Most Used Journal Entry Part 2Following on my previous post [Journal Entries Most Used by Accountants], here are other journal entries most used by accountants, either they‘re performed on daily, weekly, monthly or yearly basis. There is no way to cover all types of journal entries for various type of businesses in a set of post series [not even a huge accounting text book]. Likewise, this post serie covers journal entries that used by most businesses.  Enjoy!

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Inventory, Adjust to Physical Count

This journal entry is to adjust inventory balances, either up or down, as a result of changes in the inventory quantities that are noted during a physical count. The following entries assume that there are increases in inventory balances. If there are declines in the inventory balances, then the debits and credits are reversed:

[Debit]. Raw materials inventory  = xxx
[Debit]. Work-in-process inventory  = xxx
[Debit]. Finished goods inventory  = xxx
[Credit]. Cost of goods sold  = xxx

 

Inventory Obsolescence

This journal entry is to charge an ongoing expense to the cost of goods sold that increases the balance in a reserve against which obsolete inventory can be charged ( first entry). The second entry charges off specific inventory items against the reserve:

[Debit]. Cost of goods sold  = xxx
[Credit]. Obsolescence reserve  = xxx
[Debit].  Obsolescence reserve  = xxx
[Credit]. Raw materials inventory  = xxx
[Credit]. Work-in-process inventory  = xxx
[Credit]. Finished goods inventory  = xxx

 

Investment (Equity Method), Record Share of Investee Income

This journal entry is to record the company’s proportional share of the income reported by [name of company in which investment was made] ( first entry), as well as the income tax associated with this income recognition:

[Debit]. Investment in [company name]  = xxx
[Credit]. Income from equity share in investment  = xxx
[Debit].  Income tax expense  = xxx
[Credit]. Income taxes payable  = xxx

 

Investment (Equity Method)

This entry is to record the company’s cash or loan investment in another business entity:

[Debit].  Investment in [company name]  = xxx
[Credit]. Cash  = xxx
[Credit]. Notes payable  = xxx

 

Lease, Capital (Initial Record by Lessee)

This journal entry is to record the initial capitalization of a lease, including imputed interest that is associated with the transaction and both the short-term and long-term portions of the associated account payable. A second entry records the interest expense associated with each periodic payment on the capital lease. A third entry records the depreciation expense associated with the capital lease in each accounting period:

[Debit]. Capital leases  = xxx
[Debit]. Unamortized discount on notes payable  = xxx
[Credit].  Short-term liabilities  = xxx
[Credit].  Long-term liabilities  = xxx
[Debit]. Interest expense  = xxx
[Credit].  Unamortized discount on notes payable  = xxx
[Debit].  Depreciation expense  = xxx
[Credit].  Accumulated depreciation—capital  leases   = xxx

 

Life Insurance Transactions

This journal entry is to record the net increase in the cash surrender value of officer’s life insurance for which the company is the beneficiary, as well as that portion of the life insurance that is used in the current period and therefore charged to expense:

[Debit]. Life insurance expense  = xxx
[Debit]. Cash surrender value of life insurance  = xxx
[Credit]. Accounts payable  = xxx

 

Marketable Security (Acquisition)

This journal entry is to record the acquisition of marketable securities. If the security purchased is one that cannot be liquidated in the short term, then the debit would instead be to the long-term asset account, listed here as “marketable securities, long term”:

[Debit]. Marketable securities, short-term  = xxx
[Debit].  Marketable securities, long-term  = xxx
[Credit]. Cash  = xxx

 

Marketable Security (Adjust to Fair Market Rate)

This journal entry is to charge to expense the amount of a reduction in the market value of a marketable security below its purchase price:

[Debit]. Unrealized investment losses  = xxx
[Credit]. Reserve for losses on marketable securities  = xxx

 

Marketable Security (Disposition)

This journal entry is to record the sale of a marketable security, while also eliminating all earlier reserves for losses on its market value. The entry includes line items for the sale of both short-term and long-term marketable securities:

[Debit]. Cash  = xxx
[Debit]. Reserve for losses on marketable securities   = xxx
[Credit]. Marketable securities, short-term  = xxx
[Credit]. Marketable securities, long-term  = xxx

 

Overhead, Allocation

This journal entry is to allocate the contents of all cost pools to cost objects, which are contained within the cost of goods sold and all inventory accounts. The raw materials account is included in this categorization, since this inventory can accumulate overhead costs associated with the purchasing, receiving, and materials handling activities:

[Debit]. Cost of goods sold  = xxx
[Debit]. Raw materials inventory  = xxx
[Debit]. Work-in-process inventory  = xxx
[Debit]. Finished goods inventory  = xxx
[Credit]. [Overhead—itemize by overhead cost pool]   = xxx

 

Overhead, Transfer to Cost Pools

This journal entry is to transfer manufacturing expenses into one or more overhead cost pools for later allocation to cost objects:

