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T Account and Trial Balance - Example 1

Written by Jason Gordon

Updated at April 7th, 2022

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Example of Journal Entries and T Accounts?


Back to: Accounting & Taxation

0:00:00.320,0:00:03.439

Hey everyone welcome to chapter two's


0:00:02.320,0:00:06.000

example this is


0:00:03.439,0:00:07.200

part one of the example, so in this video


0:00:06.000,0:00:08.480

we're going to be doing the journal


0:00:07.200,0:00:10.080

entries and the T tables


0:00:08.480,0:00:11.120

and in part two the next video we're


0:00:10.080,0:00:12.960

going to be taking everything that we


0:00:11.120,0:00:14.320

did in this video and putting it into a


0:00:12.960,0:00:16.400

drawback, so this is going to give you a


0:00:14.320,0:00:18.160

couple steps in the accounting cycle


0:00:16.400,0:00:19.920

a little bit of practice so let's go


0:00:18.160,0:00:21.439

ahead and begin. And the problem it says


0:00:19.920,0:00:23.119

bravo company provides consulting


0:00:21.439,0:00:24.240

services to its customers the company


0:00:23.119,0:00:25.359

began the year with the following


0:00:24.240,0:00:27.760

account balances.


0:00:25.359,0:00:29.119

So we began the year with a cash balance


0:00:27.760,0:00:30.560

of twenty thousand dollars that means we


0:00:29.119,0:00:31.199

ended last year with twenty thousand


0:00:30.560,0:00:32.399

dollars


0:00:31.199,0:00:34.480

the ending of one year becomes the


0:00:32.399,0:00:36.079

beginning of the following uh we had a


0:00:34.480,0:00:36.960

beginning balance of supplies of four


0:00:36.079,0:00:39.200

hundred,


0:00:36.960,0:00:40.160

a beginning balance of common stock of


0:00:39.200,0:00:41.520

ten thousand,


0:00:40.160,0:00:43.440

and a beginning balance retained


0:00:41.520,0:00:44.239

earnings of ten thousand four 400 so


0:00:43.440,0:00:46.320

again this


0:00:44.239,0:00:47.920

implies that this is not the first year


0:00:46.320,0:00:49.039

of the company we actually do have


0:00:47.920,0:00:51.440

beginning balances,


0:00:49.039,0:00:52.879

so in order for us to begin this problem


0:00:51.440,0:00:54.559

or get this problem started


0:00:52.879,0:00:56.719

we need to go ahead and get the t table


0:00:54.559,0:00:58.480

set up for those accounts,


0:00:56.719,0:01:00.079

so there's the pages for our t tables


0:00:58.480,0:01:02.480

and our journal entry.


0:01:00.079,0:01:04.239

So let's go ahead with the cash t table we


0:01:02.480,0:01:05.119

need to create one so it's just again


0:01:04.239,0:01:07.520

cash with a t


0:01:05.119,0:01:09.280

capital t cash tends to be a little bit


0:01:07.520,0:01:11.360

longer because we use it more often


0:01:09.280,0:01:12.880

it's exchanged more often so you want to


0:01:11.360,0:01:14.320

give yourself a little bit more room on


0:01:12.880,0:01:15.360

this one the size of your t table may


0:01:14.320,0:01:18.640

want to be a little bit bigger


0:01:15.360,0:01:20.479

but cash t table is an asset t table so


0:01:18.640,0:01:22.640

it follows the plus minus


0:01:20.479,0:01:25.119

on the debits and credits so our debit


0:01:22.640,0:01:27.280

is plus and remember all of our balances


0:01:25.119,0:01:29.280

should go on the normal side the normal


0:01:27.280,0:01:31.200

side of a t table is the plus side


0:01:29.280,0:01:32.799

so for us the beginning cash balance is


0:01:31.200,0:01:35.600

going to go on the debit side


0:01:32.799,0:01:37.040

and so we'll put beginning balance of


0:01:35.600,0:01:38.720

20000.


