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Journal Entries to Memorize

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IMPORTANT: Rotate your smartphone to landscape mode or use a laptop for proper display of journal entries.

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🔹 Bank Reconciliation Entries

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Pro Tip: For Bank Reconciliations, you will only record a journal entry for Book Side adjustments — NOT Bank Side adjustments!

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🔹 Journal Entry for Book Side Adjustment: Bank Service Charges

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You discover a bank service charge of $35 on your bank statement. This was previously unrecorded by the company. Fee Expense 35 Cash 35

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🔹 Journal Entry for Book Side Adjustment: Non-Sufficient Funds (NSF) Check — no additional fee.

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An NSF check from a customer was returned for $100. The bank charged no fee for this bounce. This was previously unrecorded by the company. NSF Check Entry: Accounts Receivable 100 Cash 100

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🔹 Journal Entry for Book Side Adjustment: Non-Sufficient Funds (NSF) Check — with additional fee charged by bank.

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An NSF check from a customer was returned for $100. Your bank charged a $10 fee for this bounce. This was previously unrecorded by the company. NSF Check Entry: Accounts Receivable 100 Cash 100 NSF Fee Entry: Fee Expense 10 Cash 10

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🔹 Journal Entry for Book Side Adjustment: Non-Sufficient Funds (NSF) Check — with additional fee charged by bank, passed back to customer.

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An NSF check from a customer was returned for $100. Your bank charged a $10 fee for this bounce. You pass the fee to your customer. This was previously unrecorded by the company. NSF Check Entry: Accounts Receivable 100 Cash 100 NSF Fee Entry: Accounts Receivable 10 Cash 10

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🔹 Journal Entry for Book Side Adjustment: Your bank credited interest to your account

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Your bank credited interest of $50 to your account. This was previously unrecorded by the company. Cash 50 Interest Revenue 50

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From a bank's perspective... why is a deposit to your account called a credit?

A bank is crediting their own cash to deposit into your account. Cash is an asset (+/-), so they credit (reduce) their cash to put it into your account! This is common with a savings account, where interest is added every month.

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🔹 Journal Entry for Book Side Adjustment: Your bank debited interest from your account

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Your bank debited interest of $50 to your account. This was previously unrecorded by the company. Interest Expense 50 Cash 50

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From a bank's perspective... why is a withdrawal from your account called a debit?

A bank is debiting their own cash when they take money from your account and add it to theirs! Cash is an asset (+/-), so they debit (increase) their cash to remove it from your account! This is common if you take out a loan or line of credit, where interest is deducted every month.

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🔹 Journal Entry for Book Side Adjustment: Note Collection by Bank

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Your bank collected a $1000 note on your behalf. This was previously unrecorded by the company. Cash 1000 Note Receivable 1000

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🔹 Journal Entry for Book Side Adjustment: Errors (Version 1)

A check for $321 was processed correctly by the bank. The company recorded this purchase for advertising expense incorrectly in the amount of $231. 3 Step Process for Correcting Book Side Errors:

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STEP 1: Write out the error entry with the incorrect amount. Advertising Expense 231 Cash 231

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STEP 2: Write out the correct version of the entry — i.e. what it should look like. Advertising Expense 321 Cash 321

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STEP 3: Compare the two entries. Record the necessary adjustment that fixes the error. Advertising Expense 90 Cash 90

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Explanation

The correct amount that should have been recorded was $321. This means the company underreported its expense by $90 ($321 - $231 = $90). To correct the error, we need to increase the advertising expense by the difference, which is $90. This is done by debiting the Advertising Expense account. Since this expense was paid in cash, we'll also need to credit the Cash account by the same amount to show a reduction in cash. The reason we're debiting Advertising Expense and crediting Cash is to reflect the additional cash outflow of $90 that wasn't captured initially.

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🔹 Journal Entry for Book Side Adjustment: Errors (Version 2)

A check for $231 was processed correctly by the bank. The company recorded this purchase for advertising expense incorrectly in the amount of $321. 3 Step Process for Correcting Book Side Errors:

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STEP 1: Write out the error entry with the incorrect amount. Advertising Expense 321 Cash 321

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STEP 2: Write out the correct version of the entry — i.e. what it should look like. Advertising Expense 231 Cash 231

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STEP 3: Compare the two entries. Record the necessary adjustment that fixes the error. Cash 90 Advertising Expense 90

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Explanation

In contrast to the previous example, here the company overrecorded its advertising expense by $90. To correct this, we need to decrease the advertising expense by the difference of $90. This is done by crediting the Advertising Expense account. Simultaneously, since the company initially reported an excessive cash outflow, we'll need to debit the Cash account by $90 to show an increase in the cash balance. This restores the Cash account to its correct position by reflecting the overrecorded cash outflow that did not actually take place.

