How to Record Journal Entries for Business Transactions

What are the journal entries for various transactions conducted by West Secure in July 2023?

Let's break down each transaction and understand how to record them properly.

Journal Entries for July Transactions:

1. Manny Gil invested $5,600 cash:

Debit: Cash $5,600

Credit: Owner's Capital $5,600

2. Purchased $3,100 security equipment on credit:

Debit: Security Equipment $3,100

Credit: Accounts Payable $3,100

3. Performed security services for a concert and received $10,090 cash:

Debit: Cash $10,090

Credit: Service Revenue $10,090

4. Paid $4,160 for expenses:

Debit: Various Expense Accounts $4,160

Credit: Cash $4,160

5. Completed security services for a graduation event and billed $1,188:

Debit: Accounts Receivable $1,188

Credit: Service Revenue $1,188

6. Manny Gil withdrew $310 cash for personal use:

Debit: Owner's Withdrawals $310

Credit: Cash $310

Recording journal entries is crucial for maintaining accurate financial records for a business. Each transaction has a corresponding debit and credit entry that must be properly documented.

When Manny Gil invested $5,600 cash into West Secure, the Cash account is debited while the Owner's Capital account is credited. This reflects an increase in cash and the owner's equity in the business.

Similarly, when purchasing $3,100 worth of security equipment on credit, the Security Equipment account is debited and the Accounts Payable account is credited. This represents an increase in assets and liabilities.

For the revenue generated from security services, such as the concert and graduation event, the Cash account is debited while the Service Revenue account is credited. This captures the income earned by the business.

Expenses incurred, like the $4,160 paid, are recorded by debiting the appropriate expense accounts and crediting the Cash account. This reflects the outgoing funds for operating the business.

When completing services and billing clients, the Accounts Receivable account is debited for amounts owed and the Service Revenue account is credited for the revenue generated.

Lastly, when the owner, Manny Gil, withdraws $310 cash for personal use, the Owner's Withdrawals account is debited and the Cash account is credited. This reflects the reduction of cash due to the owner's withdrawal.

By following these journal entry steps, businesses can accurately track their financial transactions and ensure proper accounting practices are maintained.