0:01:37.040,0:01:40.880

Supplies is next so I want to create a


0:01:38.720,0:01:42.479

supplies t table and again supplies is


0:01:40.880,0:01:43.119

an asset so again I'm going to put the


0:01:42.479,0:01:44.720

400,


0:01:43.119,0:01:46.960

balance on the debit side because that's


0:01:44.720,0:01:50.479

the plus side or the normal side


0:01:46.960,0:01:50.960

so beginning 400. Common stock common


0:01:50.479,0:01:54.000

stock


0:01:50.960,0:01:55.759

is a type of equity account and it


0:01:54.000,0:01:57.119

follows the minus plus on the t


0:01:55.759,0:02:00.000

table so I'm going to create my common


0:01:57.119,0:02:01.360

stock t table and the balance of 10 000


0:02:00.000,0:02:03.360

is going to go on the credit side


0:02:01.360,0:02:04.479

because again that is the plus side for


0:02:03.360,0:02:06.399

common stock,


0:02:04.479,0:02:08.239

and lastly retained earnings files the


0:02:06.399,0:02:09.280

same thing will create a retained


0:02:08.239,0:02:11.760

earnings t table


0:02:09.280,0:02:14.160

and put it on the credit side of a


0:02:11.760,0:02:16.400

balance of 10 4.


0:02:14.160,0:02:17.520

Now I know this looks really odd because


0:02:16.400,0:02:20.640

I've spread all these


0:02:17.520,0:02:22.080

accounts in different areas on the paper,


0:02:20.640,0:02:23.120

but there's a reason behind it this is


0:02:22.080,0:02:24.480

just something I do you don't


0:02:23.120,0:02:24.800

necessarily have to do this you can kind


0:02:24.480,0:02:27.360

of


0:02:24.800,0:02:28.959

go with that your own way I just like to


0:02:27.360,0:02:30.319

have mine kind of clean and set up


0:02:28.959,0:02:32.319

that makes organization a little bit


0:02:30.319,0:02:33.680

easier for me to be able to see it,


0:02:32.319,0:02:35.440

everything on the far left is going to


0:02:33.680,0:02:37.680

be my assets so all my assets are going


0:02:35.440,0:02:39.280

to go in this kind of yellow area


0:02:37.680,0:02:41.200

all of my liabilities will kind of go in


0:02:39.280,0:02:42.239

the upper middle which is the red area


0:02:41.200,0:02:43.440

we don't have any right now but that's


0:02:42.239,0:02:44.959

where they will go,


0:02:43.440,0:02:47.200

and then all of my equities on the far


0:02:44.959,0:02:48.640

right that's kind of again my system


0:02:47.200,0:02:50.800

you don't have to follow it if it's not


0:02:48.640,0:02:52.400

asked of you but it's just an easy way


0:02:50.800,0:02:54.000

to look back and say hey


0:02:52.400,0:02:55.280

you know what is this where is it you


0:02:54.000,0:02:56.879

know where's it going to go and all that


0:02:55.280,0:02:59.519

good stuff so


0:02:56.879,0:03:01.440

again my method to my madness. All right.


0:02:59.519,0:03:03.440

So let's get into the transactions


0:03:01.440,0:03:05.040

now that we've done the t tables now


0:03:03.440,0:03:06.879

also too I want to point out,


0:03:05.040,0:03:08.640

notice we didn't do any uh journal


0:03:06.879,0:03:09.519

entries for the beginning balances


0:03:08.640,0:03:10.720

because those have already been


0:03:09.519,0:03:12.319

journalized last year


0:03:10.720,0:03:13.360

beginning balances are not journalized


0:03:12.319,0:03:14.080

for the next year because they've


0:03:13.360,0:03:16.080

already been


0:03:14.080,0:03:17.440

they're already on the books so we


0:03:16.080,0:03:18.000

didn't do any journal issues with for


0:03:17.440,0:03:19.920

those,


0:03:18.000,0:03:21.519

so now let's get into the transactions.


0:03:19.920,0:03:23.599

On one one it says bravo company


0:03:21.519,0:03:27.040

acquired an additional 30 000


0:03:23.599,0:03:28.640

cash by issuing common stock that means


0:03:27.040,0:03:30.080

somebody gave us money to invest in us


0:03:28.640,0:03:31.360

in exchange for common stock that we


0:03:30.080,0:03:33.120

gave back to them,


0:03:31.360,0:03:34.799

so let's put this into a journal entry.


