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Journal Entries

A journal entry made in accounting is nothing but recording of transactions into accounting journal. The entries are made everyday for the transaction of that day, so it is also called as "Day Book". Contents of a Journal Entry: The journal entry may vary in contents depending on the companies' requirement. But some of the common entries made are entry number; batch number; recurring entry, non-recurring entry, date, accounting period, description. How a journal entry should be? There will be numerous journal entries that can be either a debit or a credit entry. To make it clear a column is named as debit the other as credit. Here, if the total of the debits and credits are equal then it is a "balanced journal". Otherwise the entry is said to be an "unbalanced journal". Advantages of Journal entry In a journal entry the omission of transactions are limited, since they are recorded in the chronological order. Second advantage is that all entries are made with a related description to supplement the transactions. Since all the debit and credit amounts are written side by side chances of recording wrong amounts is less. Only with a single entry the whole history about the transaction can be got. So in a business, if all the transaction is recorded in a single journal, it will look weird. Say, if an everyday transaction and a once in a way transaction has the entry in a single will make things difficult. Most companies have a separate journal for everyday transactions to make it more useful for the business.

Accounting Basics
There are a few (and only a few) things you need to understand in order to make setting up your accounting system easier. Debits and Credits These are the backbone of any accounting system. Understand how debits and credits work and you'll understand the whole system.Every accounting entry in the general ledger contains both a debit and a credit. Further, all debits must equal all credits.If they don't, the entry is out of balance. Debits and Credits vs. Account Types

Account Type Assets Liabilities Income Expenses

Debit Increases Decreases Decreases Increases

Credit Decreases Increases Increases Decreases

Accounting Basics - 5 Basic Accounting Types:

Journal Entries
A journal entry made in accounting is nothing but recording of transactions into accounting journal. The entries are made everyday for the transaction of that day, so it is also called as "Day Book". Contents of a Journal Entry: The journal entry may vary in contents depending on the companies' requirement. But some of the common entries made are entry number; batch number; recurring entry, non-recurring entry, date, accounting period, description. How a journal entry should be? There will be numerous journal entries that can be either a debit or a credit entry. To make it clear a column is named as debit the other as credit. Here, if the total of the debits and credits are equal then it is a "balanced journal". Otherwise the entry is said to be an "unbalanced journal". Advantages of Journal entry In a journal entry the omission of transactions are limited, since they are recorded in the chronological order. Second advantage is that all entries are made with a related description to supplement the transactions. Since all the debit and credit amounts are written side by side chances of recording wrong amounts is less. Only with a single entry the whole history about the transaction can be got. So in a business, if all the transaction is recorded in a single journal, it will look weird. Say, if an everyday transaction and a once in a way transaction has the entry in a single will make things difficult. Most companies have a separate journal for everyday transactions to make it more useful for the business.

Assets Liabilities Equity Income and Expenses Balance Sheet Accounts The three so-called Balance Sheet Accounts are Assets, Liabilities, and Equity. Balance Sheet Accounts are used to track the changes in value of things you own or owe. Assets is the group of things that you own. Your assets could include a car, cash, a house, stocks, or anything else that has convertible value. Convertible value means that theoretically you could sell the item for cash. Liabilities is the group of things on which you owe money. Your liabilities could include a car loan, a student loan, a mortgage, your investment margin account, or anything else which you must pay back at some time. Equity is the same as "net worth." It represents what is left over after you subtract your liabilities from your assets. It can be thought of as the portion of your assets that you own outright, without any debt.

Journal Entries
A journal entry made in accounting is nothing but recording of transactions into accounting journal. The entries are made everyday for the transaction of that day, so it is also called as "Day Book". Contents of a Journal Entry: The journal entry may vary in contents depending on the companies' requirement. But some of the common entries made are entry number; batch number; recurring entry, non-recurring entry, date, accounting period, description. How a journal entry should be? There will be numerous journal entries that can be either a debit or a credit entry. To make it clear a column is named as debit the other as credit. Here, if the total of the debits and credits are equal then it is a "balanced journal". Otherwise the entry is said to be an "unbalanced journal". Advantages of Journal entry In a journal entry the omission of transactions are limited, since they are recorded in the chronological order. Second advantage is that all entries are made with a related description to supplement the transactions. Since all the debit and credit amounts are written side by side chances of recording wrong amounts is less. Only with a single entry the whole history about the transaction can be got. So in a business, if all the transaction is recorded in a single journal, it will look weird. Say, if an everyday transaction and a once in a way transaction has the entry in a single will make things difficult. Most companies have a separate journal for everyday transactions to make it more useful for the business.

