Question
J. Willow started Willow Creek Consulting on January 1, 2025. During January the business completed the following transactions:
- Jan 2 — The owner, J. Willow, opened a business bank account and invested $50,000 cash in the business.
- Jan 4 — Purchased office equipment for $12,000, paying cash.
- Jan 7 — Purchased office supplies costing $3,000 on account from Redwood Supply Co. The supplies will be used over the coming months, so record them as an asset (Supplies).
- Jan 12 — Completed a consulting project and collected $8,000 cash.
- Jan 18 — Completed a second project for Brightway Ltd. and sent the client an invoice for $5,500. Brightway will pay the invoice within 30 days.
- Jan 21 — Paid the January office rent of $2,000.
- Jan 25 — Paid Redwood Supply Co. $1,500 of the amount owed for supplies.
- Jan 28 — Received $3,500 from Brightway Ltd. on account.
- Jan 31 — The owner withdrew $1,000 cash for personal use.
Required: Prepare the journal entry for each of the nine transactions. Narrations are optional.
How to enter it:
- Each transaction gets its own date box. Type the day from the question — for Jan 4 type 4.
- First line: the account to debit, with the amount in the Debit column. Next line: the account to credit, with the amount in the Credit column.
- A spare blank line appears under each entry — leave it empty. Start the next transaction in the next date box, or click New Transaction.
Worked example — Jan 2. Cash comes in, so the asset Cash increases: Debit Cash $50,000. The owner's stake in the business increases: Credit Owner Capital $50,000. Enter this one too — it is marked like the others.
Watch out: three of these transactions move cash without creating any new revenue or expense. For each one ask: has the business earned something or used something up — or is it only settling an amount it already recorded?
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IAS 1 — Presentation of Financial Statements
Work the cycle in its fixed order: journalise, post to the ledger, extract an unadjusted trial balance, pass adjusting entries, extract an adjusted trial balance, prepare the statements, then close the temporary accounts. Each step consumes the output of the one before it, so an error early on propagates all the way to the closing entries rather than staying local.
Common mistakes
- Preparing the financial statements from the unadjusted trial balance instead of the adjusted one.
- Closing permanent accounts — assets, liabilities and capital carry forward; only revenue, expense and drawings/dividends close.
- Forgetting that the post-closing trial balance should contain no income statement accounts at all.
Further readingIAS 1: what goes where in a full set of statements