QuickBooks 2022 All-in-One For Dummies. Stephen L. Nelson

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Cash $1,000 Inventory 3,000 Accounts payable $2,000 Loan payable 1,000 S. Nelson, capital _____ 1,000 Totals $4,000 $4,000

      

I’m assuming that no year-to-date revenue or expenses exist yet for the hot dog stand. In other words, the operation is at a starting period.

      

You may want to take a quick peek at Table 2-1, shown earlier. It summarizes the business activities of the hot dog stand. The journal entries that follow show how the information necessary for this statement would be recorded.

      Recording rent expense

Suppose that the first transaction to record is a $1,000 check written to pay rent. In this case, the journal entry appears as shown in Table 2-8. In this example, $1,000 is debited to rent expense, and $1,000 is credited to cash.

TABLE 2-8 Journal Entry 4: Recording the Rent Expense

Account	Debit	Credit
Rent	$1,000
Cash		$1,000

      Recording wages expense

If you need to record $4,000 of wages expense, you use the journal entry shown in Table 2-9. This journal entry debits wages expense for $4,000 and credits cash for $4,000. In other words, you use $4,000 of cash to pay wages for the business.

TABLE 2-9 Journal Entry 5: Recording the Wages Expense

Account	Debit	Credit
Wages expense	$4,000
Cash		$4,000

      Recording supplies expense

To record $1,000 of supplies expense paid for by writing a check, you record the journal entry shown in Table 2-10. This transaction debits supplies expense for $1,000 and credits cash for $1,000.

TABLE 2-10 Journal Entry 6: Recording the Supplies Expense

Account	Debit	Credit
Supplies	$1,000
Cash		$1,000

      

Note that for each of the preceding transactions, debits equal credits. As long as debits equal credits, you know that the transaction is in balance. This balance is one of the ways that double-entry bookkeeping prevents errors.

      Recording sales revenue

Suppose that you sell $13,000 worth of hot dogs. To record this transaction in a journal entry, you debit cash for $13,000 and credit sales revenue for $13,000, as shown in Table 2-11. I should tell you, however, that in the case of the hot dog stand selling hot dogs for a dollar or two apiece, you wouldn’t necessarily use a single journal entry to record sales revenue amounts. Though you could use a single journal entry that tallied the entire day’s sales, if you’re selling hot dogs at a dollar a dog, you could also record 13,000 $1 transactions. Each of these $1 transactions debits cash for $1 and credits sales revenue for $1.

TABLE 2-11 Journal Entry 7: Recording the Sales Revenue

Account	Debit	Credit
Cash	$13,000
Sales revenue		$13,000

      Recording cost of goods sold

You must record the expense of the hot dogs and buns that you sell. You must also record the fact that if you use up your inventory of hot dogs and buns, your inventory balance has decreased. Table 2-12 shows how you record these items. Cost of goods sold gets debited for $3,000, and inventory gets credited for $3,000.

TABLE 2-12 Journal Entry 8: Recording the Cost of Goods Sold

Account	Debit	Credit
Cost of goods sold	$3,000
Inventory		$3,000

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