Steps in the Processing Transactions

Analyzing Deriving
Posting Preparing
source Financial
transaction the
documents Jornalizing Statements
to the Unadjusted
and transactions from the
General Trial
analyzing Trial
Ledger Balance
transactions Balance

Closing entries
Exercise
1. On February 19, 2020, Samil Bieffe invested $ 500,000 in forming AccounThing Company, a merchandising
company.
2. On February 27, 2020, AccounThing Co. borrowed $ 160,000 from the bank.
3. On March 19, 2020, AccounThing Co. acquired store equipment for $ 95,000 for credit.
4. On April 3, 2020, AccounThing Co. purchased $ 200,000 inventories, paying one-half of the amount in
cash, and the balance on an open account.
5. On May 23, 2020, AccounThing Co. lent $ 5,000 in cash in return for 2 years note from another competitor.
6. On June 6, 2020, a return of inventories for $ 20,000 cash - the amount is equal to their cost.
7. On June 30, 2020, a professional appraiser values the Equipment $ 90,000.
8. On July 1, 2020, AccounThing Co. paid rental services in advance $ 48,000 for cash. Rent is $ 2,000 per
month.
9. On July 27, 2020, employees were paid $ 10,500 for their work.
10. On August 23, 2020, AccounThing Co. sold products for $250,000, of which $ 70,000 were for cash and
balance on credit. The cost of merchandise inventory sold were $ 150,000.
11. On September 11, 2020, AccounThing Co. collected $ 100,000 of accounts receivable.
12. On October 5, 2020, AccounThing Co. paid account payables, for $ 30,000.
13. On November 18, 2020, AccounThing paid administrative expenses in cash for $ 1,500.
14. On December 31, 2020, depreciation expenses of $ 5,000 were recognised for the first year.
15. On December 31, 2020, rent expenses were recognised for the first year.

Journalize transactions and post the entries to the ledger. Prepare the trial balance at December 31, 2020.
Prepare the Income Statement and the Balance Sheet for the year. Give the closing entries.
 Transaction analysis Assets = Liabilities + Equity
Retained Earnings
Merchandise Account Accounts
Cash Equipment Note receivable Prepaid rent = Note payable + Paid in capital
Inventory Receivable payable Revenues Expenses

1 Initial Investment $ 500.000 = $ 500.000

2 Loan from Bank $ 160.000 = $ 160.000
Acquire Equipment on
3 $ 95.000 = $ 95.000
credit

Acquire Inventory for

4 $ -100.000 $ 200.000 = $ 100.000
cash plus credit
5 Lent of cash $ -5.000 $ 5.000 =
Return of inventory for
6 $ 20.000 $ -20.000 =
cash
Appraisal of
7 no transaction
equipment
8 Pay rent in advance $ -48.000 $ 48.000 =

9 Payment wages $ -10.500 = $ -10.500

Sales on open account

10a $ 70.000 $ 180.000 = $ 250.000
and for cash

10b Cost of inventories sold $ -150.000 = $ -150.000

Collect accounts
11 $ 100.000 $ -100.000 =
receivable

12 Pay accounts payable $ -30.000 = $ -30.000

Pay administrative
13 $ -1.500 $ -1.500
expenses

Recognize expiration
14 $ -5.000 $ -5.000
of equipment services

Recognize expiration
15 $ -12.000 $ -12.000
of rental service

TOTAL $ 655.000 $ 30.000 $ 90.000 $ 5.000 $ 80.000 $ 36.000 = $ 160.000 $ 165.000 + $ 500.000 $ 250.000 $ -179.000

$ 896.000 $ 896.000
Steps in the Processing Transactions

Analyzing Deriving
Posting Preparing
source Financial
transaction the
documents Jornalizing Statements
to the Unadjusted
and transactions from the
General Trial
analyzing Trial
Ledger Balance
transactions Balance

