Journalizing

Analyzing transactions and recording them as journal entries is the second step of accounting process. The following table shows the journal entries for the above events.

Company A
Journal Entries
January 31, 2010
Date	Account	L.P.	Debit	Credit
Jan 1	Cash Common Stock		100,000	100,000
Jan 2	Prepaid Rent Cash		36,000	36,000
Jan 3	Equipment Cash Notes Payable		80,000	60,000 20,000
Jan 4	Office Supplies Accounts Payable		17,600	17,600
Jan 13	Cash Service Revenue		28,500	28,500
Jan 13	Accounts Payable Cash		17,600	17,600
Jan 14	Wages Expense Cash		19,100	19,100
Jan 18	Cash Accounts Receivable Service Revenue		32,900 21,200	54,100
Jan 23	Cash Accounts Receivable		15,300	15,300
Jan 25	Cash Unearned Revenue		4,000	4,000
Jan 26	Office Supplies Accounts Payable		5,200	5,200
Jan 28	Wages Expense Cash		19,100	19,100
Jan 31	Dividends Cash		5,000	5,000
Jan 31	Electricity Expense Utilities Payable		2,470	2,470
Jan 31	Telephone Expense Utilities Payable		1,494	1,494
Jan 31	Miscellaneous Expense Cash		3,470	3,470

Posting to Ledger Accounts

The third step of accounting process is to post the journal entries to the ledger accounts. After posting all the journal entries, the balance of each account is calculated. The balance of an asset, expense, contra-liability and contra-equity account is calculated by subtracting the sum of its credit side from the sum of its debit side. The balance of a liability, equity and contra-asset account is calculated the opposite way i.e. by subtracting the sum of its debit side from the sum of its credit side.
The ledger account shown below are derived from the journal entries of  Company A

Unadjusted Trial Balance

A trial balance is a list of the balances of ledger accounts of a business at a specific point of time usually at the end of a period such as month, quarter or year. An unadjusted trial balance is the one which is created before any adjustments are made in the ledger accounts.

The preparation of a trial balance is very simple. All we have to do is to list the balances of the ledger accounts of a business.

Following is the unadjusted trial balance prepared from the ledger accounts of Company A.

Company A

Unadjusted Trial Balance

January 31, 2010

Particulars	Debit	Credit
Cash Accounts Receivable Office Supplies Prepaid Rent Equipment Accounts Payable Notes Payable Utilities Payable Unearned Revenue Common Stock Service Revenue Wages Expense Miscellaneous Expense Electricity Expense Telephone Expense Dividend Total	20,430 5,900 22,800 36,000 80,000 38,200 3,470 2,470 1,494 5,000 215,764	5,200 20,000 3,964 4,000 100,000 82,600 215,764