General Journal Entries: 40 Problems and Solutions [With PDF]
Accounting students, beginners, and professionals often need to sharpen their skills in recording financial transactions through general journal entries.
On our free accounting learning platform, we provide a wide range of general journal entry problems and solutions to help you understand the complexities of accounting, from basic transactions to more advanced scenarios.
Whether you’re preparing for an exam, enhancing your career skills, or simply learning the basics of accounting, this comprehensive guide will offer you the opportunity to practice and refine your journal entry knowledge.
Why Journal Entries Are Crucial in Accounting
Journal entries form the backbone of the accounting process. They are essential for recording financial transactions accurately, ensuring that businesses maintain proper records of all financial activities.
Each journal entry must adhere to the rules of debit and credit, making it crucial for accountants to understand how to handle these entries for different types of transactions.
From asset purchases and liabilities to equity transactions and revenue recognition, every financial move a company makes needs to be documented properly in the accounting system. These problems will help you develop that core skill.
Key Features of Our General Journal Entry Problems and Solutions
- Variety of Problems:
We provide general journal entry problems that cover a wide range of topics. You’ll find everything from simple cash transactions to complex investment deals. Our carefully designed problems ensure a comprehensive learning experience. - Realistic Scenarios:
Each problem is modeled after real-world business events, making it easier for you to understand how general journal entries are applied in practice. - Step-by-Step Solutions:
For every problem, you’ll find clear, step-by-step explanations of the correct journal entry, detailing why each account is debited or credited. This helps solidify your understanding of accounting principles. - Progressive Difficulty Levels:
Our journal entry problems progress from basic to advanced, allowing students and professionals of all levels to challenge themselves. Beginners can start with simple transactions, while more experienced users can tackle complex accounting scenarios. - Interactive Learning Experience:
These problems are perfect for self-paced study, classroom practice, or exam preparation. By solving these exercises, you’ll gain confidence in your ability to record financial transactions accurately.
Who Can Benefit from These Journal Entry Problems?
Our journal entry problems and solutions are perfect for:
- Accounting Students: Practice makes perfect. These problems will help you prepare for exams and assignments, ensuring you master journal entries.
- Beginners in Accounting: If you’re new to accounting, this is a great way to learn the foundational skills of recording transactions.
- Professionals and Accountants: Stay sharp by reviewing and practicing journal entries that you encounter in real-world scenarios.
- Small Business Owners: Understand how your financial transactions are recorded in accounting systems and manage your books more effectively.
What You’ll Learn
By practicing with these general journal entry problems, you’ll gain skills in:
- Recording daily business transactions accurately
- Applying the rules of debits and credits
- Understanding the financial impact of each entry
- Handling more complex entries like investments, loans, and accruals
Start Mastering General Journal Entries Now
If you’re looking to build a solid foundation in accounting, working through these general journal entry problems and solutions will provide you with the practice you need. Visit our platform today and start learning!
Problem 1: Purchase of Inventory on Credit
Scenario:
ABC Co. purchased inventory worth $2,000 on credit from a supplier.
Journal Entry:
- Debit: Inventory (Asset) $2,000
- Credit: Accounts Payable (Liability) $2,000
Explanation:
When the company purchases inventory, the asset increases (debit), while the liability (accounts payable) increases as it’s a credit purchase.
Problem 2: Cash Sale of Goods
Scenario:
XYZ Ltd. sold goods worth $1,500 in cash.
Journal Entry:
- Debit: Cash (Asset) $1,500
- Credit: Sales Revenue (Revenue) $1,500
Explanation:
Cash increases (debit) as it’s a cash sale, while revenue is recognized (credit) from the sale of goods.
Problem 3: Payment of Utilities Expense
Scenario:
The company paid $400 for utilities using cash.
Journal Entry:
- Debit: Utilities Expense (Expense) $400
- Credit: Cash (Asset) $400
Explanation:
Utilities expense (debit) increases, and cash (credit) decreases as the company pays for the utilities.
Problem 4: Owner Investment in the Business
Scenario:
The owner invests $5,000 cash into the business.
