Chapter F:2 LO3 (Part 3)

Recording Business Transactions

Overview of Transactions Recorded

• Part three tutorial on recording business transactions.
• Previous video covered the first six transactions.

Transaction 7: Payment for Office Supplies (November 21)

• SmartTouch Learning pays cash for previously purchased office supplies (payment on account).
• Journal Entry:
  • Accounts Payable:
  • Type: Liability Account
  • Action: Decrease
  • Amount: $300 (Debit side)
  • Cash:
  • Type: Asset Account
  • Action: Decrease
  • Amount: $300 (Credit side)
• Explanation: Pay cash on account.
• General Ledger Posting:
  • Update Accounts Payable (now has a debit of $300):
  • Remaining balance after payment: $200 (Normal Balance on Credit Side).
  • Cash decreased by $300 on the Credit Side.

Transaction 8: Collection on Account (November 22)

• Client pays the amount owed for previous services rendered on account.
• Journal Entry:
  • Cash:
  • Action: Increase
  • Amount: $2,000 (Debit side)
  • Accounts Receivable:
  • Action: Decrease
  • Amount: $2,000 (Credit side)
• Explanation: Received cash on account.
• General Ledger Posting:
  • Cash increased by $2,000 (Debit Side).
  • Accounts Receivable balance updated:
  • Remaining amount owed: $1,000 (Normal Balance on Debit Side).

Transaction 9: Cash Dividend Payment (November 25)

• SmartTouch Learning pays a cash dividend to stockholder Sheena Bright.
• Journal Entry:
  • Dividends:
  • Action: Increase
  • Amount: $5,000 (Debit side)
  • Cash:
  • Action: Decrease
  • Amount: $5,000 (Credit side)
• Explanation: Pay dividends.
• General Ledger Posting:
  • Dividends recorded and equity decreased (Debit Side).
  • Cash decreased by $5,000 (Credit Side).

Transaction 10: Prepaid Rent Payment (December 1)

• SmartTouch Learning pays $3,000 for rent covering three months in advance.
• Journal Entry:
  • Prepaid Rent:
  • Type: Asset Account
  • Action: Increase
  • Amount: $3,000 (Debit side)
  • Cash:
  • Action: Decrease
  • Amount: $3,000 (Credit side)
• Explanation: Paid rent in advance.
• General Ledger Posting:
  • Prepaid Rent increased (Debit Side).
  • Cash decreased (Credit Side).

Transaction 11: Salary Payment (December 1)

• Payment of employees' salary.
• Journal Entry:
  • Salaries Expense:
  • Action: Increase
  • Amount: $1,200 (Debit side)
  • Cash:
  • Action: Decrease
  • Amount: $1,200 (Credit side)
• Explanation: Paid salaries.
• General Ledger Posting:
  • Salaries Expense increased (Debit Side).
  • Cash decreased (Credit Side).

Transaction 12: Purchase of Building with Note Payable (December 1)

• SmartTouch Learning purchases a building via a $60,000 note payable (no cash used).
• Journal Entry:
  • Building (Asset):
  • Action: Increase
  • Amount: $60,000 (Debit side)
  • Notes Payable (Liability):
  • Action: Increase
  • Amount: $60,000 (Credit side)
• Explanation: Purchase of a building with a note.
• General Ledger Posting:
  • Building increased (Debit Side).
  • Notes Payable increased (Credit Side).

Transaction 13: Contribution of Office Furniture for Common Stock (December 2)

• Sheena Bright contributes office furniture valued at $18,000 in exchange for common stock.
• Journal Entry:
  • Furniture (Asset):
  • Action: Increase
  • Amount: $18,000 (Debit side)
  • Common Stock (Equity):
  • Action: Increase
  • Amount: $18,000 (Credit side)
• Explanation: Contribution of furniture in exchange for common stock.
• General Ledger Posting:
  • Furniture updated (Debit Side), Common Stock increased (Credit Side).

Transaction 14: Accrued Liability for Utilities (December 15)

• SmartTouch Learning receives a utility bill but has not yet paid it.
• Journal Entry:
  • Utilities Expense:
  • Action: Increase
  • Amount: $100 (Debit side)
  • Utilities Payable:
  • Action: Increase
  • Amount: $100 (Credit side)
• Explanation: Accrued utility liability.
• General Ledger Posting:
  • Utilities Expense increased (Debit Side).
  • Utilities Payable increased (Credit Side).

Transaction 15: Salary Payment (December 15)

• Repeat salary payment.
• Journal Entry:
  • Salaries Expense:
  • Action: Increase
  • Amount: $1,200 (Debit side)
  • Cash:
  • Action: Decrease
  • Amount: $1,200 (Credit side)
• Explanation: Paid salaries.
• General Ledger Posting:
  • Salaries Expense increased (Debit Side).
  • Cash decreased (Credit Side).

Transaction 16: Unearned Revenue (December 21)

• Law firm pays SmartTouch Learning $600 in advance for future services.
• Journal Entry:
  • Cash:
  • Action: Increase
  • Amount: $600 (Debit side)
  • Unearned Revenue:
  • Action: Increase
  • Amount: $600 (Credit side)
• Explanation: Collected cash for future services.
• General Ledger Posting:
  • Cash increased (Debit Side).
  • Unearned Revenue increased (Credit Side).

Transaction 17: Revenue Earned (December 28)

• Smart Touch Learning performs $8,000 worth of elearning services for a client in exchange for cash.
• Journal Entry:
  • Cash:
  • Action: Increase
  • Amount: $8,000 (Debit side)
  • Service Revenue:
  • Action: Increase
  • Amount: $8,000 (Credit side)
• Explanation: Perform services, receive cash.
• General Ledger Posting:
  • Cash increased (Debit Side).
  • Service Revenue increased (Credit Side).

Conclusion

• This concludes part three of the tutorial on recording business transactions, detailing the various types of entries and their implications for accounting records.