0:03:33.120,0:03:36.159

Our date is 1-1 and we're going to


0:03:34.799,0:03:37.920

follow the same


0:03:36.159,0:03:39.760

strategy that we did in the last chapter


0:03:37.920,0:03:42.400

where I asked myself the question


0:03:39.760,0:03:43.519

is cash involved and in this situation


0:03:42.400,0:03:46.080

it is our cash


0:03:43.519,0:03:47.680

our cash is involved we received thirty


0:03:46.080,0:03:49.840

thousand dollars cash


0:03:47.680,0:03:51.360

and what is our cash doing, well in this


0:03:49.840,0:03:54.400

situation it's going up


0:03:51.360,0:03:56.640

so we're going to debit cash so I will


0:03:54.400,0:03:59.120

start with my cash as the debit


0:03:56.640,0:04:00.480

for thirty thousand dollars and what is


0:03:59.120,0:04:03.920

on the other side what's its


0:04:00.480,0:04:05.360

in exchange of uh or for and that's


0:04:03.920,0:04:06.879

going to be common stock so we're going


0:04:05.360,0:04:10.560

to credit common stock for 30000,


0:04:06.879,0:04:11.680

that is our first journal entry


0:04:10.560,0:04:13.439

but now that we've done our journal


0:04:11.680,0:04:14.640

entry we need to put it into our t


0:04:13.439,0:04:15.680

tables now we already have these


0:04:14.640,0:04:18.160

t-tables so we're just going to


0:04:15.680,0:04:19.840

add them onto the already existing ones


0:04:18.160,0:04:20.959

so on the debit side I'll put one one of


0:04:19.840,0:04:22.800

30 000


0:04:20.959,0:04:24.080

for cash and on the credit side of


0:04:22.800,0:04:26.720

common stock I will do


0:04:24.080,0:04:27.360

the same thing, and that's transaction


0:04:26.720,0:04:29.680

one


0:04:27.360,0:04:31.600

so let's go to transaction two. Bravo


0:04:29.680,0:04:32.240

company completed a consultation for a


0:04:31.600,0:04:35.440

client


0:04:32.240,0:04:37.600

for 165 000 an invoice was sent to the


0:04:35.440,0:04:39.919

client but not yet collected in cash,


0:04:37.600,0:04:42.320

so in this one we've done the work we've


0:04:39.919,0:04:44.080

sent the client the bill they just


0:04:42.320,0:04:45.440

haven't paid for it in cash yet they


0:04:44.080,0:04:48.320

still owe us.


0:04:45.440,0:04:48.880

So again first question is cash involved,


0:04:48.320,0:04:50.240

well no


0:04:48.880,0:04:52.400

cash is not involved here because they


0:04:50.240,0:04:53.600

haven't paid it yet so then we ask


0:04:52.400,0:04:55.040

ourselves the question


0:04:53.600,0:04:57.360

what are we expected to do with that


0:04:55.040,0:04:58.880

cash at a later date well that cash


0:04:57.360,0:05:00.960

we're expected to receive


0:04:58.880,0:05:02.160

at a later date so this makes it


0:05:00.960,0:05:05.360

accounts receivable,


0:05:02.160,0:05:06.400

we will go 210 as the date and accounts


0:05:05.360,0:05:09.199

receivable is an


0:05:06.400,0:05:11.440

asset so we're going to start with the


0:05:09.199,0:05:13.919

debit of accounts receivable


0:05:11.440,0:05:16.160

because we're making our asset go up and


0:05:13.919,0:05:17.600

465 thousand,


0:05:16.160,0:05:19.440

and then what is the other side what is


0:05:17.600,0:05:22.240

the credit well we've done the work


0:05:19.440,0:05:23.360

we've earned this value uh so because


0:05:22.240,0:05:24.000

we've earned it we're going to put it


0:05:23.360,0:05:25.680

into a


0:05:24.000,0:05:27.360

revenue account and we're going to call


0:05:25.680,0:05:30.800

that just consulting revenue


0:05:27.360,0:05:32.240

of 165 000 as a credit, so I don't have


0:05:30.800,0:05:33.919

either one of these


0:05:32.240,0:05:36.160

accounts as a t table so I need to


0:05:33.919,0:05:38.080

create these t tables so I'll put ar


0:05:36.160,0:05:39.520

I'll put it again on the debit side for


0:05:38.080,0:05:41.759

165


0:05:39.520,0:05:42.800

and then consulting revenue put on the


0:05:41.759,0:05:46.560

credit side


0:05:42.800,0:05:48.320

again for 165, and that's transaction 2.


