# Example of Journal Entries and T Accounts?

Back to: Accounting & Taxation

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Hey everyone welcome to chapter two's

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example this is

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part one of the example, so in this video

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we're going to be doing the journal

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entries and the T tables

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and in part two the next video we're

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going to be taking everything that we

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did in this video and putting it into a

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drawback, so this is going to give you a

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couple steps in the accounting cycle

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a little bit of practice so let's go

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ahead and begin. And the problem it says

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bravo company provides consulting

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services to its customers the company

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began the year with the following

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account balances.

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So we began the year with a cash balance

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of twenty thousand dollars that means we

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ended last year with twenty thousand

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dollars

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the ending of one year becomes the

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beginning of the following uh we had a

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beginning balance of supplies of four

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hundred,

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a beginning balance of common stock of

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ten thousand,

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and a beginning balance retained

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earnings of ten thousand four 400 so

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again this

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implies that this is not the first year

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of the company we actually do have

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beginning balances,

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so in order for us to begin this problem

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or get this problem started

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we need to go ahead and get the t table

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set up for those accounts,

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so there's the pages for our t tables

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and our journal entry.

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

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need to create one so it's just again

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cash with a t

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capital t cash tends to be a little bit

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longer because we use it more often

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it's exchanged more often so you want to

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give yourself a little bit more room on

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this one the size of your t table may

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want to be a little bit bigger

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but cash t table is an asset t table so

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it follows the plus minus

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on the debits and credits so our debit

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is plus and remember all of our balances

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should go on the normal side the normal

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side of a t table is the plus side

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so for us the beginning cash balance is

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going to go on the debit side

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and so we'll put beginning balance of

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20000.

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Supplies is next so I want to create a

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supplies t table and again supplies is

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an asset so again I'm going to put the

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400,

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balance on the debit side because that's

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the plus side or the normal side

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so beginning 400. Common stock common

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stock

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is a type of equity account and it

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follows the minus plus on the t

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table so I'm going to create my common

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stock t table and the balance of 10 000

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is going to go on the credit side

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because again that is the plus side for

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common stock,

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and lastly retained earnings files the

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same thing will create a retained

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earnings t table

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and put it on the credit side of a

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balance of 10 4.

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Now I know this looks really odd because

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I've spread all these

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accounts in different areas on the paper,

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but there's a reason behind it this is

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just something I do you don't

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necessarily have to do this you can kind

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of

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go with that your own way I just like to

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have mine kind of clean and set up

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that makes organization a little bit

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easier for me to be able to see it,

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everything on the far left is going to

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be my assets so all my assets are going

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to go in this kind of yellow area

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all of my liabilities will kind of go in

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the upper middle which is the red area

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

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where they will go,

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and then all of my equities on the far

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right that's kind of again my system

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

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asked of you but it's just an easy way

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to look back and say hey

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you know what is this where is it you

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know where's it going to go and all that

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good stuff so

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again my method to my madness. All right.

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So let's get into the transactions

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now that we've done the t tables now

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also too I want to point out,

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notice we didn't do any uh journal

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entries for the beginning balances

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because those have already been

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journalized last year

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beginning balances are not journalized

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for the next year because they've

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they're already on the books so we

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didn't do any journal issues with for

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those,

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so now let's get into the transactions.

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On one one it says bravo company

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acquired an additional 30 000

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cash by issuing common stock that means

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somebody gave us money to invest in us

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in exchange for common stock that we

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gave back to them,

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so let's put this into a journal entry.

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

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strategy that we did in the last chapter

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where I asked myself the question

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is cash involved and in this situation

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it is our cash

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our cash is involved we received thirty

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thousand dollars cash

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and what is our cash doing, well in this

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situation it's going up

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so we're going to debit cash so I will

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start with my cash as the debit

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for thirty thousand dollars and what is

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on the other side what's its

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in exchange of uh or for and that's

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going to be common stock so we're going

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to credit common stock for 30000,

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that is our first journal entry

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but now that we've done our journal

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entry we need to put it into our t

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tables now we already have these

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t-tables so we're just going to

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add them onto the already existing ones

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

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30 000

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for cash and on the credit side of

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common stock I will do

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the same thing, and that's transaction

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one

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so let's go to transaction two. Bravo

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company completed a consultation for a

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client

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for 165 000 an invoice was sent to the

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client but not yet collected in cash,

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

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sent the client the bill they just

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haven't paid for it in cash yet they

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still owe us.

