Recording January Transactions for Sheffield Corp.
How did Sheffield Corp. record its liability accounts during January 2022?
What were the key transactions that affected Sheffield Corp.'s liability accounts?
Journal Entries for January Transactions
The journal entries for the January transactions are as follows:
Jan. 1: Cash $22,800, Notes Payable $22,800
Jan. 5: Cash $6,890, Sales Revenue $6,500, Sales Taxes Payable $390
Jan. 12: Cash $10,000, Unearned Service Revenue $10,000
Jan. 14: Sales Taxes Payable $7,500, Cash $7,500
Jan. 20: Accounts Receivable $20,160, Sales Revenue $19,000, Sales Taxes Payable $1,160
Recording January Transactions for Sheffield Corp. In January 2022, Sheffield Corp. had several transactions that affected its liability accounts. To properly record these transactions in the accounting records, journal entries were made following the rules of double-entry bookkeeping. On January 1, Sheffield Corp. borrowed $22,800 in cash from Apex Bank by issuing a 3-month, 5% note. This transaction increased the company's cash balance while also incurring a liability in the form of the Notes Payable. On January 5, the company sold merchandise for cash, which amounted to $6,890, including 6% sales taxes. The journal entry includes a debit to Cash for $6,890, and Sales Revenue is credited with $6,500 (the net sales amount after deducting the sales taxes of $390). Additionally, the Sales Taxes Payable account is credited for the sales taxes collected. On January 12, Sheffield Corp. performed services for customers who had made advance payments of $10,000. This transaction involves reducing the Unearned Service Revenue liability account and recognizing the corresponding increase in cash. On January 14, the company paid the state treasurer's department $7,500 for sales taxes collected in December 2021. This transaction is recorded by reducing Cash and the Sales Taxes Payable liability account. Finally, on January 20, Sheffield Corp. sold 400 units of a new product on credit at $48 per unit, plus 6% sales tax. The journal entry includes a debit to Accounts Receivable for the sales amount, a credit to Sales Revenue for the net sales amount (after deducting the sales tax), and a credit to Sales Taxes Payable for the collected sales tax. It is important to accurately record these transactions in the journal to ensure the financial statements reflect the company's financial position and performance accurately.