0:05:46.560,0:05:49.600

Now if you want to and I would highly


0:05:48.320,0:05:51.199

suggest this if you want to pause the


0:05:49.600,0:05:53.440

videos and go to the next one


0:05:51.199,0:05:54.800

and try the next one on your on your own


0:05:53.440,0:05:55.680

and then come back and check it and then


0:05:54.800,0:05:57.120

the next one


0:05:55.680,0:05:58.880

that's a great system just to kind of


0:05:57.120,0:06:00.080

see what you do and what you don't know,


0:05:58.880,0:06:01.520

so if you want to pause it here and go


0:06:00.080,0:06:02.240

to the next one then come come back and


0:06:01.520,0:06:04.080

check it that's


0:06:02.240,0:06:05.520

great please do that I'm going to go


0:06:04.080,0:06:08.960

ahead and go on now.


0:06:05.520,0:06:12.080

228 bravo company paid 20 000


0:06:08.960,0:06:14.160

cash to its employee for work done on


0:06:12.080,0:06:17.759

the consulting contract,


0:06:14.160,0:06:20.639

so 228 is our date is cash involved here,


0:06:17.759,0:06:22.400

yes cash is involved it says 20 000 cash


0:06:20.639,0:06:24.080

what is our cash doing,


0:06:22.400,0:06:26.080

our cash is now going down because we


0:06:24.080,0:06:27.919

paid this to our employee so our cash is


0:06:26.080,0:06:28.479

going down and in order to make cash go


0:06:27.919,0:06:30.560

down


0:06:28.479,0:06:32.160

we need to put it as a credit, so let's


0:06:30.560,0:06:35.440

go ahead and credit cash


0:06:32.160,0:06:36.639

for 20 000. Now we need to know what the


0:06:35.440,0:06:39.680

debit is going to be


0:06:36.639,0:06:41.440

well we've used our employees services


0:06:39.680,0:06:42.720

and what we do the things we use we


0:06:41.440,0:06:43.840

expense them so this is going to be an


0:06:42.720,0:06:44.800

expense account and I'm just going to


0:06:43.840,0:06:47.759

call it,


0:06:44.800,0:06:49.919

salaries expense because I'm paying for


0:06:47.759,0:06:51.440

their salary for twenty thousand


0:06:49.919,0:06:52.960

uh so I need to again make another t


0:06:51.440,0:06:54.160

table for salaries expense


0:06:52.960,0:06:55.840

this time it's going to go on the debit


0:06:54.160,0:06:57.120

side because it is an expense expenses


0:06:55.840,0:06:59.520

are plus minus


0:06:57.120,0:07:00.400

it is going to be 20 000 as a debit for


0:06:59.520,0:07:02.160

salaries expense


0:07:00.400,0:07:03.840

and then 20 thousand as a credit for


0:07:02.160,0:07:05.520

cash because again our cash is going


0:07:03.840,0:07:07.599

down.


0:07:05.520,0:07:10.080

All right. Transaction four on four one


0:07:07.599,0:07:11.840

bravo signed a one year lease and paid


0:07:10.080,0:07:13.360

twenty four thousand dollars up front to


0:07:11.840,0:07:16.720

rent office space


0:07:13.360,0:07:19.440

the one year lease began april 1,


0:07:16.720,0:07:21.280

so in this one we're paying for the use


0:07:19.440,0:07:22.800

of something but it's for the future use


0:07:21.280,0:07:24.400

of something we're just paying for it up


0:07:22.800,0:07:26.800

front we're prepaying for it,


0:07:24.400,0:07:27.759

okay, so let's go through our steps is


0:07:26.800,0:07:30.639

cash involved


0:07:27.759,0:07:31.039

yes cash is involved because we paid


0:07:30.639,0:07:33.759

24000


0:07:31.039,0:07:35.599

cash it doesn't say cash but it also


0:07:33.759,0:07:36.479

doesn't say on account so we assume cash


0:07:35.599,0:07:37.840

right now,


0:07:36.479,0:07:39.759

our cash is going down so that means


0:07:37.840,0:07:42.880

we're going to credit it


0:07:39.759,0:07:46.080

so I'll start with the date for one and


0:07:42.880,0:07:49.440

credit cash for 24 000.