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🔹 Petty Cash Entries

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🔹 Establishment of a Petty Cash Fund

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You establish a Petty Cash fund for $100. Petty Cash 100 Cash 100

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🔹 Increasing a Petty Cash Fund

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You decide to increase your Petty Cash fund from $100 to $150. Petty Cash 50 Cash 50

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🔹 Decreasing a Petty Cash Fund

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You decide to decrease your Petty Cash fund from $150 to $125. Petty Cash 25 Cash 25

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🔹 Reimbursing a Petty Cash Fund (neither “Short” or “Over”)

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Your Petty Cash fund is established at an amount of $125. At the end of the month, you see the following receipts from expenses: Postage: $20 Advertising Expense: $50 Supplies: $10 Prepare the entry to reimburse the Petty Cash fund, assuming $45 remains in the fund. Postage Expense 20 Advertising Expense 50 Supplies 10 Cash 80

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Explanation

STEP 1: Determine the “replenishment” amount. Subtract the remaining balance ($45) from the initial fund amount ($125). The result, $80, is how much you need to replenish. This amount is credited to the cash account, indicating payment into the Petty Cash fund.

STEP 2: Record the expenses. Debit each expense category with the corresponding amount.

STEP 3: Ensure total debits (expenses) match the credit (cash). If they don't align, your Petty Cash might have discrepancies (shortages or overages). In this example, they match, so there are no short or over amounts in the fund.

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🔹 Reimbursing a Petty Cash Fund (”Over” Example)

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Your Petty Cash fund is established at an amount of $125. At the end of the month, you see the following receipts from expenses: Postage: $20 Advertising Expense: $50 Supplies: $10 Prepare the entry to reimburse the Petty Cash fund, assuming $55 remains in the fund. Postage Expense 20 Advertising Expense 50 Supplies 10 Cash 70 Cash Short & Over 10

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Explanation

STEP 1: Determine the “replenishment” amount. Subtract the remaining balance ($45) from the initial fund amount ($125). The result, $80, is how much you need to replenish. This amount is credited to the cash account, indicating payment into the Petty Cash fund.

STEP 2: Record the expenses. Debit each expense category with the corresponding amount.

STEP 3: Ensure total debits (expenses) match the credit (cash). If they don't align, your Petty Cash might have discrepancies (shortages or overages). In this case, a $10 discrepancy was found between expected and actual amounts, which is reflected under "Cash Short & Over”

HINT: If you need a CREDIT to Cash Short & Over in your entry, it always means your Petty Cash fund was OVER.

Why? If you had $125 originally in the fund. And you spent a total of $80 on expenses — you should’ve had $45 remaining. Since you had $55 remaining instead, this means your fund was over by $10.

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🔹 Reimbursing a Petty Cash Fund (”Short” Example)

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Your Petty Cash fund is established at an amount of $125. At the end of the month, you see the following receipts from expenses: Postage: $20 Advertising Expense: $50 Supplies: $10 Prepare the entry to reimburse the Petty Cash fund, assuming $35 remains in the fund. Postage Expense 20 Advertising Expense 50 Supplies 10 Cash Short & Over 10 Cash 70

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Explanation

STEP 1: Determine the “replenishment” amount. Subtract the remaining balance ($45) from the initial fund amount ($125). The result, $80, is how much you need to replenish. This amount is credited to the cash account, indicating payment into the Petty Cash fund.

STEP 2: Record the expenses. Debit each expense category with the corresponding amount.

STEP 3: Ensure total debits (expenses) match the credit (cash). If they don't align, your Petty Cash might have discrepancies (shortages or overages). In this case, a $10 discrepancy was found between expected and actual amounts, which is reflected under "Cash Short & Over”

HINT: If you need a DEBIT to Cash Short & Over in your entry, it always means your Petty Cash fund was SHORT.

Why? If you had $125 originally in the fund. And you spent a total of $80 on expenses — you should’ve had $45 remaining. Since you only had $35 remaining instead, this means your fund was short by $10.

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The list above showcases examples of the most commonly-tested journal entries. While these examples serve as a foundation, they might not encompass every possible scenario. Always consult with your professor regarding any additional or specific entries that might be vital for your exam.