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in this video we will see how to journalize basic transactions and adjusting entries after analyzing each transaction of the business company's first record all transactions in a journal a journal is a chronological listing of a firm's transactions including the amounts and accounts that are affected and direction in which the accounts are affected it records the financial data pertaining to business transactions debit and credit effects on specific accounts the process of entering data in the journal is known as journalizing a complete journal entry consists of the date of entry the accounts into which the debits and credits are to be recorded and a brief explanation of the transaction to record revenues in the period in which they are earned and to recognize expenses in the period in which they are incurred companies prepare adjusting entries at the end of each accounting period adjusting entries convert a company's accounting records to the accrual basis of accounting their main purpose is to match incomes and expenses to appropriate accounting periods every adjusting entry will involve one income statement account and one balance sheet account adjusting entry is needed in cases of deferrals and accruals deferrals are further classified into prepaid expenses and unearned revenues prepaid expenses are expenses paid in cash and recorded as assets before they are used or consumed unearned revenues are revenues received in cash and recorded as liabilities before services are performed accruals are further classified into accrued revenues and accrued expenses accrued revenues are revenues for services performed but not yet received in cash are recorded accrued expenses are expenses incurred but not yet paid in cash or recorded let's look at an illustration to see how to journalize basic transactions and adjusting entries selected accounts of meadows company are provided we are required to journalize the July transactions and the relevant adjusting entries required at the end of July let's first journalize the transactions that occurred during July on July 10 the supplies account has been debited for $800 indicating the purchase of supplies this is recorded by debiting supplies and asset account for $800 in crediting cash and asset account for $800 on July 14th service revenue has been credited for $2,500 it indicates that the company has earned service revenue worth of $2,500 on that date we assume that cash is paid for the transaction as there is no corresponding debit in the accounts receivable account to record this transaction the cash account is debited for $2,500 and a service revenue account is credited for the same amount on July 15th salaries and wages expense has been debited by $1,350 which indicates that the salaries and wages expense have been incurred it is assumed that the expenses paid in cash as there is no corresponding credit in these salaries and wages payable account on July 15th to record the payment of expense salaries and wages expense is debited for $1,350 and cash is credited for the same amount on July 20th online service revenue a liability account has been credited for $1000 this indicates the receipt of cash for the service to be provided into the future it is considered a liability because revenue has not been earned yet but cash has been received for such unperformed services to record the unearned revenue we debit cash for $1000 as there is an inflow of cash and credit unearned service revenue for the same amount let's now journalize the adjusting entries required at the end of July on July 31st supplies account has a credit balance of $1000 and supplies expense is a corresponding debit balance of $1000 it means that the supplies consumed during July equal $1,000 which has been recognized as an expense when supplies are consumed it decreases asset and increases expense to record the use of supplies we debit supplies expense for $1000 and credit supplies for 1 dollars there is a debit balance of $1,500 in the accounts receivable account as of July 31st also there is a corresponding credit in the service revenue account for $1,500 on the same date it is understood that revenue is earned for which no payment is made nor the transaction is recorded therefore an adjusting entry is passed to record the accrued revenue which is a debit to accounts receivable for $1,500 and a credit to service revenue for the same amount on July 31st salaries and wages payable has a credit balance of $1,350 salaries and wages expense has a debit balance of $1,350 it indicates that salaries and wages expense has incurred but not paid until July 31st to record the accrued expense we debit salaries and wages expense for $1,350 and credit salaries and wages payable for the same amount the service revenue account reflects an ending credit balance of $1,150 and the unearned service revenue account reflects an ending debit balance of $1,150 this represents that cash that was received in advance for unperformed services has now been earned hence adjusting entry is passed to increase the income as the income pertains to the month of July to record this transaction unearned service revenue account is debited for $1,150 and service revenue account is credited for $1,150