0:07:46.080,0:07:51.280

Now the debit it's not an expense


0:07:49.440,0:07:52.879

because we haven't used yet


0:07:51.280,0:07:55.440

what we're doing is we're paying for the


0:07:52.879,0:07:57.199

right or the ownership to use it


0:07:55.440,0:07:59.120

and so therefore this is going to be an


0:07:57.199,0:08:00.800

asset and it's pretty much exactly what


0:07:59.120,0:08:04.160

it says this is going to be called


0:08:00.800,0:08:04.960

a prepaid rent, we prepaid for it up


0:08:04.160,0:08:07.440

front


0:08:04.960,0:08:08.639

and it is specific to rent a lot of


0:08:07.440,0:08:10.319

times you'll see these


0:08:08.639,0:08:12.479

with prepaid insurance or prepaid rent


0:08:10.319,0:08:14.400

the most common ones. I need to create a


0:08:12.479,0:08:15.919

t table for prepaid rent again it is an


0:08:14.400,0:08:18.000

asset so it is plus minus


0:08:15.919,0:08:19.280

so I'll put it with the assets put on


0:08:18.000,0:08:22.639

the debit side


0:08:19.280,0:08:26.400

of 24 000 and then add the 24 000 to the


0:08:22.639,0:08:29.599

credit side of cash,


0:08:26.400,0:08:32.000

that is transaction four.


0:08:29.599,0:08:35.360

Now let's go on to the next one on 415


0:08:32.000,0:08:37.200

bravo company collected 141 000


0:08:35.360,0:08:39.279

cash from its customers as a partial


0:08:37.200,0:08:42.240

settlement for the consulting job


0:08:39.279,0:08:43.120

completed on february 10th. All right. So


0:08:42.240,0:08:46.160

we know


0:08:43.120,0:08:47.040

again the date is 4 15 is cash affected


0:08:46.160,0:08:49.519

here,


0:08:47.040,0:08:50.240

yes they're paying us so our cash is


0:08:49.519,0:08:56.560

going up


0:08:50.240,0:08:57.920

so we're going to debit cash for 141 000


0:08:56.560,0:09:00.320

and then what is the credit going to be


0:08:57.920,0:09:02.560

well they're paying us for what was an


0:09:00.320,0:09:04.320

accounts receivable so they're lowering


0:09:02.560,0:09:05.600

their accounts receivable so in order to


0:09:04.320,0:09:06.480

lower it we're going to credit it so I


0:09:05.600,0:09:08.160

want to credit


0:09:06.480,0:09:09.760

accounts receivable for the same amount


0:09:08.160,0:09:11.440

141


0:09:09.760,0:09:13.360

I need to put that in my t tables so I'm


0:09:11.440,0:09:18.640

going to debit cash


0:09:13.360,0:09:21.279

for 141 and credit ar for 141,


0:09:18.640,0:09:22.640

all right that's transaction 5. All


0:09:21.279,0:09:25.839

right, let's go to six.


0:09:22.640,0:09:27.519

Bravo company was paid 18 000 cash in


0:09:25.839,0:09:29.600

advance from a client


0:09:27.519,0:09:30.880

for consulting services to be completed


0:09:29.600,0:09:32.880

over the next 12 months


0:09:30.880,0:09:35.360

beginning immediately. All right. So our


0:09:32.880,0:09:37.680

date 6-2


0:09:35.360,0:09:38.560

is cash being involved here or affected


0:09:37.680,0:09:40.640

here,


0:09:38.560,0:09:42.640

yes cash is being affected what's


0:09:40.640,0:09:44.800

happening to our cash our cash is going


0:09:42.640,0:09:47.040

up because they're paying us in advance


0:09:44.800,0:09:50.000

so if you remember back on 4-1


0:09:47.040,0:09:50.959

we prepaid for something in this one


0:09:50.000,0:09:53.519

they're prepaying


0:09:50.959,0:09:54.560

us for something, so it's kind of on the


0:09:53.519,0:09:55.920

the other end


0:09:54.560,0:09:58.000

but our cash is going up so we're going


0:09:55.920,0:09:59.519

to start by crediting cash


0:09:58.000,0:10:01.839

uh excuse me we're going to start by


0:09:59.519,0:10:05.040

debiting cash of 18 000


0:10:01.839,0:10:07.200

and then the credit this is


0:10:05.040,0:10:09.040

money that they're paying us for work to


0:10:07.200,0:10:11.839

be done but it hasn't been done


0:10:09.040,0:10:12.959

yet so we haven't earned it yet we will


0:10:11.839,0:10:14.399

when we do the work but we haven't


0:10:12.959,0:10:15.600

earned it yet so what we're going to do


0:10:14.399,0:10:19.440

is we're going to credit


0:10:15.600,0:10:21.440

unearned revenue which is liability we


0:10:19.440,0:10:23.279

still owe that service


0:10:21.440,0:10:25.600

so it is a liability unearned revenue


0:10:23.279,0:10:27.839

for 18 000 and then I'm going to again


0:10:25.600,0:10:30.720

make my t tables I'm going to add the 18000


0:10:27.839,0:10:32.320

to the debit side of cash


0:10:30.720,0:10:34.240

and I'm going to create an unearned


0:10:32.320,0:10:37.519

revenue t table


0:10:34.240,0:10:39.760

and put 18 000 on the credit side.