Journal Entry:
- Debit: Cash (Asset) $5,000
- Credit: Owner’s Capital (Equity) $5,000
Explanation:
Cash increases as the business receives funds (debit), while the owner’s equity increases (credit) due to the investment.
Problem 5: Purchase of Equipment with Cash
Scenario:
ABC Co. purchased office equipment for $3,000, paying in cash.
Journal Entry:
- Debit: Equipment (Asset) $3,000
- Credit: Cash (Asset) $3,000
Explanation:
Equipment (asset) increases as the company acquires a new asset, while cash decreases (credit) as payment is made.
Problem 6: Payment of Accounts Payable
Scenario:
XYZ Ltd. paid $2,000 to a supplier for an earlier purchase on credit.
Journal Entry:
- Debit: Accounts Payable (Liability) $2,000
- Credit: Cash (Asset) $2,000
Explanation:
Liabilities decrease (debit) as the company pays off its debt, and cash decreases (credit) as the payment is made.
Problem 7: Received Cash from Accounts Receivable
Scenario:
ABC Co. received $1,200 from a customer as payment for a previous credit sale.
Journal Entry:
- Debit: Cash (Asset) $1,200
- Credit: Accounts Receivable (Asset) $1,200
Explanation:
Cash increases (debit) as the payment is received, while accounts receivable (credit) decreases, indicating that the customer has paid off their debt.
Problem 8: Loan Taken from a Bank
Scenario:
XYZ Ltd. took out a loan of $10,000 from a bank.
Journal Entry:
- Debit: Cash (Asset) $10,000
- Credit: Bank Loan Payable (Liability) $10,000
Explanation:
Cash increases (debit) as the company receives the loan, and a liability is created (credit) for the loan amount.
Problem 9: Payment of Wages
Scenario:
The company paid wages amounting to $2,500 in cash.
Journal Entry:
- Debit: Wages Expense (Expense) $2,500
- Credit: Cash (Asset) $2,500
Explanation:
Wages expense (debit) increases, reducing equity, and cash (credit) decreases as the company makes the payment.
Problem 10: Customer Prepaid for Future Services
Scenario:
XYZ Ltd. received $1,800 from a customer as an advance payment for services to be performed next month.
Journal Entry:
- Debit: Cash (Asset) $1,800
- Credit: Unearned Revenue (Liability) $1,800
Explanation:
Cash increases (debit) when the advance is received, but since the services have not been provided yet, unearned revenue (liability) is recorded (credit).
Problem 11: Rent Paid in Advance
Scenario:
ABC Co. paid $3,000 in advance for the next three months’ rent.
Journal Entry:
- Debit: Prepaid Rent (Asset) $3,000
- Credit: Cash (Asset) $3,000
Explanation:
Prepaid rent (debit) is recorded as an asset because it represents future benefits, and cash decreases (credit) as the payment is made.
Problem 12: Depreciation of Office Equipment
Scenario:
The office equipment, costing $5,000, depreciates by $500 for the month.
Journal Entry:
- Debit: Depreciation Expense (Expense) $500
- Credit: Accumulated Depreciation (Contra Asset) $500
Explanation:
Depreciation expense (debit) is recorded to allocate the cost of the equipment, while accumulated depreciation (credit) reduces the value of the asset.
Problem 13: Owner Withdraws Cash for Personal Use
Scenario:
The owner of XYZ Ltd. withdrew $1,000 in cash for personal use.
Journal Entry:
- Debit: Owner’s Drawings (Equity) $1,000
- Credit: Cash (Asset) $1,000
Explanation:
The owner’s equity (debit) decreases with the withdrawal, and cash (credit) decreases as the money is withdrawn from the business.
Problem 14: Issuing a Check to Pay Rent
Scenario:
The business issues a check for $2,200 to pay for rent.
Journal Entry:
- Debit: Rent Expense (Expense) $2,200
- Credit: Cash (Asset) $2,200
Explanation:
Rent expense increases (debit), reducing the company’s equity, while cash decreases (credit) as the payment is made by check.
