Starting the business: journal entry worksheet
Name: Date:
Convention: United States (US textbooks)
Record each transaction as a journal entry: write each account in the Debit or the Credit column with its amount.
Owner invests cash to start the business
To start a sole proprietorship, the owner deposits $20,000.00 of personal savings into the business’s new bank account.
Assumptions: This is the opening contribution that starts the business: it is recorded directly in the owner’s capital.
Accounts to choose from: Notes Payable · Owner’s Drawings · Service Revenue · Owner’s Capital · Accounts Receivable · Common Stock · Cash
Account Debit Credit Owner contributes a machine to start the business
To start a workshop as a sole proprietorship, the owner contributes a machine from personal property to the business. Its fair value is $12,000.00.
Assumptions: This is the opening contribution that starts the business: it is recorded directly in the owner’s capital, at the fair value stated.
Accounts to choose from: Depreciation Expense · Owner’s Drawings · Cash · Accounts Payable · Owner’s Capital · Common Stock · Equipment
Account Debit Credit Owner invests cash and a delivery van
To start a store as a sole proprietorship, the owner puts $3,000.00 in currency into the store’s cash register and contributes a delivery van from personal property, with a fair value of $15,000.00.
Assumptions: Both are the opening contribution that starts the business: they are recorded directly in the owner’s capital. The van is recorded at the fair value stated.
Accounts to choose from: Vehicles · Notes Payable · Equipment · Cash · Owner’s Drawings · Owner’s Capital · Accounts Payable
Account Debit Credit Receiving a bank loan
The business borrows $30,000.00 from its bank, signing a 5-year note payable; the bank pays the money into the business’s bank account. The whole principal is due at maturity.
Assumptions: The bank charges no fees. Interest will be paid later and is not part of this entry.
Accounts to choose from: Owner’s Capital · Service Revenue · Cash · Interest Expense · Accounts Payable · Accounts Receivable · Notes Payable
Account Debit Credit Repaying the principal of a bank loan
A one-year note payable to the bank matures today. The business pays the principal of $10,000.00 from its bank account.
Assumptions: The interest is paid in a separate transfer and is not part of this entry.
Accounts to choose from: Interest Revenue · Accounts Payable · Cash · Notes Payable · Notes Receivable · Owner’s Drawings · Interest Expense
Account Debit Credit Paying a loan installment: principal plus interest
The business pays this month’s installment on a 12-month note payable to its bank from its bank account: $1,500.00 of principal and $45.00 of interest.
Assumptions: No interest had been accrued for this month before the payment.
Accounts to choose from: Notes Payable · Owner’s Drawings · Interest Expense · Notes Receivable · Interest Revenue · Accounts Payable · Cash
Account Debit Credit Owner withdraws cash for personal use
The owner of the business, a sole proprietor, withdraws $1,500.00 from the business’s bank account for personal use.
Assumptions: During the year the business records the owner’s withdrawals in a separate account, not directly in capital. The owner draws no salary from the business.
Accounts to choose from: Accounts Payable · Salaries Expense · Cash · Owner’s Drawings · Service Revenue · Owner’s Capital · Notes Receivable
Account Debit Credit Owner takes goods from stock for personal use
The owner of an appliance store, a sole proprietor, takes a dishwasher from the store’s inventory for use at home. It cost the store $600.00.
Assumptions: Perpetual inventory: each sale also records its cost of goods sold. The goods are recorded at cost. Sales and use taxes are ignored.
Accounts to choose from: Owner’s Drawings · Cash · Inventory · Sales Revenue · Notes Payable · Accounts Receivable · Owner’s Capital
Account Debit Credit Owner pays a business expense personally
The owner of a store, a sole proprietor, pays a $480.00 invoice for repairs to the store’s air conditioning from a personal bank account. The invoice is made out to the business.
Assumptions: The business will not repay the owner: the payment is an additional investment by the owner.
Accounts to choose from: Owner’s Capital · Owner’s Drawings · Repairs Expense · Prepaid Insurance · Cash · Notes Payable · Accounts Payable
Account Debit Credit Issuing common stock at par for cash
A newly formed corporation issues 6000 shares of common stock with a par value of $10.00 per share, at par. The stockholders pay the full amount in cash.
Assumptions: The shares are fully paid at once. Organization costs are ignored.
Accounts to choose from: Paid-in Capital in Excess of Par—Common Stock · Common Stock · Retained Earnings · Accounts Receivable · Notes Payable · Cash · Owner’s Capital
Account Debit Credit
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