Closing entries
Journalizing transactions
Exercise
1. On February 19, 2020, Samil Bieffe invested $ 500,000 in forming AccounThing Company, a merchandising
company.
2. On February 27, 2020, AccounThing Co. borrowed $ 160,000 from the bank.
3. On March 19, 2020, AccounThing Co. acquired store equipment for $ 95,000 for credit.
4. On April 3, 2020, AccounThing Co. purchased $ 200,000 inventories, paying one-half of the amount in
cash, and the balance on an open account.
5. On May 23, 2020, AccounThing Co. lent $ 5,000 in cash in return for 2 years note from another competitor.
6. On June 6, 2020, a return of inventories for $ 20,000 cash - the amount is equal to their cost.
7. On June 30, 2020, a professional appraiser values the Equipment $ 90,000.
8. On July 1, 2020, AccounThing Co. paid rental services in advance $ 48,000 for cash. Rent is $ 2,000 per
month.
9. On July 27, 2020, employees were paid $ 10,500 for their work.
10. On August 23, 2020, AccounThing Co. sold products for $250,000, of which $ 70,000 were for cash and
balance on credit. The cost of merchandise inventory sold were $ 150,000.
11. On September 11, 2020, AccounThing Co. collected $ 100,000 of accounts receivable.
12. On October 5, 2020, AccounThing Co. paid account payables, for $ 30,000.
13. On November 18, 2020, AccounThing paid administrative expenses in cash for $ 1,500.
14. On December 31, 2020, depreciation expenses of $ 5,000 were recognised for the first year.
15. On December 31, 2020, rent expenses were recognised for the first year.
 Journalizing transactions (1/3)
Date Entry Account and Explanation Post. Ref. DEBIT CREDIT
1 Cash 500.000
February, 19 1 Paid in capital 500.000
Initial investment
2 Cash 160.000
February, 27 2 Note payable 160.000
Loan from Bank
3 Equipment 95.000
March, 19 3 Accounts Payable 95.000
Acquire Equipment on credit
4 Merchandise Inventory 200.000
4 Cash 100.000
April, 3
4 Accounts Payable 100.000
Acquire Inventory for cash plus credit
5 Note Receivable 5.000
May, 23 5 Cash 5.000
Lent of cash
Journalizing transactions (2/3)
Date Entry Account and Explanation Post. Ref. DEBIT CREDIT
6 Cash 20.000
June, 6 6 Merchandise Inventory 20.000
Return of inventory for cash
June, 30 7 No transaction
Appraisal of equipment
8 Prepaid rent 48.000
July, 1 8 Cash 48.000
Pay rent in advance
9 Wages Expenses 10.500
July, 27 9 Cash 10.500
Payment wages
10a Cash 70.000
10a Account Receivable 180.000
10a Sales Revenues 250.000
August, 23 Sales on open account and for cash
10b Cost of inventory sold 150.000
10b Merchandise Inventory 150.000
Cost of inventories sold
Journalizing transactions (3/3)
Date Entry Account and Explanation Post. Ref. DEBIT CREDIT
11 Cash 100.000
September, 11 11 Account Receivable 100.000
Collect accounts receivable
12 Accounts Payable 30.000
October, 5 12 Cash 30.000
Pay accounts payable
13 Administrative expenses 1.500
November, 18 13 Cash 1.500
Pay administrative expenses
14 Depreciation expense 5.000
December, 31 14 Accumulate depreciation, store equipment 5.000
Recognize expiration of equipment services
15 Rent Expenses 12.000
December, 31 15 Prepaid rent 12.000
Recognize expiration of rental service
Tot 1.587.000 1.587.000
Date Entry Account and Explanation Post. Ref. DEBIT CREDIT
1 Cash 500.000
February, 19 1 Paid in capital 500.000
Initial investment
2 Cash 160.000
February, 27 2 Note payable 160.000
Loan from Bank
3 Equipment 95.000
March, 19 3 Accounts Payable 95.000
Acquire Equipment on credit
4 Merchandise Inventory 200.000
4 Cash 100.000
April, 3
4 Accounts Payable 100.000
Acquire Inventory for cash plus credit
5 Note Receivable 5.000
May, 23 5 Cash 5.000
Lent of cash
6 Cash 20.000
June, 6 6 Merchandise Inventory 20.000
Return of inventory for cash

Journalizing
June, 30 7 No transaction
Appraisal of equipment
8 Prepaid rent 48.000
July, 1 8 Cash 48.000

transactions
Pay rent in advance
9 Wages Expenses 10.500
July, 27 9 Cash 10.500
Payment wages
10a Cash 70.000
10a Account Receivable 180.000

August, 23
10a Sales Revenues
Sales on open account and for cash
250.000
(all the entries)
10b Cost of inventory sold 150.000
10b Merchandise Inventory 150.000
Cost of inventories sold
11 Cash 100.000
September, 11 11 Account Receivable 100.000
Collect accounts receivable
12 Accounts Payable 30.000
October, 5 12 Cash 30.000
Pay accounts payable
13 Administrative expenses 1.500
November, 18 13 Cash 1.500
Pay administrative expenses
14 Depreciation expense 5.000
December, 31 14 Accumulate depreciation, store equipment 5.000
Recognize expiration of equipment services
15 Rent Expenses 12.000
December, 31 15 Prepaid rent 12.000
Recognize expiration of rental service
Steps in the Processing Transactions

Analyzing Deriving
Posting Preparing
source Financial
transaction the
documents Jornalizing Statements
to the Unadjusted
and transactions from the
General Trial
analyzing Trial
Ledger Balance
transactions Balance

