Professional Documents
Culture Documents
2005, Chris
Clark begins a
business that will
be known as
NetSolutions.
a. Chris Clark deposits $25,000 in a bank
account in the name of NetSolutions.
Owner’s
Assets = Liabilities + Equity
Accounts Chris Clark,
Cash + Supplies + Land Payable Capital
Bal. 8,850 1,350 20,000 = 1,350 28,850
f. – 950 – 950
Bal. 7,900 1,350 20,000 400 28,850
g. At the end of the month, the cost
of supplies on hand is $550, so
$800 of supplies were used.
Owner’s
Assets = Liabilities + Equity
Accounts Chris Clark,
Cash + Supplies + Land Payable Capital
Bal. 7,900 1,350 20,000 = 400 28,850
g. – 800 – 800 Supplies
expense
Bal. 7,900 550 20,000 400 28,050
h. At the end of the month, Chris
withdrew $2,000 in cash from the
business for personal use.
Owner’s
Assets = Liabilities + Equity
Accounts Chris Clark,
Cash + Supplies + Land Payable Capital
Bal. 7,900 550 20,000 = 400 28,050
h. –2,000 –2,000 With-
drawal
Bal. 5,900 550 20,000 400 26,050
Example of the effect of Accounting Equation
Transaction / Scenario Owners’ / Shareholder's
Equity
No. Assets Liabilities
Earning revenues
5 + R700 + R700
A business entity enters into a lot of transactions daily in the course of its
business
e.g. Purchase of raw materials; sale of goods; payments of expenses like
salaries, wages, commissions, fees, rent taxes; receipt of many non operating
incomes like rent; interest on investments; royalty; apprenticeship premium;
commissions etc.
Each transaction influences the profits of the business.In business you have
to take into account all these transactions if you want to find out the results of
the business.
And hence you should record all the transactions properly on regular basis.
Journal Entries In Accounting
All rthe transactions are entered into this book in a chronological order i.e. in
the order of time. For example the transaction taking place on 2nd march is
recorded before the transaction which took place on 5th march.
Journal Entries In Accounting
The process of recording the transaction in the Journal or making entry in the
journal is called Journalizing.
Journal is also called "The Book Of Original Entry'. Entries in the Journal are
recorded on the basis of source Documents like Cash Memos, Vouchers etc
which serve as an evidence of a transaction. Entries in the Journal are made on
the basis of ' Rules Of Journalizing'.
Journal Entries In Accounting
As in accounting there are some specified formats for all types of accounting
statements or accounts etc ,
1. Date --------------- Under this column we write the date on which the
transaction occurred.
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.
Journal Entries In Accounting
All journal entries have two “sides”:
• Debit and Credit
– For every journal entry, the total debits must equal
the total credits
– This ensures that the fundamental accounting equation (A = L
+ OE) is always in balance.
Asset Expense
Owners’
Liability Revenue
Equity
Journal Entries In Accounting
Balance
Sheet/
Balance Income
Sheet Statement Stmt of
Retained
Earnings
Owners’
Credit Liability Revenue
Equity
Account Element
Journal Entries In Accounting
Accounts
Personal Impersonal
Natural Artificial Representative Real Nominal
Tangible Intangible
Journal Entries In Accounting
Classification of Accounts:-
• Personal Account:- when a transaction involved with a person known as
personal account such as Mr. Roy, Bose& sons ABC Ltd. co. etc.
• Real Account:- Other than above two accounts all are fall under this
category, such as Machinery, Furniture etc
Journal Entries In Accounting
· In case of Nominal Account- Debit all expenses and losses and Credit all
Income and liabilities.
· In case of Real Accounts - Debit what comes in and credit what goes out
Journal Entries In Accounting
5. Borrowing money
5a. Borrowed $9,000 in cash
5b. Issued a promissory note and received $11,000 in cash
6. Issuance of stock
6a. Issued 500 shares of common stock, at $50 per share
6b. Issued 200 shares of preferred stock, at $80 per share
Presented by:
BHAVYA TANEJA