0:10:37.519,0:10:42.640

All right that is the sixth transaction,


0:10:39.760,0:10:45.519

let's go to the next one


0:10:42.640,0:10:45.519

I got to move some paper up.


0:10:45.760,0:10:52.480

7-1 bravo company purchased 1500


0:10:48.800,0:10:55.760

worth of supplies in cash, again


0:10:52.480,0:10:56.800

is cash involved yes cash is being


0:10:55.760,0:10:59.360

affected how,


0:10:56.800,0:11:00.240

it is going down because we purchased


0:10:59.360,0:11:03.120

the supplies


0:11:00.240,0:11:04.320

so our cash is going to go down so if


0:11:03.120,0:11:06.959

cash goes down


0:11:04.320,0:11:07.760

our date 7-1 is going to go on the credit


0:11:06.959,0:11:11.200

so cash


0:11:07.760,0:11:12.880

credit for 1 500. What is our


0:11:11.200,0:11:14.320

debit going to be well in exchange for


0:11:12.880,0:11:16.320

the cash we're getting supplies


0:11:14.320,0:11:19.680

that's going to be an asset so we will


0:11:16.320,0:11:22.959

increase our supplies by 1500


0:11:19.680,0:11:22.959

put these on our t tables


0:11:23.519,0:11:27.680

1500 on the debit side of supplies and


0:11:26.000,0:11:31.200

then 1500 on the credit


0:11:27.680,0:11:34.720

side of cash. All right. On to 7


0:11:31.200,0:11:37.519

15. on 7 15 bravo company paid


0:11:34.720,0:11:38.480

44 000 of miscellaneous expenses on


0:11:37.519,0:11:40.959

account,


0:11:38.480,0:11:42.000

so 715 is our date is cash being


0:11:40.959,0:11:44.240

involved


0:11:42.000,0:11:45.360

no cash is not being involved because it


0:11:44.240,0:11:47.040

says on account,


0:11:45.360,0:11:48.880

so that lets me know that I'm putting it


0:11:47.040,0:11:50.399

on my tab.


0:11:48.880,0:11:52.079

So what am I expected to do with this


0:11:50.399,0:11:54.240

cash at a later date well I'm expected


0:11:52.079,0:11:55.360

to pay cash at a later date for this


0:11:54.240,0:11:58.160

so this is going to be in accounts


0:11:55.360,0:12:00.160

payable accounts payable is a liability


0:11:58.160,0:12:02.079

so we're going to in order to increase


0:12:00.160,0:12:03.600

liabilities it needs to go on the


0:12:02.079,0:12:05.519

credit side so we're going to credit


0:12:03.600,0:12:09.120

accounts payable


0:12:05.519,0:12:12.320

for 44 000 and then on the other side


0:12:09.120,0:12:13.839

what are we going to debit,


0:12:12.320,0:12:15.360

well this is an expense it tells us an


0:12:13.839,0:12:16.639

expense it actually tells us the name so


0:12:15.360,0:12:18.720

we're just going to put miscellaneous


0:12:16.639,0:12:21.600

expense


0:12:18.720,0:12:23.519

for 44 000. I'm going to create a


0:12:21.600,0:12:26.560

miscellaneous expense t-table


0:12:23.519,0:12:28.480

for 44 000 on the debit side and I'm


0:12:26.560,0:12:30.320

also going to create an accounts payable


0:12:28.480,0:12:34.240

t table because I don't have one


0:12:30.320,0:12:35.519

with 44 000 on the credit side.


