On this page
Worked-example setupScope and assumptions
- Juniper Consulting is a fictional sole proprietorship that begins with no balances, and each event meets the simplified recording assumptions stated.
- The equipment remains controlled and unused, the service is fully performed on credit, and the utility service is consumed when paid.
- The loan payment is principal only, and the owner distribution is properly authorized.
- Period
- Entity's first reporting period
- Units
- USD
- Rounding
- Whole US dollars; no rounding required
Problem
Prepare journal entries for 7 first-period events for Juniper Consulting, a new sole proprietorship. Explain why a debit or credit can increase one account and decrease another. Then compute the ending account balances and prepare the trial balance.
Classification and entries
Each row begins with the classified event. The normal-balance map then assigns the side. Cash is debited when it rises and credited when it falls. Note Payable is credited when it rises and debited when it falls.
Ending balances
Debit-normal balances
Cash $19,500
Equipment 6,000
Accounts Receivable 4,000
Utilities Expense 1,500
Owner Distributions 1,000
Total debits 32,000
Credit-normal balances
Note Payable 8,000
Contributed Capital 20,000
Service Revenue 4,000
Total credits 32,000
The seven entries contain $44,500 of debit lines and $44,500 of credit lines. That activity total is larger than the $32,000 ending trial-balance total because accounts contain offsetting increases and decreases during the period. Do not confuse transaction volume with ending balances.
What equal totals show
The trial balance shows that the recorded debit and credit balances agree arithmetically. It does not prove that all seven events occurred, that no event is missing, or that Service Revenue rather than another account is correct. Those claims require the fact pattern and evidence.
Interpretation
The $19,500 ending Cash balance does not explain why cash changed. Cash came from the owner and a lender. Juniper used cash for equipment, utilities, loan principal, and an owner's draw. It also earned Service Revenue without receiving cash. The separate accounts retain information that the Cash balance cannot show.
Common wrong paths
- Debit every decrease: This would reverse the Cash and Note Payable logic in at least one of the loan events.
- Credit every favorable event: Favorability is not an account side; the loan credit increases an obligation.
- Force every entry to two accounts: A compound transaction can require more than two lines while remaining balanced.
- Treat equal totals as proof that every account is correct: Equal sides cannot detect an amount posted to the wrong account on the same side.
Verified calculation · journal entry
The curriculum loader recomputed this example before it entered the site build. Expand any structured input to inspect the stated facts.
- accounts
- 8 fields
Inspect data
{
"accounts_receivable": {
"classification": "asset",
"opening": 0
},
"cash": {
"classification": "asset",
"opening": 0
},
"contributed_capital": {
"classification": "equity",
"opening": 0
},
"equipment": {
"classification": "asset",
"opening": 0
},
"note_payable": {
"classification": "liability",
"opening": 0
},
"owner_distributions": {
"classification": "owner-distribution",
"opening": 0
},
"service_revenue": {
"classification": "revenue",
"opening": 0
},
"utilities_expense": {
"classification": "expense",
"opening": 0
}
}- entries
- 7 items
Inspect data
[
{
"label": "owner investment",
"lines": [
{
"account": "cash",
"credit": null,
"debit": 20000
},
{
"account": "contributed_capital",
"credit": 20000,
"debit": null
}
]
},
{
"label": "equipment purchased for cash",
"lines": [
{
"account": "equipment",
"credit": null,
"debit": 6000
},
{
"account": "cash",
"credit": 6000,
"debit": null
}
]
},
{
"label": "bank borrowing",
"lines": [
{
"account": "cash",
"credit": null,
"debit": 10000
},
{
"account": "note_payable",
"credit": 10000,
"debit": null
}
]
},
{
"label": "service performed on credit",
"lines": [
{
"account": "accounts_receivable",
"credit": null,
"debit": 4000
},
{
"account": "service_revenue",
"credit": 4000,
"debit": null
}
]
},
{
"label": "current utility service paid",
"lines": [
{
"account": "utilities_expense",
"credit": null,
"debit": 1500
},
{
"account": "cash",
"credit": 1500,
"debit": null
}
]
},
{
"label": "loan principal repaid",
"lines": [
{
"account": "note_payable",
"credit": null,
"debit": 2000
},
{
"account": "cash",
"credit": 2000,
"debit": null
}
]
},
{
"label": "owner distribution paid",
"lines": [
{
"account": "owner_distributions",
"credit": null,
"debit": 1000
},
{
"account": "cash",
"credit": 1000,
"debit": null
}
]
}
]Recomputed result
| Measure | Value |
|---|---|
| accounts receivable | 4,000 |
| cash | 19,500 |
| contributed capital | 20,000 |
| ending credit balances | 32,000 |
| ending debit balances | 32,000 |
| equipment | 6,000 |
| note payable | 8,000 |
| owner distributions | 1,000 |
| service revenue | 4,000 |
| total credits | 44,500 |
| total debits | 44,500 |
| trial balance difference | 0 |
| utilities expense | 1,500 |