First determine if an event (transaction) needs to be recorded in the accounting records. If yes, recording transactions involves three steps: Analysis: analyze the transaction to determine if it should be recorded in terms of increases and decreases in assets, liabilities, and owner's equity. This analysis includes identifying the accounts involved and the amount. Rules: follow the rules of debits/credits to determine whether the accounts involved will be debited or credited. Entry: Prepare the journal entry Note: The journal entry is a tool for analyzing and describing the impact of events (transactions) on the entity. For example: Transaction: On 4/1 XYZ purchased Land for cash in the amount of $100,000. Asset Land Analysis increase Asset Cash decrease Rule Increase asset: debit Decrease asset: credit Entry Debit: Land $100,000 Credit: Cash $100,000 Use the above method to record the journal entries for Jones Company (question 1). Remember: Journalizing means recording a journal entry in a journal. The unit of organization of a journal is the transaction. Posting means transferring the debit and credit amounts from the journal to the accounts in the ledger. The ledger is organized by accounts. Jones Inc. has a 12/31 fiscal year end and had the following balances at 12/31/ (example 2013): Cash Common stock Additional paid in capital $40,000 10,000 25,000 5,000 Retained earnings Jones Inc. reported the following for January the following year (example 2014): 1/1 Jones Inc., received $150,000 cash from Jane Jones and issued $50,000 par value common stock to Jane. 1/2 Purchased land for $30,000 with $10,000 paid in cash and $20,000 due in 60 days. (use Amount due on Land purchase account) 1/3 Incurred and paid office rent for January of $600 cash. 1/4 Purchased office equipment for a cash payment of $8,500. The equipment has a 10 year life, $100 residual value. Jones, Inc., will use the straight line depreciation method. 1/14 Billed customers $20,000 of accounting fees for work done for customers. (use Fee Revenue account) 1/22 Collected $15,000 cash from customers for work billed on 1/14 1/30 Paid $9.000 of the payable incurred on 1/2 1/30 Paid $9,000 of the payable incurred on 1/2 1/31 Sold a one-year contract for accounting work to Apple Company for $12,000 cash, work to commence on 2/1 1/31 Declared a $4,000 cash dividend, payable on 2/10/14 to holders of record as of 2/5/14 ADJUSTING ENTRIES: 1/31 Incurred salaries of $5,000 in January, to be paid on 2/4/14 1/31 Recorded depreciation expense for January Required: Journalize in good form the January transactions and the two adjusting entries for Jones, Inc. Assume that Jones has an operating cycle of 90 days. Post journal entries to ledger accounts (Show accounts as T-Accounts) Prepare an Adjusted Trial Balance at 1/31. Prepare an Income Statement and a Retained Earnings Statement for January. Prepare a Balance Sheet and post closing trial balance for 1/31. Prepare and post the closing entries for 1/31. Check Figures: Net Income 14,330 Retained Earnings 1/31 15,330 Total current asset 193,900 Total assets 232,330