0:12:34.240,0:12:38.000

All right that's that transaction, let's


0:12:35.519,0:12:39.760

go to 720. Bravo company


0:12:38.000,0:12:41.600

purchased some land worth a hundred and


0:12:39.760,0:12:43.600

twenty thousand dollars for


0:12:41.600,0:12:45.360

a hundred thousand dollars cash for


0:12:43.600,0:12:47.760

future expansion,


0:12:45.360,0:12:49.279

now there's two numbers here and it's


0:12:47.760,0:12:50.320

it's here for a purpose because again we


0:12:49.279,0:12:51.200

want to go back to our accounting


0:12:50.320,0:12:52.639

principles


0:12:51.200,0:12:54.480

one of the accounting principles is the


0:12:52.639,0:12:55.600

cost principle that says that we have to


0:12:54.480,0:12:58.560

keep things recorded


0:12:55.600,0:12:58.959

at cost what it cost us. All right. So our


0:12:58.560,0:13:00.160

date


0:12:58.959,0:13:02.880

let's go ahead and get into the journal


0:13:00.160,0:13:05.920

entries our date is 720,


0:13:02.880,0:13:07.440

is cash involved yes cash is involved


0:13:05.920,0:13:09.040

what's happening to our cash it's going


0:13:07.440,0:13:09.920

down because we purchased it so we paid


0:13:09.040,0:13:13.360

the cash


0:13:09.920,0:13:14.480

cash goes down but by how much I care


0:13:13.360,0:13:16.639

about the 100000


0:13:14.480,0:13:18.320

not the 120 I don't care what it's


0:13:16.639,0:13:19.680

worth I care about what I actually paid


0:13:18.320,0:13:21.600

for it in cash


0:13:19.680,0:13:23.200

that's the cost principle so I'm going


0:13:21.600,0:13:26.000

to keep it on my books for what it costs


0:13:23.200,0:13:28.000

me in cash. So a hundred thousand dollars


0:13:26.000,0:13:29.680

and then on the debit side what am I


0:13:28.000,0:13:31.600

getting a return I'm getting land


0:13:29.680,0:13:32.959

and that land I'm gonna put again keep


0:13:31.600,0:13:34.480

it as a hundred thousand dollars I want


0:13:32.959,0:13:37.279

to make sure my debit and my credit


0:13:34.480,0:13:39.279

equal in every single one of these,


0:13:37.279,0:13:40.800

so that's what it looks like I need to


0:13:39.279,0:13:42.560

create a land t table


0:13:40.800,0:13:43.839

so there's my land t table with a


0:13:42.560,0:13:46.399

hundred thousand dollars


0:13:43.839,0:13:48.000

debit and I also need to put a hundred


0:13:46.399,0:13:52.240

thousand dollars on the


0:13:48.000,0:13:54.480

credit side for cash. All right. 815


0:13:52.240,0:13:56.079

bravo company paid 30 000 cash as a


0:13:54.480,0:13:59.279

partial settlement for its


0:13:56.079,0:14:01.680

accounts payable all right so 815


0:13:59.279,0:14:03.440

is cash involved yes because we're


0:14:01.680,0:14:05.760

paying off our accounts payable


0:14:03.440,0:14:08.160

our cash is going down therefore cash


0:14:05.760,0:14:11.360

will be credited


0:14:08.160,0:14:12.720

and also we'll put credit cash 30 000


0:14:11.360,0:14:14.560

and the other side of that is we're


0:14:12.720,0:14:15.199

paying off our accounts payable in order


0:14:14.560,0:14:17.440

to get


0:14:15.199,0:14:19.279

accounts payable decreased it needs to


0:14:17.440,0:14:20.000

go on the debit side so we're going to


0:14:19.279,0:14:22.240

debit


0:14:20.000,0:14:23.600

accounts payable for the same amount


0:14:22.240,0:14:25.440

30000,


0:14:23.600,0:14:27.279

now we need to post them to our t tables


0:14:25.440,0:14:30.399

debit accounts payable


0:14:27.279,0:14:32.720

430 000 and then credit cash for thirty


0:14:30.399,0:14:32.720

thousand.


0:14:33.040,0:14:36.639

All right. Twelve one bravo company paid


0:14:35.040,0:14:37.120

five thousand dollars in cash dividends


0:14:36.639,0:14:39.600

to its


0:14:37.120,0:14:41.920

stockholders so we've declared dividends


0:14:39.600,0:14:44.320

now we're paying them,


0:14:41.920,0:14:46.000

is cash being affected yes what's


0:14:44.320,0:14:49.199

happening to our cash it's going down


0:14:46.000,0:14:52.079

I'm going to credit cash for 5 000


0:14:49.199,0:14:52.079

again 12 1.


0:14:52.800,0:14:56.079

And then what's the other side to what's


0:14:54.320,0:14:58.399

the debit this is going to be dividends


0:14:56.079,0:14:59.839

because again it tells us dividends uh


0:14:58.399,0:15:03.279

for five thousand


0:14:59.839,0:15:06.079

I need to create a dividends t table,


0:15:03.279,0:15:07.760

so dividend t table five thousand on the


0:15:06.079,0:15:08.320

debit side and then I'm going to credit


0:15:07.760,0:15:11.760

cash t


0:15:08.320,0:15:14.639

table for the same five thousand.


