Now it's your turn. I'm going to give you some transactions to allow you to practice. After each transaction take a few minutes, give it a try, and then come back and we'll see how you did. Again, it's going to be like eating vegetables. But they're getting better and better. Okay, the first transaction, DEF Company records $200,000 in sales to customers. $150,000 of those sales were cash out sales, and $50,000 were sales on account. Remember you need to write the journal entry to record the transaction. And then you need to record the impact on the individual T-accounts affected. Take a few minutes, give it a try, then come back, and we'll see how you did. And in the meantime, just so you don't feel alone I will eat some broccoli as well. Okay, how did you do? Let's take a look. First the journal entry. Let's see how we would have recorded that. Now recall when we record revenues we record those as a right side entry or a credit to retained earnings. And we include a notation that that entry is associated with revenues. And then we record the left hand side to the asset accounts that tell us what the company received in exchange for those revenues. So here we have cash increasing by 150,000. We have accounts receivable increasing by 50,000. And retained earnings is the right side entry for revenues of 200,000. Let's make sure we record the impact on each of the T accounts. The left side entry to cash gets posted to the left side of the cash T account. The left side entry to the accounts receivable account gets posted to the left side of that T account. The right side entry to retained earnings gets posted to the right side of the retained earnings t account. Nice work, let's try another one. The inventory that DEF company sold in that previous transaction originally cost $140,000. Take a few minutes. Give it a try, then come on back, and we'll see how you did. And yes I will, Eat another piece of broccoli. Let's see how you did with this one. Did you remember to record that journal entry? Let's talk about that. When we were recording expenses, recall that we make a left hand side entry or a debit to the retained earnings account. And we make a notation out beside that entry to indicate what type of an expense that entry represented. Here we have cost of goods sold. Recall that COGS is cost of goods sold. Retained earnings decreases by $140,000 because of this expense. The company sold inventory so the inventory account decreases by $140,000. Let's post the impact of this journal entry into the T accounts. We have a left side entry to the retained earnings T account. So that's posted to the left side of the T-account. We have a right side entry to the inventory account, that gets posted to the right side of the inventory T-account. Good work. Next transaction, DEF Company incurred $20,000 in advertising expense for the year, and it paid for it all in cash. Take a few minutes, I bet you can do this one. Give it a try then come back and we'll see how it went. How did it go? Let's take a look. First the journal entry, we're recording an expense for the year, so that is a left-hand side to the retained earnings account. We're making a notation that this was advertising expense. And we're recording a right hand side to cash, or a credit to cash, because we paid for the advertising in cash. We post to the individual T accounts. The left side to the retained earnings T-account gets posted to the left side here. The right side entry to cash gets posted to the right side of the cash T-account. Let's do one more. In December, DEF Company received its utilities bill showing that it owed the Electric Company $2,000. DEF planned to pay the bill in January of the following year. So let's record the transaction for what happened in December. Take a few minutes, give it a try then come back and we'll see how you did. And this one really is a bit more difficult so I might even add a Brussels sprout in with the broccoli on this one. How did it go? Was this a bit more difficult for you? I bet it was, but let's take a look at it and see how you did. Okay, first let's take a look at the journal entry. We see a left-hand side to retained earnings for utilities expense. Retained earnings decreases by $2,000. And the company has incurred the obligation to pay the utilities bill the following year. So it has to record a liability. We'll call it utilities payable. We could call it the amount that I owe to the utility company. But it's a liability which is the important thing and it increases by $2,000. Now notice that we're recording an expense or reduction to retained earnings even though the company has not paid the bill in cash yet. Let's recall the matching principle. The matching principle tells us that during any accounting period when we're recording revenues. We have to go hunt for all of the costs that we've incurred to generate those revenues. And record those as expenses so that those expenses are matched to the revenues they help us to generate. Well the company has incurred utilities cost during the year that it has generated some revenues. And so it needs to record an expense for that utilities cost even though it hasn't yet paid the bill in cash. Let's post these to the T-Accounts. The left side to retained earnings is posted on the left side of the retained earnings T-Account. And the right side entry to utilities payable is posted on the right side of the utilities payable liability account. Okay, we've recorded a lot of transactions related to revenues and expenses. I've eaten plenty of broccoli. I think we'll stop at the moment and take a break.
