Description of the accounting equation, and an example of how to make journal entries using the double entry system.

1. How to Make Journal Entries Using
the Double Entry System

2. The Accounting Equation:
Assets = Liabilities + Owner’s Equity
When making general ledger entries, it is essential to remember that
both debit and credits have to match for accurate record keeping.
Businesses will have a list of monthly transactions completed, and
these transactions must be recorded using the appropriate account
types in order to create accurate financial statements. The following
is a demonstration of how general ledger entries are recorded.
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3. List of Business Transactions
On April 1, 2014, John Collins established a catering company, Collins Catering. During the month, John completed the following transactions
related to the business:
April 1. John transferred cash from a personal bank account to an account used for the business, $19,500.
2. Paid rent for period of April 5 to the end of the month, $2,550.
4. Purchased a used catering truck for $17,575, paying $9,865 cash and giving a note payable for the remainder.
5. Purchased supplies for cash, $2,200.
10. Received cash for job complete, $15,650.
15. Paid annual premiums on property and casualty insurance, $2,985.
16. Recorded jobs completed on account and sent invoices to customers, $7,950.
25. Received cash from customers on account, $4,250.
30. Paid wages of employees, $3,700.
30. Withdrew cash for personal use, $2,550.
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4. April 1. John transferred cash from a personal bank account to an account used for the business, $19,500.
There are two accounts that would be affected by this business transaction: Cash and Capital. The entry
would be recorded in the general ledger as:
Journal
Date Description Debit Credit
April 1. Cash………………………….. 19,500
John Collins, Capital……... 19,500
Journaling Using the Double-Entry Method of Accounting
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5. April 2. John paid rent for period of April 5 to the end of the month, $2,550.
There are two accounts that would be affected by this business transaction: Rent Expense and Cash.
The entry would be recorded in the general ledger as:
Journal
Date Description Debit Credit
April 2. Rent Expense………………….. 2,550
Cash……………………… 2,550
Journaling Using the Double-Entry Method of Accounting
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6. April 4. John purchased a used catering truck for $17,575, paying $9,865 cash and giving a note payable
for the remainder.
There are three accounts that would be affected by this business transaction: Truck, Cash, and Notes
Payable. The entry would be recorded in the general ledger as:
Journal
Date Description Debit Credit
April 4. Truck………………………….. 17,575
Cash……………….……... 9,865
Notes Payable……………. 7,710
Journaling Using the Double-Entry Method of Accounting
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7. April 5. John purchased supplies for cash, $2,200.
There are two accounts that would be affected by this business transaction: Supplies and Cash. The entry
would be recorded in the general ledger as:
Journal
Date Description Debit Credit
April 5. Supplies……………………….. 2,200
Cash……………….……... 2,200
Journaling Using the Double-Entry Method of Accounting
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8. April 10. John received cash for job complete, $15,650.
There are two accounts that would be affected by this business transaction: Cash and Fees Earned. The
entry would be recorded in the general ledger as:
Journal
Date Description Debit Credit
April 10. Cash..………………………….. 15,650
Fees Earned….…….……... 15,650
Journaling Using the Double-Entry Method of Accounting
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9. April 15. John paid annual premiums on property and casualty insurance, $2,985.
There are two accounts that would be affected by this business transaction: Prepaid Insurance and Cash.
The entry would be recorded in the general ledger as:
Journal
Date Description Debit Credit
April 15. Prepaid Insurance.…………….. 2,985
Cash……………….……... 2,985
Journaling Using the Double-Entry Method of Accounting
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10. April 16. John recorded jobs completed on account and sent invoices to customers, $7,950.
There are two accounts that would be affected by this business transaction: Accounts Receivable and Fees
Earned. The entry would be recorded in the general ledger as:
Journal
Date Description Debit Credit
April 16. Accounts Receivable………….. 7,950
Fees Earned……….……... 7,950
Journaling Using the Double-Entry Method of Accounting
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11. April 25. John received cash from customers on account, $4,250.
There are two accounts that would be affected by this business transaction: Cash and Accounts
Receivable. The entry would be recorded in the general ledger as:
Journal
Date Description Debit Credit
April 25. Cash………………………….. 4,250
Accounts Receivable...…... 4,250
Journaling Using the Double-Entry Method of Accounting
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12. April 30. John paid wages of employees, $3,700.
There are two accounts that would be affected by this business transaction: Wages Expense and Cash. The
entry would be recorded in the general ledger as:
Journal
Date Description Debit Credit
April 30. Wages Expense……………….. 3,700
Cash……………….……... 3,700
Journaling Using the Double-Entry Method of Accounting
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13. April 30. John withdrew cash for personal use, $2,550.
There are two accounts that would be affected by this business transaction: John Collins, Drawing and
Cash. The entry would be recorded in the general ledger as:
Journal
Date Description Debit Credit
April 30. John Collins, Drawing………….. 2,550
Cash……………….……... 2,550
Journaling Using the Double-Entry Method of Accounting
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