Journal Entries Flashcards
Direct Write off of Bad Debt Expense
DR Bad Debt Expense
CR Accounts Receivable
Create Allowance for Uncollectibles
DR Bad Debt Expense
CR Allowance for Bad Debts (or Uncollectibles)
Write off Bad Debt through allowance account
Dr Allowance for Bad Debts
CR Accounts Receivable
Recovery of Account previously written off
Reverse Original Write-Off:
DR Accounts Receivable
CR Allowance for Bad Debts
Record payment:
DR Cash
CR Accounts Receivable
Factored Accounts Receivable without Recourse
DR Cash
CR Accounts Receivable (for book value)
Show a gain or a loss on the sale (will mostly be a loss)
Factored Accounts Receivable with Recourse
DR Factored Accounts Receivable
CR Accounts Receivable
(this separates the factored A/R from other A/R on the balance sheet)
DR Cash
CR Notes Payable
As the receivables are collected, pay back the note with interest
Note Receivable–seller collects cash and takes N/R for balance
DR Cash (amount collected)
DR Note Receivable (Discounted)
CR Asset
Remember to record the note at its discounted present value.
Debit Loss, Credit Gain
The interest is the difference between the note’s discounted present value and it’s face value.
Amortization of interest on N/R (seller’s side)
DR Note Receivable
CR Interest Income
The Interest increases the carrying value of the N/R – remember we are always amortizing toward face value
Note Payable–Buyer pays cash and will pay balance with N/P
DR Asset
CR Note Payable (discounted Present Value)
CR Cash (amount paid today)
Amortization of Interest on N/R (buyer’s side)
DR Interest Expense
CR Note Payable
Note Receivable with a Gain or Loss on sale of asset
DR Note Receivable (discounted PV)
DR Loss on Sale
CR Equipment (carrying value)
DR Note Receivable (Discounted PV)
CR Gain on Sale
CR Equipment (carrying value)
Trading Securities: Purchase, unrealized loss, unrealized gain
Purchase:
DR Trading Securities
CR Cash
Unrealized Loss:
DR Unrealized holding loss (to I/S)
CR Trading Securities (or valuation allowance)
Unrealized Gain:
DR Trading Securities (or valuation allowance)
CR Unrealized holding gain (to I/S)
Remember that Debits increase the investment and Credits decrease the investment
Trading Securities: sale
DR Cash
CR Trading Securities (carrying value)
DR Loss on sale OR CR Gain on Sale
Remember that the trading security has already been written up or down so it should be removed from the balance sheet at the amount to which it was last written up or down.
Multiple trading securities, write them up/down separately:
DR Investment in A (this increases investment)
DR Investment in B (this increases investment)
CR Investment in C (this decreases investment)
DR Unrealized holding loss OR CR Unrealized holding gain
Available for Sale Securities: Purchase, unrealized loss, unrealized gain
Purchase:
DR Available for Sale Securities
CR Cash
Unrealized Loss:
DR Unrealized holding gain/loss–OCI
CR AFS Securities
Unrealized Gain:
DR AFS Securities
CR Unrealized holding gain/loss–OCI
I/S not affected
Available for Sale adjusting entries using a valuation account
Market adjustment is a valuation account for the balance sheet. It goes directly to stockholder’s equity as an item of OCI. Income statement not affected.