Income and Expenses Accounts The two Income and Expense Accounts are used to increase or decrease the value of your accounts. Income is the payment you receive for your time, services you provide, or the use of your money. Expenses refer to money you spend to purchase goods or services provided by someone else

Trial balance
Trial balance is a list of balances of all the ledger accounts within a ledger. Usually the trial balance is prepared every month. This only done after all the transactions are recorded in the ledger. Purpose of Trial Balance: The main purpose of creating a trial balance is to check the correctness of all transactions recorded in accounts. But the preparation of trial balance also helps to easily consolidate the final account statements. How is Trial Balance prepared?

Journal Entries
A journal entry made in accounting is nothing but recording of transactions into accounting journal. The entries are made everyday for the transaction of that day, so it is also called as "Day Book". Contents of a Journal Entry: The journal entry may vary in contents depending on the companies' requirement. But some of the common entries made are entry number; batch number; recurring entry, non-recurring entry, date, accounting period, description. How a journal entry should be? There will be numerous journal entries that can be either a debit or a credit entry. To make it clear a column is named as debit the other as credit. Here, if the total of the debits and credits are equal then it is a "balanced journal". Otherwise the entry is said to be an "unbalanced journal". Advantages of Journal entry In a journal entry the omission of transactions are limited, since they are recorded in the chronological order. Second advantage is that all entries are made with a related description to supplement the transactions. Since all the debit and credit amounts are written side by side chances of recording wrong amounts is less. Only with a single entry the whole history about the transaction can be got. So in a business, if all the transaction is recorded in a single journal, it will look weird. Say, if an everyday transaction and a once in a way transaction has the entry in a single will make things difficult. Most companies have a separate journal for everyday transactions to make it more useful for the business.
Trial balance lists the debit, credit accounts for a given ledger for a month. Trial balance is created in two columns one with all the debit balances and the other with all the credit balances. If the total of the debit column does not equal the total of the credit column then there is an error in the ledger accounts. The assets, expenses will be recorded under the debit balances. Liabilities, equity and revenue will be recorded under the credit balances. Limitations But there is no guarantee that if the trial balance is fine, the ledger accounts are correct. There might be some omissions in the ledger accounts, or even a duplicate entry is also a possibility. Some times there will be ledger entries that are wrong when looked into individually. But while doing a trial balancing there might have be other wrong entries that have compensated these errors. Trial balancing can easily trace the wrong posting of amounts in a different account. So trial balancing is also time consuming, but this will ensure that the debit and credit balances are corrected every month.

Introduction to Adjustment Entries


In accounting adjustment entries are made in the journal at the end of the accounting period. These types of entries are made in accrual based accounting based on the revenue recognition principle. Adjusting entries are made for income or expenses occurred in a previous time period at the time of preparing the financial statements or on the balance day.

Journal Entries
A journal entry made in accounting is nothing but recording of transactions into accounting journal. The entries are made everyday for the transaction of that day, so it is also called as "Day Book". Contents of a Journal Entry: The journal entry may vary in contents depending on the companies' requirement. But some of the common entries made are entry number; batch number; recurring entry, non-recurring entry, date, accounting period, description. How a journal entry should be? There will be numerous journal entries that can be either a debit or a credit entry. To make it clear a column is named as debit the other as credit. Here, if the total of the debits and credits are equal then it is a "balanced journal". Otherwise the entry is said to be an "unbalanced journal". Advantages of Journal entry In a journal entry the omission of transactions are limited, since they are recorded in the chronological order. Second advantage is that all entries are made with a related description to supplement the transactions. Since all the debit and credit amounts are written side by side chances of recording wrong amounts is less. Only with a single entry the whole history about the transaction can be got. So in a business, if all the transaction is recorded in a single journal, it will look weird. Say, if an everyday transaction and a once in a way transaction has the entry in a single will make things difficult. Most companies have a separate journal for everyday transactions to make it more useful for the business. Two Scenarios for adjustment entry: Accruals: In this scenario the income or expenses accrued but not recorded in the accounts. For example, if the payment for a machinery that is acquired in this month is paid the next month, an adjustment entry is made in this months account about the expenses next month. Deferrals: In this scenario the income or expense is recorded but need to be deferred at a later time. For example, if the EMI payment is made for year in the month of January itself, a deferred entry must be made for every month by dividing the total amount by 12. In a case of payments received before the goods are delivered also requires an adjustment entry. First the cash received is recorded then a deferral adjustment entry is made on the day the goods are invoiced. Importance of adjustment entries: So at the end of financial year the neat and clean balance sheet has to be presented to the stock holders. Not only to know the cash flow for the financial period, but also to calculate the profit and loss precisely adjustment entries are must. Even though adjustment entries are known as balance day entries, it can be done at the right time to avoid income and expense confusion.