Closing entries
 ASSETS

Cash Equipment Merchandise Inventory

1 500.000 100.000 3 3 95.000 4 200.000 20.000 6
2 160.000 5.000 5 150.000 10b
6 20.000 48.000 8
10a 70.000 10.500 9
11 100.000 30.000 12
1.500 13
Posting entries to
850.000 195.000 200.000 170.000
the G. Ledger
Bal. 655.000 Bal. 95.000 Bal. 30.000

8
Prepaid Rent
48.000 12.000 15 5
Note receivable
5.000 10a
Account Receivable
180.000 100.000 11
ASSETS

Bal. 36.000 Bal. 5.000 Bal. 80.000

Accumulated depreciation,
store equipment
5.000 14

5.000 Bal.
 LIABILITIES

Note Payable
160.000 2

Posting entries to
the G. Ledger

160.000 Bal.
LIABILITIES
Accounts Payable
12 30.000 95.000 3
100.000 4

30.000 195.000
165.000 Bal.
 OWNERS' EQUITY
PAID IN CAPITAL RETAINED EARNINGS
Retained Earnings
Paid in Capital 71.000
500.000

500.000 Bal.

REVENUES EXPENSES
Sales Revenues Wages Expenses
250.000 10a 9 10.500

Posting entries to
250.000 Bal. Bal. 10.500

the G. Ledger
Cost of inventory sold
10b 150.000

Bal. 150.000

Administrative Expense
OWNERS’ EQUITY
12 1.500

Bal. 1.500

Depreciation Expense
14 5.000

Bal. 5.000

Rent expense
15 12.000

Bal. 12.000
Posting entries to the G. Ledger
Steps in the Processing Transactions

Analyzing Deriving
Posting Preparing
source Financial
transaction the
documents Jornalizing Statements
to the Unadjusted
and transactions from the
General Trial
analyzing Trial
Ledger Balance
transactions Balance

Closing entries
Preparing the trial balance
Trial Balance
December 31, 2020, for the period
January 1, 2020 - December 31,2020
DEBITS CREDITS
Cash $ 655.000
Equipment $ 95.000

Merchandise Inventory $ 30.000

Prepaid rent $ 36.000
Note receivable $ 5.000
Accounts receivable $ 80.000

Accumulate depreciation,
store equipment $ 5.000
Note Payable $ 160.000
Accounts Payable $ 165.000
Paid in Capital $ 500.000
Retained Earnings $ -
Sales Revenues $ 250.000
Wage Expenses $ 10.500

Cost of Inventory sold $ 150.000

Administrative expenses $ 1.500

Depreciation Expenses $ 5.000

Rent expenses $ 12.000

Total $1.080.000 $ 1.080.000

Steps in the Processing Transactions

Analyzing Deriving
Posting Preparing
source Financial
transaction the
documents Jornalizing Statements
to the Unadjusted
and transactions from the
General Trial
analyzing Trial
Ledger Balance
transactions Balance

Closing entries
Closing entries (Journalizing)
Post.
Date Entry Account and Explanation DEBIT CREDIT
Ref.

December, 31 C1 Sales revenue 250.000

December, 31 C1 Income summary 250.000

December, 31 C2 Income Summary 179.000

December, 31 C2 Wage Expenses 10.500
December, 31 C2 Cost of invenotry sold 150.000
December, 31 C2 Administrative Expenses 1.500
December, 31 C2 Depreciation Expenses 5.000
December, 31 C2 Rent Expenses 12.000

December, 31 C3 Income Summary 71.000

December, 31 C3 Retained Earnings 71.000
Closing entries (G. Ledger)
Steps in the Processing Transactions

Analyzing Deriving
Posting Preparing
source Financial
transaction the
documents Jornalizing Statements
to the Unadjusted
and transactions from the
General Trial
analyzing Trial
Ledger Balance
transactions Balance

Closing entries
Preparing the Income Statement
AccounThing Company
Income Statement
1st January 2018 - 31st December 2018
Sales Revenues $ 250.000
Expenses: $ -179.000
Wage Expenses $ 10.500
Cost of inventory sold $ 150.000
Administrative expenses $ 1.500
Depreciation $ 5.000
Rent expenses $ 12.000
Net Income $ 71.000
Preparing the Balance Sheet
AccounThing Company
Balance Sheet
December 31st, 2020
Assets Liabilities and Shareholders' Equity
Cash
$ 655.000 Note payable $ 160.000
Merchandise Inventory
$ 30.000 Accounts payable $ 165.000
Equipment $95.000
$ 90.000 Paid-in capital $ 500.000
Less: Accumulated Depreciation $5.000

Note receivable $ 5.000 Retained earnings $ 71.000

Prepaid rent
$ 36.000

Accounts receivable $ 80.000

Total Liabilities and Shareholders'

Total Assets $ 896.000 $ 896.000
equity