– Today’s video is all about account journals, accounts journals entries. What are they? And how do I prepare them? I’ll also walk you through examples of account journals, accounts journals entries and discuss how automation makes preparing and approving account journals, accounts journals entries easier. So what is a account journals, accounts journals entry? A account journals, accounts journals entry is a way to record or correct a transaction in a company’s accounting system. For centuries, virtually every business has been using double-entry accounting as the standard for its accounting cycle. A bookkeeping method in which every transaction has two sides, a debit and a credit. So, let’s walk it back. The three main principles of double-entry accounting or a T-account are, one, there are always at least two entries for every transaction, a debit and a credit. Two, asset accounts and expense accounts increase with a debit while liability and income accounts increase with a credit. Three, debits and credits in a account journals, accounts journals entry must be equal. That’s what we mean by saying the trial balance is in balance. For example, when a business purchases office supplies, the business posts a account journals, accounts journals entry to increase the office supplies expense account by the cost of the office supplies, a debit and decreases its cashflow account by the same amount, a credit. So how do you write a account journals, accounts journals entry? Preparing your account journals, accounts journals entry involves three basic steps. Step one is determining what kind of account journals, accounts journals entry you need to make. And there are two types of account journals, accounts journals entries. Adjusting entries are typically made at the end of a period to allocate income statements and expenses to that period. Some examples include prepaid expenses, unearned revenues and accrued expenses. Adjusting account journals, accounts journals entries can also be used to correct errors. Now recurring entries are recorded on a periodic basis, monthly, quarterly, or annually. And one example is recording depreciation every month. Once you know what type of accounting account journals, accounts journals entry you need, you are ready for this second step, gather the information needed to make the account journals, accounts journals entry. And every account journals, accounts journals entry has five components.
The first is the date of the transaction. You need to date the transaction in the period you want it to show up in the financial statements. For example, if you’re recording depreciation for the first quarter of 2021 your transaction date would be March 31st, 2021. The second is the names of the accounts impacted and the account number, if applicable. The third is the amounts to be credited and debited. And the fourth is a reference number to identify the above transaction. If you use accounting software, it may automatically assign a reference number for you. Finally, you need a description of the transaction. This helps you remember why you made the account journals, accounts journals entry if you later need to review or correct it. Step three, record the account journals, accounts journals entry. Once you have all of the information you need, it’s time to record the account journals, accounts journals entry. The actual the process for entering your account journals, accounts journals entry will depend on the accounting software you use. What are some account journals, accounts journals entry examples? Now that you know how to write a general account journals, accounts journals entry, let’s walk through a few examples. On January 10th, Sally orders $200 worth of office supplies for Sally’s Scrapbook Design from OfficeMart. When the supplies are delivered, Sally receives invoice number 4987 from OfficeMart, payment on that invoice is due in 14 days. The account journals, accounts journals entry to record the receipt of the supplies and the related payable will debit office supplies expense for $200 and credit accounts payable for this same amount. Two weeks later, Sally pays the invoice, the account journals, accounts journals entry to record the payment and reduce her payables balance, debits accounts payable for $200 and credits cash for the same amount, ensuring the balance sheets are in order. On January 30th, Sally completes the scrapbook design project for Veronica Danson and sends out invoice number 21095 for $450. The account journals, accounts journals entry to record the revenue and related receivable debits accounts receivable for $450 and credits revenue for the same amount.
Two days later, Sally receives payment on that invoice, the account journals, accounts journals entry to record payments on that invoice, debits cash for $450 and credits account receivable for this same amount. On February 26, Sally purchases a new scrapbook binding machine that costs $2,500. She pays 500 in cash and finances the remaining $2,000 balance with a bank loan. To record this transaction, Sally needs to make a compound account journals, accounts journals entry. Compound account journals, accounts journals entries affect more than two accounts. For this transaction, Sally will need to debit her equipment account for the machine’s total cost. Credit amount of $500 cash payment to cash and credit the bank loan account for the $2,000 loan. At the end of each quarter, Sally records depreciation for her furniture and equipment. The account journals, accounts journals entry to record depreciation debit, depreciation expense for $1,000 and credits accumulated depreciation for the same amount. At the end of the year, Sally’s accountant informs her that she posted the wrong amount for depreciation each quarter. Instead of posting depreciation expense of $1,000 each quarter, she should have posted $800 per quarter. As a result, depreciation expense is overstated by $800 for the year. That’s 200 multiplied by four quarters. Rather than go back to correct each of the four quarterly account journals, accounts journals entries manually, Sally posts one adjusting account journals, accounts journals entry at the end of the year to credit depreciation expense by $800 and debit accumulated depreciation by the same amount. Did you get that? Automating account journals, accounts journals entries. For centuries, accountants did their bookkeeping with paper and pencil. Recording business transactions in specialized account journals, accounts journalss and ledgers. For example, a company would record sales in a sales account journals, accounts journals and payroll in the payroll account journals, accounts journals. At the end of the period, the bookkeeper would summarize those financial transactions in a general ledger. Account journals, accounts journals entries were the only way to enter data into a company’s financial records. While the examples we provided in this video are relatively simple, modern companies can have hundreds or thousands of transactions every month, or even every day.
Imagine how easy it would be to transpose a number, make an addition or subtraction error or accidentally record a transaction to the wrong account. It would be impossible to handle that volume manually with any level of efficiency, accuracy, or security. That’s why modern accounting software includes a account journals, accounts journals entry system. An automated account journals, accounts journals entry system saves time, reduces the amount of duplicate work an the accounting department has to do and makes it easier for the accounting manager or controller to review and approve account journals, accounts journals entries. Transactions like the examples we’ve provided in this video are automatically entered into the correct accounts, as invoices are credited, customer payments are processed and bills are paid. Accountants still make a few account journals, accounts journals entries, mostly to adjust accruals, prepaid expenses or unearned revenues at the end of a period. Record non-cash transactions like depreciation and amortization. Make adjustments to ensure the company’s financials follow Generally Accepted Accounting Principles. Still, it’s helpful for accountants to understand the basics of what a account journals, accounts journals entry is and how to make one. That way, they can ensure that automated account journals, accounts journals entries are accurate and know how to make manual account journals, accounts journals entries if needed. Let’s recap. Now let’s review what we learned about account journals, accounts journals entries. One, recording account journals, accounts journals entries are a way to verify or correct transactions in a company’s accounting records. Two, to record a account journals, accounts journals entry, you need a transaction date, names and account numbers for the accounts that will be impacted, amounts to be credited and debited. Remember debits must equal credits. A reference number, a description of the transaction. Debits and credits in a account journals, accounts journals entry must be equal, this ensures the account balances are in balance. And finally, while making a account journals, accounts journals entry is relatively simple, maintaining hundreds or even thousands of account journals, accounts journals entries each accounting period can be time-consuming and error-prone.
That’s why companies use accounting software as a defacto accounting equation to automate account journals, accounts journals entries. Hey, if you found this video useful, hit that like button and don’t forget to subscribe. That’s all for today. Good luck with your account journals, accounts journals entries.
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