Bank reconciliation | Bank Statement


Bank reconciliation is a process of matching the accounting details with the bank statements. Companies record the transaction like checks written, receiving payments, service charges paid in a general ledger of

Journal Entries
A journal entry made in accounting is nothing but recording of transactions into accounting journal. The entries are made everyday for the transaction of that day, so it is also called as "Day Book". Contents of a Journal Entry: The journal entry may vary in contents depending on the companies' requirement. But some of the common entries made are entry number; batch number; recurring entry, non-recurring entry, date, accounting period, description. How a journal entry should be? There will be numerous journal entries that can be either a debit or a credit entry. To make it clear a column is named as debit the other as credit. Here, if the total of the debits and credits are equal then it is a "balanced journal". Otherwise the entry is said to be an "unbalanced journal". Advantages of Journal entry In a journal entry the omission of transactions are limited, since they are recorded in the chronological order. Second advantage is that all entries are made with a related description to supplement the transactions. Since all the debit and credit amounts are written side by side chances of recording wrong amounts is less. Only with a single entry the whole history about the transaction can be got. So in a business, if all the transaction is recorded in a single journal, it will look weird. Say, if an everyday transaction and a once in a way transaction has the entry in a single will make things difficult. Most companies have a separate journal for everyday transactions to make it more useful for the business. the company. So in the same checking account the bank will also record the transaction done by the company. Why to do Bank reconciliation: Most banks send statements to its clients on a monthly basis. So most companies check their ledger with the transactions recorded in the bank statement. Loss of checks can be found out easily by checking the statement or even the amount can be added to the ledger. Errors committed in cash received, are rectified while doing bank reconciliation. This process ensu that none of the transaction is missed out in the res banks statements and vice versa. For sure this is a tedious and a time consuming process to manually check each and every entry. Especially the bank service charges deduction may be only on the bank statement, it cannot be found in the company ledger. Most important is the interest charges credited by the bank will be in the bank statement, but not in companies' ledger. Apart from checking the amounts, even the timing at which the transaction was done is important. Say if a check was deposited at the end of the month the transactions will be in the ledger, but not in the current month's bank statement. Bank reconciliation can avoid from check bounces, undue credit reduction from a bank. Bank reconciliation has more advantages than disadvantages. All companies no matter big or small do bank reconciliation to set right the accounts on a monthly basis. Instead of breaking the head while preparing final statements, bank reconciliation would be the best alte rnative.

Journal Entries
A journal entry made in accounting is nothing but recording of transactions into accounting journal. The entries are made everyday for the transaction of that day, so it is also called as "Day Book". Contents of a Journal Entry: The journal entry may vary in contents depending on the companies' requirement. But some of the common entries made are entry number; batch number; recurring entry, non-recurring entry, date, accounting period, description. How a journal entry should be? There will be numerous journal entries that can be either a debit or a credit entry. To make it clear a column is named as debit the other as credit. Here, if the total of the debits and credits are equal then it is a "balanced journal". Otherwise the entry is said to be an "unbalanced journal". Advantages of Journal entry In a journal entry the omission of transactions are limited, since they are recorded in the chronological order. Second advantage is that all entries are made with a related description to supplement the transactions. Since all the debit and credit amounts are written side by side chances of recording wrong amounts is less. Only with a single entry the whole history about the transaction can be got. So in a business, if all the transaction is recorded in a single journal, it will look weird. Say, if an everyday transaction and a once in a way transaction has the entry in a single will make things difficult. Most companies have a separate journal for everyday transactions to make it more useful for the business.

Nowadays with online banking the banking reconciliation becomes simpler with advanced bookkeeping software. Most bookkeeping software's are designed to integrate with the online bank statements.

