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Journal Entries
The second step in the accounting cycle is to record journal entries. This is how we formally enter transactions into the company's books.
Wize Tip
Writing journal entries is all about remembering the rules of debits and credits!
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Example: Journal Entries
Journalize the following transactions
- On April 12th, Purchased 500 units of merchandise inventory from its supplier for $10, the purchase is paid for in cash.
- Purchased equipment costing $50,000 by signing a 5-year note on June 13th.
- Borrowed $50,000 from KG Bank on August 23rd signing a 3-year note to repay the principle and interest at maturity. The interest rate on the note is 5%.
- Collected $500 from a customer on September 8th for services to be provided next month.
- Paid insurance company $1,800 on June 17th for 12 months of coverage beginning on the first of next month.
Practice: Journal Entries
Prepare the following journal entries:
January 17, ABC Corp. purchased a new tract of land for $500,000. The land was paid for by signing a 5-year note payable for $300,000 and the rest in cash.
Transactions:
| Account | Debit | Credit |
|---|---|---|