Problem 15: Services Rendered on Credit
Scenario:
ABC Co. provided services worth $3,500 on credit to a client.
Journal Entry:
- Debit: Accounts Receivable (Asset) $3,500
- Credit: Service Revenue (Revenue) $3,500
Explanation:
Accounts receivable (debit) increases as the company expects future payment, and service revenue (credit) is recorded for the services provided.
Problem 16: Purchase of Equipment with Partial Cash Payment and Loan
Scenario:
XYZ Ltd. purchased equipment worth $10,000. They paid $4,000 in cash and financed the remaining $6,000 through a loan.
Journal Entry:
- Debit: Equipment (Asset) $10,000
- Credit: Cash (Asset) $4,000
- Credit: Loan Payable (Liability) $6,000
Explanation:
The equipment (asset) increases with the full amount ($10,000), while part of the purchase is paid in cash ($4,000). The remaining amount is financed by a loan, creating a liability ($6,000).
Problem 17: Sale of Goods on Credit with Trade Discount
Scenario:
ABC Co. sold goods worth $5,000 on credit to a customer, providing a trade discount of 10%.
Journal Entry:
- Debit: Accounts Receivable (Asset) $4,500
- Credit: Sales Revenue (Revenue) $4,500
Explanation:
The sale is recorded after applying the 10% trade discount ($500), so the accounts receivable increases by the net amount of $4,500, and the corresponding revenue is recognized.
Problem 18: Issuance of Common Stock
Scenario:
ABC Ltd. issued 1,000 shares of common stock at $15 per share to investors.
Journal Entry:
- Debit: Cash (Asset) $15,000
- Credit: Common Stock (Equity) $15,000
Explanation:
Cash increases (debit) as funds are received from the issuance of stock, and common stock (credit) increases as equity in the business rises.
Problem 19: Purchase of Office Supplies on Credit and Later Payment
Scenario:
XYZ Ltd. purchased office supplies for $1,000 on credit. A month later, they paid off the liability.
Journal Entry (Initial Purchase):
- Debit: Office Supplies (Asset) $1,000
- Credit: Accounts Payable (Liability) $1,000
Journal Entry (Payment):
- Debit: Accounts Payable (Liability) $1,000
- Credit: Cash (Asset) $1,000
Explanation:
At the time of purchase, office supplies (debit) are recorded as an asset, and the accounts payable (credit) reflects the liability. Once the payment is made, accounts payable is reduced (debit), and cash is decreased (credit).
Problem 20: Recording Depreciation Expense
Scenario:
XYZ Co. purchased machinery worth $25,000 with a useful life of 5 years. The company records depreciation using the straight-line method.
Journal Entry (Yearly Depreciation):
- Debit: Depreciation Expense (Expense) $5,000
- Credit: Accumulated Depreciation (Contra Asset) $5,000
Explanation:
Depreciation expense (debit) is recorded each year to allocate the cost of machinery over its useful life, while accumulated depreciation (credit) reduces the asset’s book value.
Problem 21: Accrued Salaries Payable
Scenario:
XYZ Ltd. has $3,000 in salaries accrued at the end of the month that will be paid next month.
Journal Entry (Accrued Salaries):
- Debit: Salaries Expense (Expense) $3,000
- Credit: Salaries Payable (Liability) $3,000
Explanation:
Even though the payment hasn’t been made, the salary expense (debit) must be recorded for the period, and the liability (credit) is created for future payment.
Problem 22: Purchase of an Asset with a Trade-In
Scenario:
ABC Co. traded in old equipment with a book value of $2,000 (original cost $5,000, accumulated depreciation $3,000) and purchased new equipment for $6,000. The trade-in allowance for the old equipment is $2,500.
Journal Entry:
- Debit: Equipment (New Asset) $6,000
- Debit: Accumulated Depreciation (Old Asset) $3,000
- Credit: Equipment (Old Asset) $5,000
- Credit: Cash (Asset) $2,500
- Credit: Gain on Disposal of Equipment (Revenue) $500
Explanation:
The old equipment’s accumulated depreciation (debit) is removed from the books, while the cash paid and trade-in value are recorded. The difference is accounted for in the acquisition of new equipment. Gain on disposal of equipment is credited to record the gain on the disposal of the old equipment. The gain is calculated as the trade-in allowance ($2,500) minus the book value of the old equipment ($2,000).