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So again first question is cash involved,

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well no

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cash is not involved here because they

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haven't paid it yet so then we ask

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ourselves the question

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what are we expected to do with that

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cash at a later date well that cash

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we're expected to receive

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at a later date so this makes it

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accounts receivable,

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we will go 210 as the date and accounts

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receivable is an

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asset so we're going to start with the

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debit of accounts receivable

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because we're making our asset go up and

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465 thousand,

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and then what is the other side what is

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the credit well we've done the work

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we've earned this value uh so because

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

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into a

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revenue account and we're going to call

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that just consulting revenue

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

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either one of these

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accounts as a t table so I need to

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create these t tables so I'll put ar

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I'll put it again on the debit side for

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165

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and then consulting revenue put on the

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credit side

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again for 165, and that's transaction 2.

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Now if you want to and I would highly

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suggest this if you want to pause the

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videos and go to the next one

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and try the next one on your on your own

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and then come back and check it and then

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the next one

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that's a great system just to kind of

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

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so if you want to pause it here and go

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to the next one then come come back and

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check it that's

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great please do that I'm going to go

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ahead and go on now.

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228 bravo company paid 20 000

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cash to its employee for work done on

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the consulting contract,

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so 228 is our date is cash involved here,

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yes cash is involved it says 20 000 cash

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what is our cash doing,

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our cash is now going down because we

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paid this to our employee so our cash is

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going down and in order to make cash go

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down

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

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go ahead and credit cash

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for 20 000. Now we need to know what the

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debit is going to be

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well we've used our employees services

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and what we do the things we use we

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expense them so this is going to be an

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expense account and I'm just going to

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call it,

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salaries expense because I'm paying for

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their salary for twenty thousand

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uh so I need to again make another t

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table for salaries expense

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this time it's going to go on the debit

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side because it is an expense expenses

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are plus minus

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it is going to be 20 000 as a debit for

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salaries expense

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and then 20 thousand as a credit for

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cash because again our cash is going

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down.

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All right. Transaction four on four one

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bravo signed a one year lease and paid

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twenty four thousand dollars up front to

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rent office space

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the one year lease began april 1,

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so in this one we're paying for the use

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of something but it's for the future use

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of something we're just paying for it up

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front we're prepaying for it,

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okay, so let's go through our steps is

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cash involved

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yes cash is involved because we paid

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24000

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cash it doesn't say cash but it also

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doesn't say on account so we assume cash

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right now,

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our cash is going down so that means

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we're going to credit it

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so I'll start with the date for one and

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credit cash for 24 000.

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Now the debit it's not an expense

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because we haven't used yet

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

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right or the ownership to use it

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and so therefore this is going to be an

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asset and it's pretty much exactly what

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it says this is going to be called

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a prepaid rent, we prepaid for it up

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front

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and it is specific to rent a lot of

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times you'll see these

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with prepaid insurance or prepaid rent

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the most common ones. I need to create a

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t table for prepaid rent again it is an

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asset so it is plus minus

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so I'll put it with the assets put on

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the debit side

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of 24 000 and then add the 24 000 to the

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credit side of cash,

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that is transaction four.

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

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bravo company collected 141 000

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cash from its customers as a partial

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settlement for the consulting job

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completed on february 10th. All right. So

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we know

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again the date is 4 15 is cash affected

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here,

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yes they're paying us so our cash is

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going up

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so we're going to debit cash for 141 000

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and then what is the credit going to be

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well they're paying us for what was an

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accounts receivable so they're lowering

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their accounts receivable so in order to

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lower it we're going to credit it so I

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want to credit

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accounts receivable for the same amount

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141

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

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going to debit cash

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for 141 and credit ar for 141,

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all right that's transaction 5. All

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right, let's go to six.

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Bravo company was paid 18 000 cash in

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advance from a client

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for consulting services to be completed

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over the next 12 months

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beginning immediately. All right. So our

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date 6-2

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is cash being involved here or affected

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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

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

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.