[Debit]. [Overhead—itemize by overhead cost pool]  = xxx
[Credit]. Maintenance expenses  = xxx
[Credit].  Manufacturing supplies  = xxx
[Credit]. Rent, manufacturing related  = xxx
[Credit].  Repairs, manufacturing related  = xxx
[Credit]. Salaries, maintenance department  = xxx
[Credit]. Salaries, materials handling  department   = xxx
[Credit].  Salaries, production control department   = xxx
[Credit].  Salaries, purchasing department  = xxx
[Credit].  Salaries, quality control department  = xxx
[Credit].  Salaries, supervisory  = xxx
[Credit]. Scrap, normal  = xxx
[Credit]. Utilities  = xxx
[Credit]. [Depreciation—various accounts]  = xxx

 

Revenue (Installment Basis)

This journal entry is to record installment sales as a liability, as noted in the first entry. As the revenue is earned over time, the second entry is used to recognize portions of the installment sales as current revenue:

[Debit]. Accounts receivable  = xxx
[Credit]. Unearned installment revenue  = xxx
[Debit].  Unearned installment revenue  = xxx
[Credit]. Revenue  = xxx

 

Standard Costing, Labor Rate Variance

This journal entry to record the difference between standard and actual direct labor rate costs. This entry assumes that the variance results in a write up of labor rates. If the result is a write down, then reverse all debits and credits:

[Debit]. Work-in-process inventory  = xxx
[Debit].  Finished goods inventory  = xxx
[Credit]. Direct labor rate variance  = xxx

 

Standard Costing, Price Variance

This journal entry is to record the difference between the standard and actual purchase price for materials. This entry assumes that the variance results in a write up of material prices. If the result is a write down, then reverse all debits and credits:

[Debit]. Raw materials inventory  = xxx
[Debit].  Work-in-process inventory  = xxx
[Debit].  Finished goods inventory  = xxx
[Credit]. Materials price variance  = xxx

 

Transfer to General Ledger from Disbursements Journal

This journal entry is to transfer the summary totals for all cash payments made through the disbursements journal to the general ledger for the current accounting period. If cash disbursements are made with ACH or wire transfers and there is a known bank charge for this service, then the associated bank charge can be recorded as an expense, as well:

[Debit].  Accounts payable  = xxx
[Debit].  Bank charges  = xxx
[Credit]. Cash  = xxx
[Credit]. Early payment discounts taken  = xxx

 

Transfer to General Ledger from Payables Journal

This journal entry is to transfer the summary totals for all accounts payable recorded in the payables journal to the general ledger for the current accounting period:

[Debit]. Raw materials inventory account  = xxx
[Debit].  [Various expense accounts]  = xxx
[Debit].  [Various fixed asset accounts]  = xxx
[Credit]. Accounts payable  = xxx

 

Transfer to General Ledger from Payroll Journal

This journal entry to transfer the summary totals for all payroll transactions recorded in the payroll journal to the general ledger for the current accounting period. It may also be necessary to credit various expense accounts if employees are paying back the company for any purchases they have made through it:

[Debit]. Direct labor expense  = xxx
[Debit]. [Salaries—itemize by department]  = xxx
[Credit]. Cash  = xxx
[Credit]. Federal withholding taxes payable  = xxx
[Credit]. Social security withholding taxes  payable   = xxx
[Credit]. Medicare withholding taxes payable  = xxx
[Credit]. Federal unemployment taxes payable  = xxx
[Credit]. State withholding taxes payable  = xxx
[Credit]. State unemployment taxes payable  = xxx
[Credit]. Garnishments payable  = xxx

 

Transfer to General Ledger from Receipts Journal

This journal to transfer the summary totals for all cash receipts recorded in the receipts journal to the general ledger for the current accounting period:

[Debit]. Cash  = xxx
[Debit]. Early payment discounts  = xxx
[Credit]. Accounts receivable  = xxx

 

Transfer to General Ledger from Sales Journal

This journal entry to transfer the summary totals for all sales transactions recorded in the sales journal to the general ledger for the current accounting period. The freight expense is credited if the company bills customers for freight charges incurred:

[Debit]. Accounts receivable  = xxx
[Credit]. Sales taxes payable  = xxx
[Credit].  GST taxes payable  = xxx
[Credit].  Freight expense  = xxx
[Credit].  [Various revenue accounts]  = xxx

 

Treasury Stock, Purchase

This journal entry is to record the acquisition by the company of stock, which is paid for in cash:

[Debit]. Treasury stock  = xxx
[Credit]. Cash  = xxx

 

Treasury Stock, Sale

This journal entry is to record the sale of treasury stock to investors by the company, with payments in excess of treasury stock cost being credited to the additional paid-in capital account:

[Debit]. Cash  = xxx
[Credit]. Treasury stock  = xxx
[Credit]. Additional paid-in capital  = xxx

 

If you have not read journal entries on the previous post you can read it now: Journal Entries Most Used by Accountants