Answer Video 1: Basic Transaction Analysis I

Answer Video 1: Basic Transaction Analysis I



hey guys so I'm guessing most of you who have subbed to my channel I've noticed by how that I put out quite a few presentations and tutorials on accounting time to time actually I'm going to be taking questions regarding any my tutorials and questions you might have within your course that might be relevant to managerial financial accounting and so on so this week I decided to take one question from subscriber and I'm going to put it up and hopefully unless you get some benefit out of this because it's also very similar to a bunch of questions you'll probably have in financial accounting alright so let me just take it up right there and it has to do with journal entries and we're going to prepare an income statement so I'm going to essentially analyze the transaction and prepare the journal entry simultaneously and will run through it quick as lightning all right so let me just create a layer Oh actually I do have a layer already up so we'll start right away ok so we deposited 200 thousand dollars cash on for capital in our operations so cash is going to be added to the books of our company two hundred thousand dollars and we're injecting capital into our companies so we're increasing our capital account and we're increasing our cash accounts so debit cash credit capital and capital you'll find that in your equity portion of your balance sheet all right next one is we paid forty thousand dollars for land soul and is an asset we're increasing that asset so it's going to be increased by forty thousand dollars and cash is being decreased by forty thousand because we're spending forty thousand to purchase the land next question is office supplies on credit so we can debit supplies since we're getting an asset and since we're paying on credit we're going to be increasing our liability bye-bye 500 and doubling our supplies by 500 alternatively if you use supplies in this month you can just go ahead and do supplies expense and accounts payable instead and then 500 500 all right but I'm not exactly sure if they actually did use the supplies within within April so I'm going to stick with my my first part and we're going to use this entry and next one is we received cash from our customers so when you provide a service you obviously receive revenue and we provided a service so we're going to get cash and our service revenue is going to increase and we debit cash because it's an acid and we're increasing it any credit revenue because we're increasing revenue and we earn this revenue because we perform the service so it's going to be 5500 always make sure to look if you've earned the revenue because if not that it's going to be considered unearned revenue next one is you purchase a fax machine fax machine is considered equipment and equipment is in assets so we're increasing this asset by debiting it and we're using cash so debit equipment 3,000 credit cash 3,000 the next part I'm going to have to erase this and use a different layer because I've used up all my space so we're on to this one which are the expense entry and whenever we have expenses that we're trying to increase we're debiting them so rental expense salary and you sell letís and these are all being increased by 1200 or biter our respective amounts that are listed right there because we've essentially used up our rental on we've used up our rent for the month by essentially renting it out for the entire month we've used salaries of our workers and we have to pay for utilities because we also used electricity and other things for the month and are paying for them in cash so if you add these up 1,100 1,200 and 400 that should get you 2700 and that's going to be credited to cash since we're essentially losing cash this transaction right here is going to refer back to this transaction since we're paying off the accounts payable so since we're paying off the accounts payable we're going to be debiting accounts payable because we're getting rid of the liability that we owe to you now because we paid on credit and we're going to pay them with cash so debit accounts payable 500 credit cash 500 next one is owners invested two thousand dollars in the business which is exactly like the first one so we're going to have cash increasing and capital increasing by two thousand dollars beach finally the last one we sold land for cash of twenty-two thousand dollars and the original cost is forty thousand dollars for land so we're going to be receiving cash of twenty two thousand dollars and we have to write off the land acid since we don't own it anymore at cost which is forty thousand dollars now it's kind of a problem here because obviously this doesn't balance so what we're going to have to do is we're going to have to debit a loss on sale because it was worth forty thousand dollars we sold it for twenty two thousand dollars which means the remaining difference which is eighteen thousand dollars is going to be considered a loss so those are the transactions and essentially the the journal entries and let's go on to do our quick income statement which should be very small since we did not have many revenues or expenses so we have revenues we have expenses and we have a loss so the loss on land let's just put that down there right away which is eighteen thousand dollar loss our revenue going through this the only revenue I remember was I think the 5500 ours cash so we have service revenue of 5,500 we have expenses of rental salary and utilities of 1,100 1,200 and 400 which add up to twenty seven hundred dollars of expense and once you summarize this you should have the revenues subtracting the expenses and subtracting the laws which should get you to 500 minus twenty-seven hundred minus eighteen thousand is a net loss of 15,000 202 15,200 so net income or net loss the losses in brackets because brackets indicate that it is a loss alright so that is essentially our income statement and those were all the journal entries I'm just looking through it one last time to make sure I didn't miss anything I think that is it alright so if you have any questions about this answer video make sure to leave it in the comment section below I subscribe and you'll be entitled to send me some questions that i'll probably be answering in the future alright so i'm going to be working on some manager counting videos today and hopefully you guys check this out alright see you guys in the next presentation

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