000
January 25
Wages Expense
545,000


     Cash

545,000
January 29
Accounts Payable
215,000


     Cash

215,000
January 31
Dividends
1,000,000


     Cash

1,000,000
January 31
Utilities Payable – Electricity
15,450


     Cash

15,450
January 31
Utilities Payable – Phone
17,850


     Cash

17,850
January 31
Miscellaneous Expenses
650,000


     Cash

650,000
This journal records all payments that the company makes to any responsibilities they may have including accounts payable recorded in the purchases journal.

Cash Receipts

Date
Account
Debit
Credit
January 4
Cash
570,000


     Service Revenue

570,000
January 5
Cash
350,000


     Sales Revenue

350,000
January 7
Cash
235,000


     Sales Revenue

235,000
January 8
Cash
300,000


     Service Revenue

300,000
January 10
Cash
25,000


     Accounts Receivable – Sales

25,000
January 13
Cash
65,000


     Accounts Receivable – Service Revenue

65,000
January 15
Cash
53,000


     Accounts Receivable – Sales

53,000
January 16
Cash
43,000


     Accounts Receivable – Service Revenue

43,000
January 18
Cash
35,000


     Accounts Receivable – Service Revenue

35,000
January 21
Cash
100,000


     Accounts Receivable – Sales

100,000
January 22
Cash
235,000


     Sales Revenue

235,000
January 23
Cash
211,000


     Accounts Receivable – Service Revenue

211,000
January 24
Cash
65,000


     Unearned Revenue

65,000
January 26
Cash
62,000


     Accounts Receivable – Sales

62,000
January 27
Cash
345,000


     Sales Revenue

345,000
January 30
Cash
765,000


     Service Revenue

765,000
These are all payments made by customers with cash. This includes any advanced payments, listed as unearned revenue.



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