Examples of Accounting Transactions
The following Accounting Transactions Examples
We shall see some basic accounting transactions at different levels and of different nature going ahead.
Accounting Transactions Example #1
Kathy owns a florist shop and to expand her business with deliveries, she bought a second-hand delivery van worth $30,000. She made the cash payment to the seller. Note the entries in her book of accounts.
Accounting Transactions Example #2
Now, with the same example, consider Kathy hired an employee on January 1st, 2019, on a monthly salary of $5,000 payable on the 1st day of the next month. She made total sales of $30,000 in January, however, her customers paid only $22,000 in cash (including $6,000 as advance payments) and $8,000 was to be received from them after deliveries in the month of February. Can you help Kathy record these transactions in her books of accounts for January?
Let’s see what entries we can make for Kathy:
*To be realized by payment in Cash on Feb 1st.
Accounting Transactions Example #3
ABC Corporation acquired Best Corporation in May 2018. ABC paid $1 million to Best in return of purchasing its goodwill. Goodwill at this time was worth $900,000 in the market, so Best Corp made a profit of $100,000 from this sale. At the end of 2018, the market value of goodwill was $800,000. So, ABC decided to impair the goodwill at the end of 2018. What should be the journal entries in ABC Corp’s books of accounts for these transactions?
Accounting Transactions Example #4
Fast-track courier services decided to make developments in its operations for which they opened a new department. Below is a list of transactions they made:
- July 1st, 2018: Additional office rent of $2,000 per month – advance rent paid for 2 months
- July 1st, 2018: Hired 2 new employees with a monthly salary of $3000 each – to be paid by 1st day of next month
- July 5th, 2018: Purchase of 5 new computers worth $5,000 each – paid by cash
- July 15th, 2018: Other electrical connections with a total expense of $5,000 – to be paid to the electrical expert along with the next monthly bill (Aug’18).
- July 17th 2018: $20,000 received as an advance from ABC Company (an existing client) for courier services order booked by them.
- July 18th, 2018: Advertising expenses of $8,000 – paid $3,500 by cash and $4,500 to be paid by next month upon completion of the campaign.
- July 20th, 2018: Registration services amounted to $2,500 – paid to the attorney at the time of a transaction.
Create a book of accounts for Fast-track couriers.
Let’s see the current month journal entries posted in the courier company’s book of accounts:
Accounting Transactions Example #5
Now, as per the above example, below are a few transactions for August:
- August 1st, 2018: Salary paid for the 2 new employees: $6,000
- August 5th, 2018: Cash income received against consignment booking: $15,000
- August 5th, 2018: Consignment booking expenses: $10,000
- August 5th, 2018: July Electrical Expenses paid: $5,000
- August 10th, 2018: Cash income received on courier booking: $10,000.
- August 10th, 2018: Consignment booking expenses: $5,500.
- August 12th 2018: Advance received for courier booking: $25,000.
- August 15th, 2018: July month payable advertising expenses paid: $4,500.
- August 30th, 2018: Courier booking income: $10,000.
- August 30th, 2018: Consignment booking expenses: $6,000.
Create journal entries for the month of August.
Expenses payable in July (wages and advertising) were paid in August. Entries passed in August nullified payable accounts in both cases, and final entries only include cash a/c and their respective expense account. In such transactions, payable accounts are created only for temporary amount parking requirement.
It is noted that all Debit entries have a corresponding Credit entry, and vice-versa. This is based on the double entry book-keeping system of accounting. Correct journal entries are vital to any book-keeping system. With the help of correct and proper accounting entries, errors can be eliminated and any contingencies can be properly accounted for. Right account records can help an organization make future decisions with apt financial provisions.
This has been a guide to Accounting Transaction Examples. Here we discuss the most common basic accounting transaction along with practical examples and record book-keeping. You can learn more about accounting from the following articles –