If securities increase in value (in aggregate) by 12,000:
DR Market Adjustment 12,000
CR Unrealized holding gain/loss–OCI 12,000
If securities then decrease to 4,000 below original cost:
DR Unrealized holding gain/loss–OCI 16,000
CR Market Adjustment 16,000
Last period we set up our market adjustment account at 12,000 (DR). To bring it to a 4,000 CR balance, we need to CR the account 16,000. Think of the T-account
Market Adjustment
DR 12,000
CR 16,000
Ending Balance CR 4,000
Sell an available for sale investment
DR Cash
CR AFS Security (at original cost)
DR loss on sale or CR gain on sale
Realized gains/losses go to income statement
Permanent decline in an investment
DR Realized loss (income statement)
CR Investment (write it off)Transfer of security to or from trading
Transfer to Trading:
DR Trading Securities (increases investment)
CR AFS Securities (or HTM) (removes investment)
DR loss or CR gain (goes to I/S)
Transfer from Trading:
DR AFS Securities (or HTM) (Increases Investment)
CR Trading Securities (removes investment)
DR loss or CR gain (goes to I/S)
Transfer of security from AFS to HTM or HTM to AFS
trading not involved
Rule is the same: goes at FMV
BUT the gain/loss goes to OCI, not the I/S
DR HTM Securities (increases Investment)
CR AFS Securities (Removes investment)
DR Loss or CR Gain in OCI
Cash Flow Hedge: Investment in A: an effective cash flow hedge. value is rising, making a profit
DR Investment in A (carried as an asset)
CR OCI
When the loss that you were hedging against gets to the I/S:
DR OCI
CR Gain on Derivatives
This removes the gain from OCI (B/S) and shows on the income statement that the loss was counter-balanced by the hedge
Cash Flow Hedge: Investment in B: an ineffective cash flow hedge
DR Loss on derivatives (loss directly to I/S)
CR Investment in B (Write investment down to FMV)
Write Inventory Down (market loss or shortage)
DR Inventory Loss
CR Inventory
Loss goes to I/S
Inventory Purchases and sales in a periodic system
Purchase:
DR Purchases
CR Accounts/Payable
Sale:
DR A/R
CR Sales Revenue
(no reduction of inventory at time of sale)
Periodically, inventory is counted and account is adjusted
If inventory increased, DR Inventory for the amount of the increase. If it decreased, CR Inventory for the amount of the decrease
Decrease example
DR COGS
CR Inventory
CR Purchases
Increase Example
DR Inventory
DR COGS
CR Purchases
OR you can DR Inventory for the Ending Balance and CR Inventory for the Beginning Balance
DR Inventory (Ending Balance)
DR COGS
CR Inventory (Beginning Balance)
CR Purchases
Inventory Purchases and Sales in a Perpetual System
No Purchases account–when purchase is made:
DR Inventory
CR Cash (or A/P)
Sale (two entries required)
DR Accounts Receivable (or cash)
CR Sales
and
DR COGS
CR Inventory
So you have a perpetual running total of Inventory and COGS
Purchase Discounts: Gross Method
Purchase:
DR Inventory (gross Purchase price)
CR A/P
Make Payment during discount period:
DR A/P (gross amount of product paid for)
CR Cash (amount paid)
CR Inventory (amount of discount on product paid for)
Make Final Full payment after discount period expires
DR A/P (remaining amount)
CR Cash (amount paid)
No discount is applied if the payment is made after the discount period
Purchase Discounts, Net Method
Purchase
DR Inventory (net of discount)
CR A/P (net of discount)
Make Payment during discount period
DR A/P for amount collected
CR Cash
Make payment after discount period expires
DR Accounts Payable for remaining amount
DR Interest Expense
CR Cash
The discount lost is a debit to interest expense
Bond sold at a discount entries: Issue, amortization of discount, interest paid, last entry
Issue:
DR Cash (for what was collected)
DR Discount on Bonds
CR Bonds Payable (face amount–this never changes)
Amortization of Discount:
DR Interest Expense
CR Interest Payable (check in the mail)
CR Amortization of Bond Discount
Payment of Interest:
DR Interest Payable (check in the mail)
CR Cash
Final Entry
DR Bonds Payable
CR Cash
Bonds sold at a premium: Issue, amortization of premium, payment of interest, final entry
Issue:
DR Cash (for what was collected)
CR Bonds Payable (always for the face amount)
CR Premium on Bonds
Amortization of Premium:
DR Interest Expense
DR Amortization of Bond Premium
CR Interest Payable (check in the mail)
Payment of Interest:
DR Interest Payable
CR Cash
Final Entry:
DR Bonds Payable
CR Cash
Bonds purchased at a discount: purchase, receipt of interest, at maturity
Purchase:
DR Investment in Bonds (at cost)
CR Cash (paid)
Investor does not set up a discount account, just records investment at cost.
Interest and amortization of discount:
DR Interest receivable (always stated x face)
DR Investment in Bonds (no discount account, just goes directly to the investment)
CR Interest Income
When interest check is received:
DR Cash
CR Interest Receivable
At Maturity:
DR Cash
CR Investment in Bonds (face value)
Acquisition of Treasury Stock – Par Value Method
DR Common Stock – Treasury (par value of treasury stock)
DR APIC (Take out of APIC at the same price it went in to APIC, the shares are constructively retired out of APIC)
DR Retained Earnings (excess of reacquisition cost over the original issue price)
CR Cash (for amount paid)
Nonmonetary exchange with commercial substance
DR New Asset (at fair value)
CR Old Asset (at carrying value)
CR Cash (given)
CR Gain
