Double-entry Accounting System
Let's look at the general journal containing transactions from our illustration above:
Illustration 4-47: General Journal for Huske's Consultants
Date |
Account titles |
Debit |
Credit |
Jan 31 |
Cash |
10,000 |
|
|
Contributed Capital |
|
10,000 |
May 15 |
Supplies |
400 |
|
|
Accounts Payable |
|
400 |
May 20 |
Accounts Receivable |
2,600 |
|
|
Consulting Revenue |
|
2,600 |
April 5 |
Operating Expense |
600 |
|
|
Cash |
|
600 |
May 31 |
Cash |
4,000 |
|
|
Notes Payable |
|
4,000 |
June 1 |
Prepaid Rent |
2,400 |
|
|
Cash |
|
2,400 |
June 15 |
Cash |
1,500 |
|
|
Accounts Receivable |
|
1,500 |
June 31 |
Cash |
3,600 |
|
|
Unearned Revenue |
|
3,600 |
June 31 |
Cash |
700 |
|
|
Consulting Revenue |
|
700 |
June 31 |
Notes Receivable |
3,000 |
|
|
Cash |
|
3,000 |
June 31 |
Office Equipment |
2,000 |
|
|
Cash |
|
2,000 |
Aug. 14 |
Accounts Payable |
400 |
|
|
Cash |
|
400 |
Sept 18 |
Office Maintenance Expense |
800 |
|
|
Accounts Payable |
|
800 |
Nov 31 |
Distributions |
300 |
|
|
Cash |
|
300 |
Adjusting entries |
|||
Dec 31 |
Interest Expense |
163 |
|
|
Interest Payable |
|
163 |
Dec 31 |
Rent Expense |
1,167 |
|
|
Prepaid Rent |
|
1,167 |
Dec 31 |
Unearned Revenue |
1,800 |
|
|
Consulting Revenue |
|
1,800 |
Dec 31 |
Interest Receivable |
100 |
|
|
Interest Revenue |
|
100 |
Dec 31 |
Depreciation Expense |
800 |
|
|
Accumulated Depreciation |
|
800 |
Dec 31 |
Salaries Expense |
600 |
|
|
Salaries Payable |
|
600 |
Dec 31 |
Supplies Expense |
300 |
|
|
Supplies |
|
300 |
Totals of debits and credits |
35,530 |
35,530 |
|
In addition to adjusting entries, closing entries must be made at the end of an accounting period.
Closing entries are made to free up (to zero) the nominal (temporary) accounts so that they are prepared to be used in the next accounting period.
Nominal accounts are revenue, expense, and distribution accounts. All nominal accounts are closed to Retained Earnings.
The general journal with closing entries is presented below:
Illustration 4-48: Closing entries for Huske's Consultants
Date |
Account titles |
Debit |
Credit |
Closing entries |
|||
Dec. 31 |
Consulting Revenue |
5,100 |
|
|
Interest Revenue |
100 |
|
|
Retained Earnings |
|
5,200 |
Dec. 31 |
Retained Earnings |
4,430 |
|
|
Operating Expense |
|
600 |
|
Office Maintenance Expense |
|
800 |
|
Interest Expense |
|
163 |
|
Rent Expense |
|
1,167 |
|
Depreciation Expense |
|
800 |
|
Salaries Expense |
|
600 |
|
Supplies Expense |
|
300 |
Dec. 31 |
Retained Earnings |
300 |
|
|
Distributions |
|
300 |
Page 11 of 12
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