0:15:11.760,0:15:16.399

The last one 12 31 bravo company signed


0:15:14.639,0:15:18.560

a contract for 187


0:15:16.399,0:15:19.519

000 in consulting services to be


0:15:18.560,0:15:21.600

completed


0:15:19.519,0:15:24.399

over the next 12 months beginning


0:15:21.600,0:15:26.240

january 1st of the next year,


0:15:24.399,0:15:28.480

so we need to figure out what the


0:15:26.240,0:15:31.519

journal entry is


0:15:28.480,0:15:32.800

well what is happening here essentially


0:15:31.519,0:15:36.320

what this is saying is,


0:15:32.800,0:15:39.839

I'm promising to do work for 12 months


0:15:36.320,0:15:40.480

and the customer is promising to pay 


0:15:39.839,0:15:42.720

187000


0:15:40.480,0:15:44.320

for that work but all of that happens


0:15:42.720,0:15:46.240

next year.


0:15:44.320,0:15:47.600

Remember one of the parts of the


0:15:46.240,0:15:50.079

accounting cycle is


0:15:47.600,0:15:51.440

your ability to analyze when we need to


0:15:50.079,0:15:53.680

actually journalize


0:15:51.440,0:15:54.560

when we need to record and in this one


0:15:53.680,0:15:56.160

we're saying


0:15:54.560,0:15:57.839

I'm promising to do work and you're


0:15:56.160,0:16:00.560

promising to pay cash but all these


0:15:57.839,0:16:02.560

promises are going to be done next year


0:16:00.560,0:16:03.759

nothing is actually changing hands


0:16:02.560,0:16:06.000

nothing is actually


0:16:03.759,0:16:06.800

moving it's just simply if you want to


0:16:06.000,0:16:09.360

think about this


0:16:06.800,0:16:11.519

it is simply a handshake that says yeah


0:16:09.360,0:16:14.880

we'll do business later


0:16:11.519,0:16:18.079

and you don't recognize handshakes,


0:16:14.880,0:16:19.199

so for that reason it is going to be no


0:16:18.079,0:16:21.279

entry


0:16:19.199,0:16:22.639

it's not applicable so you would


0:16:21.279,0:16:24.079

essentially leave this one blank there


0:16:22.639,0:16:25.199

would be no journal entry if it's asking


0:16:24.079,0:16:26.560

for a journal street then you would just


0:16:25.199,0:16:28.639

put non-applicable or


0:16:26.560,0:16:30.160

or whatever the answer may be but you


0:16:28.639,0:16:31.920

can't journalize this because nothing's


0:16:30.160,0:16:35.279

happening cash is not going up,


0:16:31.920,0:16:37.920

ar is not going up or down,


0:16:35.279,0:16:38.639

ap is not going up or down, ar implies


0:16:37.920,0:16:40.800

that


0:16:38.639,0:16:42.000

we have done work and somebody owes us


0:16:40.800,0:16:44.160

money for that work


0:16:42.000,0:16:45.440

well we haven't done anything for this,


0:16:44.160,0:16:47.199

ap implies that


0:16:45.440,0:16:48.880

we owe money because we've already got


0:16:47.199,0:16:50.399

something we haven't got anything we


0:16:48.880,0:16:51.920

don't know any money,


0:16:50.399,0:16:53.920

there's no revenue because we haven't


0:16:51.920,0:16:56.000

earned anything so


0:16:53.920,0:16:57.440

this is just a non-applicable you can't


0:16:56.000,0:16:58.880

journalize this, so this is one of the


0:16:57.440,0:16:59.759

things with accounting is your ability


0:16:58.880,0:17:01.600

to look at it


0:16:59.759,0:17:03.199

and understand when you do and when you


0:17:01.600,0:17:04.880

don't have to journalize.


0:17:03.199,0:17:06.319

That's how we do the journal entries in


0:17:04.880,0:17:08.720

the t tables


0:17:06.319,0:17:10.400

for this problem, in the next video we


0:17:08.720,0:17:10.959

will be taking all this information and


0:17:10.400,0:17:14.880

putting it


0:17:10.959,0:17:16.959

into a trial balance. I hope this was


0:17:14.880,0:17:19.839

understandable to you I hope you enjoyed


0:17:16.959,0:17:19.839

it you all take care.


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