Journalizing a Business Transaction – Example 8
On Jan 15th, 'X' business provided service to Max Company for $500 on account (Sales Invoice 5).
Step 1: Analysis:
The accounts affected in the transaction are:
- Accounts Receivable: Max Company Account
- Service Revenue Account
- Accounts Receivable: Max Company is an Asset account
- Service Revenue is a Revenue account
- Accounts Receivable: Max Company account increases by $500
- Service Revenue increases by $500
Step 2: Debit – Credit Rule:
- Increase in the Asset account is recorded as debit. Debit the Accounts Receivable: Max Company account for $500.
- Increase in the Revenue account is recorded as credit. Credit Service Revenue for $500.
Step 3: Prepare a T Account:
Step 4: Pass a Journal Entry:
Date |
Account Title |
Debit |
Credit |
Jan 15 |
Accounts Receivable: Rex-Co |
$500 |
|
|
Service Revenue Account |
|
$500 |
|
Sales Invoice No. 5 |
|
|