This is a comprehensive example of the accounting cycle. Assume a merchandise company experienced the following events during the first month.
Identify the accounts that are debited and credited. Journalize, post, and create a trial balance, make adjusting entries, prepare an adjusted trial balance, complete the financial statements, journalize and post closing entries, and create a post-closing trial balance.
Step 1 - Analyze and Journalize
Analyze and Journalize each of the following Transactions using a General Journal Page 1 (journal will be provided by the teacher or you can download from the Advanced Accounting LiveBinder - Accounting documents tab.)
01-1 Issued $500,000 of capital stock to owners.
Debit: Cash Credit: Capital Stock
01-2 Obtained a loan for $200,000 from the bank.
Debit: Cash Credit: Bank Loan Payable
01-3 Equipment was purchased for $400,000 cash.
Debit: Equipment Credit: Cash
01-4 Merchandise Inventory was purchased for $250,000 on account
Debit: Inventory Credit: Accounts Payable
01-15 Employees who earned $5,000 this period were paid.
Debit: Salary Expense Credit: Cash
01-16 A utility bill for $1,500 was received, but not paid.
Step 2 - Post General Journal Entries to the General Ledger and/or subsidiary ledgers
Stop and Post Journal Entries to the Individual Ledger Accounts using the General Ledger sheets provided by the teacher or you can download from the Advanced Accounting LiveBinder - Accounting documents tab.
Step 3 - Prepare a Trial Balance
Prepare a Trial Balance (Trial Balance sheets will be provided by the teacher or you can download from the Advanced Accounting LiveBinder - Accounting documents tab.)
Step 4 - Enter Adjusting Entries & then post to the ledger
Enter the following adjustments for depreciation and accrued interest.
01-31 Depreciation on the equipment is estimated at $4,000.