Golden Rules Of Accounting


Golden Rules of Accounting: A good accounting system is to find the information about a transaction in a single entry. By looking into the nature of an element, the elements affected by the transaction we decide on what to debit and what to credit. Any account that is affected by transaction has to either debited or credited. To do this we have a set of rules used to apply the debit and credit. The accounts are widely classified into three categories they are Real, Personal and Nominal Accounts. So we will see how debits and credits act on these accounts. Real Accounts - Debit what comes in, Credit what goes out. Nominal Accounts - Debit all expenses and losses, Credit all incomes and revenues. Personal Accounts - Debit the receiver, Credit the giver. Real Accounts: The real accounts related to accounts that are intangible like assets, reserves, capital, and liabilities whose balances are carried to next operational cycle are real accounts. The accounting rule that is used for this type of accounts are "debit what comes in" and "credit what goes out". Say, if a building is bought from a person, debit the amount from the building account (real account) and credit it to the person account

Journal Entries
A journal entry made in accounting is nothing but recording of transactions into accounting journal. The entries are made everyday for the transaction of that day, so it is also called as "Day Book". Contents of a Journal Entry: The journal entry may vary in contents depending on the companies' requirement. But some of the common entries made are entry number; batch number; recurring entry, non-recurring entry, date, accounting period, description. How a journal entry should be? There will be numerous journal entries that can be either a debit or a credit entry. To make it clear a column is named as debit the other as credit. Here, if the total of the debits and credits are equal then it is a "balanced journal". Otherwise the entry is said to be an "unbalanced journal". Advantages of Journal entry In a journal entry the omission of transactions are limited, since they are recorded in the chronological order. Second advantage is that all entries are made with a related description to supplement the transactions. Since all the debit and credit amounts are written side by side chances of recording wrong amounts is less. Only with a single entry the whole history about the transaction can be got. So in a business, if all the transaction is recorded in a single journal, it will look weird. Say, if an everyday transaction and a once in a way transaction has the entry in a single will make things difficult. Most companies have a separate journal for everyday transactions to make it more useful for the business. (personal account). Other scenario would be to sell a product on credit to a person, so credit the amount to product account(real account), debit it from the persons account(personal account). Nominal Accounts: The Nominal accounts are temporary accounts which are closed at the end of each year by moving their balances to Permanent accounts. Accounts that come under this type are expenses, gains, revenues, losses. The balance of these accounts becomes assets or losses at the end of year and moved to permanent accounts. The accounting rule that is used for this type of accounts is "De all expenses and bit losses" and "credit all incomes and gains". While paying the salary to the employees in cash, the amount is debited from the salary account (nominal account). If a discount is got from a company then it is credited to the discounts account. Personal Accounts: The Personal accounts are accounts that are related to a person or an organization. The accounting rule that is used for this type of accounts is "debit the benefit receiver" and "credit the benefit giver". If some cash was paid to a person X. Then according to the rule the amount is debited from the person "X" accounts (personal account) and credit to the cash account. If a product is bought on credit from a company "Y", then the amount is credited to company "Y" account (personal account) and debited from the product account (Real Account). So these are the "debit and credit" golden rules applied for accounting.

Journal Entries
A journal entry made in accounting is nothing but recording of transactions into accounting journal. The entries are made everyday for the transaction of that day, so it is also called as "Day Book". Contents of a Journal Entry: The journal entry may vary in contents depending on the companies' requirement. But some of the common entries made are entry number; batch number; recurring entry, non-recurring entry, date, accounting period, description. How a journal entry should be? There will be numerous journal entries that can be either a debit or a credit entry. To make it clear a column is named as debit the other as credit. Here, if the total of the debits and credits are equal then it is a "balanced journal". Otherwise the entry is said to be an "unbalanced journal". Advantages of Journal entry In a journal entry the omission of transactions are limited, since they are recorded in the chronological order. Second advantage is that all entries are made with a related description to supplement the transactions. Since all the debit and credit amounts are written side by side chances of recording wrong amounts is less. Only with a single entry the whole history about the transaction can be got. So in a business, if all the transaction is recorded in a single journal, it will look weird. Say, if an everyday transaction and a once in a way transaction has the entry in a single will make things difficult. Most companies have a separate journal for everyday transactions to make it more useful for the business.