Problem 23: Sale of Goods with Sales Tax
Scenario:
ABC Co. sold goods worth $4,000 to a customer, with a sales tax rate of 5%.
Journal Entry:
- Debit: Cash (Asset) $4,200
- Credit: Sales Revenue (Revenue) $4,000
- Credit: Sales Tax Payable (Liability) $200
Explanation:
The sales revenue (credit) is recorded at $4,000, while the sales tax payable (credit) reflects the $200 tax liability. The company receives a total of $4,200 in cash (debit).
Problem 24: Interest Earned on Investment
Scenario:
XYZ Ltd. earned $600 in interest on its investment, but the interest will be received next month.
Journal Entry:
- Debit: Interest Receivable (Asset) $600
- Credit: Interest Revenue (Revenue) $600
Explanation:
Interest revenue (credit) is recognized when earned, and interest receivable (debit) is recorded since the cash will be received in the future.
Problem 25: Disposal of an Asset
Scenario:
ABC Co. sold old office furniture for $2,000. The furniture had a book value of $1,500 (original cost $3,000, accumulated depreciation $1,500).
Journal Entry:
- Debit: Cash (Asset) $2,000
- Debit: Accumulated Depreciation (Contra Asset) $1,500
- Credit: Furniture (Asset) $3,000
- Credit: Gain on Disposal (Revenue) $500
Explanation:
The company receives cash (debit) and removes the old furniture’s cost and accumulated depreciation. The gain on disposal ($500) is recorded as revenue (credit).
Problem 26: Issuance of Bonds at Discount
Scenario:
XYZ Ltd. issued $50,000 worth of bonds at a discount, receiving $47,000.
Journal Entry:
- Debit: Cash (Asset) $47,000
- Debit: Discount on Bonds Payable (Contra Liability) $3,000
- Credit: Bonds Payable (Liability) $50,000
Explanation:
The bonds payable (credit) reflect the face value of the bonds issued, while the cash received is lower (debit). The difference is recorded as a discount on bonds payable (debit).
Problem 27: Customer Default on Account Receivable
Scenario:
ABC Co. wrote off a customer’s account receivable of $1,500 as uncollectible.
Journal Entry:
- Debit: Allowance for Doubtful Accounts (Contra Asset) $1,500
- Credit: Accounts Receivable (Asset) $1,500
Explanation:
The accounts receivable is written off (credit) against the allowance for doubtful accounts (debit), which was created to cover expected bad debts.
Problem 28: Payment of Dividends
Scenario:
XYZ Ltd. declared and paid $3,000 in dividends to its shareholders.
Journal Entry:
- Debit: Retained Earnings (Equity) $3,000
- Credit: Cash (Asset) $3,000
Explanation:
The company’s retained earnings (debit) decrease, reducing equity, while cash (credit) is reduced by the dividend payment.
Problem 29: Employee Benefits Accrual
Scenario:
ABC Co. provided $800 worth of employee benefits that have not yet been paid.
Journal Entry:
- Debit: Employee Benefits Expense (Expense) $800
- Credit: Employee Benefits Payable (Liability) $800
Explanation:
The expense is recognized when the benefit is provided (debit), but the actual payment will be made later, creating a payable (credit).
Problem 30: Purchase of Insurance Policy
Scenario:
XYZ Ltd. paid $2,400 for a one-year insurance policy.
Journal Entry:
- Debit: Prepaid Insurance (Asset) $2,400
- Credit: Cash (Asset) $2,400
Explanation:
Prepaid insurance (debit) is recorded as an asset because the benefit extends beyond the current period, and cash (credit) decreases as payment is made.
Problem 31: Investment in Another Company’s Stock
Scenario:
ABC Co. invested $15,000 in another company’s common stock.
