Stein Company had the following transactions pertaining to its short-term stock

Question

Stein Company had the following transactions pertaining to its short-term stock investments. Stein owns more than 20% of the Pine Company stock and has significant influence in decision-making.
Jan. 1
June 1
Sept. 15
Purchased 50,000 shares of Pine Company stock as an investment for $499,750 cash plus brokerage fees of $250.
Received cash dividends of $0.25 per share on the Pine Company stock investment.
Sold 2,000 shares of the Pine Company stock investment for $220,100 less brokerage fees of $100.
Instructions
Journalize the transactions.

Explanation / Answer

Assets = Liabilities + Owners' Equity.

Initially the transaction is recorded from the primary source document into the Journal. Each transaction will be identified as affecting specific accounts and every transaction will affect at least two accounts:

the first account will show a debit entry for the amount shown on the source document, while
the second account will show a credit entry for a similar amount.

At the end of any accounting period the totals in the Journal debit column must equal the totals in the Journal credit column.

Later these Journal entries are posted to Ledger accounts. When all these Journal entries for that accounting period have been properly and correctly posted to the Ledger accounts, and all the Ledger account balances are totalled up, it must follow that all the Debit balances must equal all the Credit balances in these Ledger accounts for that accounting period.

Later still, all these balances in the Ledger accounts will be used to prepare the Balance Sheet and the Revenue (Profit and Loss) Statements.

It is important to understand that when all these Ledger accounts balances are transferred, then the final figures in the Balance Sheet will balance ( the Assets will equal the Liabilities plus Owners Equity).

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