Journal Entry:
- Debit: Investment in Stocks (Asset) $15,000
- Credit: Cash (Asset) $15,000
Explanation:
The investment in stocks (debit) increases as ABC Co. acquires shares in another company. Cash (credit) decreases by the same amount as payment is made.
Problem 32: Purchase of Office Furniture on Credit
Scenario:
XYZ Ltd. purchased office furniture worth $3,000 on credit from a supplier.
Journal Entry:
- Debit: Office Furniture (Asset) $3,000
- Credit: Accounts Payable (Liability) $3,000
Explanation:
The office furniture (debit) increases as it is purchased on credit, and accounts payable (credit) reflects the liability created by this transaction.
Problem 33: Prepaid Rent for Office Space
Scenario:
ABC Co. paid $12,000 in advance for office rent for the next 12 months.
Journal Entry:
- Debit: Prepaid Rent (Asset) $12,000
- Credit: Cash (Asset) $12,000
Explanation:
The prepaid rent (debit) is recorded as an asset since the benefit extends beyond the current period. Cash (credit) decreases as payment is made upfront.
Problem 34: Unearned Revenue for Services Paid in Advance
Scenario:
XYZ Ltd. received $5,000 in advance from a customer for services that will be provided in the future.
Journal Entry:
- Debit: Cash (Asset) $5,000
- Credit: Unearned Revenue (Liability) $5,000
Explanation:
The cash (debit) increases with the advance payment received, but since the services haven’t been provided, the amount is recorded as unearned revenue (credit), a liability.
Problem 35: Utility Bill Accrual
Scenario:
ABC Co. received a utility bill of $600 for the current month, which will be paid next month.
Journal Entry:
- Debit: Utilities Expense (Expense) $600
- Credit: Utilities Payable (Liability) $600
Explanation:
The utility expense (debit) is recognized immediately, even though the payment will be made later, creating a liability in the form of utilities payable (credit).
Problem 36: Interest Payment on a Loan
Scenario:
XYZ Ltd. paid $500 in interest on a loan.
Journal Entry:
- Debit: Interest Expense (Expense) $500
- Credit: Cash (Asset) $500
Explanation:
The interest expense (debit) is recognized as the company pays interest on its loan, while cash (credit) decreases as the payment is made.
Problem 37: Lease Payment for Equipment
Scenario:
ABC Co. made a lease payment of $2,000 for equipment used in operations.
Journal Entry:
- Debit: Lease Expense (Expense) $2,000
- Credit: Cash (Asset) $2,000
Explanation:
The lease expense (debit) reflects the cost of using the equipment, and cash (credit) decreases as payment is made to the lessor.
Problem 38: Purchase of Inventory on Credit
Scenario:
XYZ Ltd. purchased inventory worth $8,000 on credit from a supplier.
Journal Entry:
- Debit: Inventory (Asset) $8,000
- Credit: Accounts Payable (Liability) $8,000
Explanation:
The inventory (debit) increases as it is purchased for resale, and accounts payable (credit) reflects the liability to the supplier until payment is made.
Problem 39: Sale of Goods on Credit
Scenario:
ABC Co. sold goods worth $10,000 on credit to a customer.
Journal Entry:
- Debit: Accounts Receivable (Asset) $10,000
- Credit: Sales Revenue (Revenue) $10,000
Explanation:
The sale is recognized by increasing accounts receivable (debit) since the customer will pay later, and the corresponding sales revenue (credit) is recorded.
Problem 40: Payment of Accounts Payable
Scenario:
XYZ Ltd. paid $5,000 to a supplier to settle an outstanding accounts payable balance.
Journal Entry:
- Debit: Accounts Payable (Liability) $5,000
- Credit: Cash (Asset) $5,000
Explanation:
The accounts payable (debit) is reduced as the liability is settled, and cash (credit) decreases to reflect the payment made to the supplier.
Take advantage of this free resource and strengthen your accounting skills by mastering the art of journal entries.
Whether you’re a student preparing for exams, a beginner getting started, or a professional seeking to refresh your knowledge, these exercises will help you achieve your goals.
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