Accounting Journal Entry | How to Prepare Journal Entries?

Accounting Journal Entry | How to Prepare Journal Entries?


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a detail format but what exactly this concept is all about that’s what we need
to get into the Nitty Gritty know an accounting journal entry it is it’s a
formal recording of the transactions where you know what happens you debit
and credit of the transactions are recorded in the journal ledger and this
is a written record of the commercial transactions now there are some types of
accounting journal entries we are going to study each and every one of them
first in the transaction entry transaction entry is the basic amount
you know basic account or entry for any event in the business like for example
let’s say there is bill receipt from a customer and the bill presented from a
supplier for payment so cash receipts entry from a customer and other cash
payment has been done which is an expense for that so transaction entry in cash
basis and accrual basis second there is thing called adjusting entry now what
exactly this is see adjusting entry is a journal entry done at the end of the
accounting year or the accounting period what we can say that no it is based on
the accrual basis of accounting right see the accounting journal entry is
required at the end to adjust various balances balances in the various ledger
accounts which is done to meet the financial position of the business
that’s what the accounting principle like you know let’s say gap that has
generally accepted accounting principles so in short it is basically a line
reported results the third in the toss is the closing entry see closing entry is
basically a journal end and which is done at the end of the accounting period
so this type of entry is posted to shift ending to retain earning account from
all the temporary accounts like you know you have loss account
gain account expense account revenue account so this is done to what we call
as transfer information to the extent to the next accounting period so accounting
entries for the transactions are done through what we call as the accounting
software and where one doing transaction will know he is creating an accounting
entry example like you know creating customer invoice accounting entries you
know they basically record all the commercial transactions very for now
there is a system of accounting journal entries you know how does this go the
first is single entry accounting now the term single entry is vaguely used to
define the method of maintaining the accounts which can not confirm to strict
principles of the double entry so it is not wrong to define into a system the
term single entry does mean that there is only one entry there is only one
entry for each transactions so the absence of the two folded you can say
that two folded effect of each transaction makes it really very
impossible to prepare a trial balance and to check arithmetic ‘accuracy of
the box of accounts endangering the you know a spirit of laxity or providing
inviting frauds of misappropriations so that may be the case now the profit
and loss accounts and balance sheet cannot be separated due to the absence
of the nominal account okay and hence a single entry is not only incomplete but
the final result is also not reliable so this system typically tracks only the
what we call as the cash receipts and cash disbursements okay and it shows
only those results that are needed to construct income statement now there are
some advantages of single entry accounting the first one the single
entry system is very simple and less expensive second a professional person
is not required to maintain or you can see a professional person is not
required to maintain any sort of single entry system accounting third it has
what we call as the summary or for daily transactions like you know
incomes and expenses now let me talk about some disadvantages see the
disadvantage of the single entry is that you know there is a lack of data and may
adversely affect a planning controlling of the business or target goals second
there is a lack of what we call as control on different issues which
company may face and third in case of any loss or theft one will not be able
to find out or won’t be able to find it through this single entry accounting
system so let’s take an example of single entry system the example of the
entry single entry system is here know we have couple of dates income
expenses whether it is inventory on salary wherever things have been
recorded it’s here so hence the entry of the single entry is done oh no each and
every transaction like you know unforced April the balance was this expenses this
happened or on this particular lines on 4th April raw material worth in purchase
and so on and so forth other entries up in given so this was the first example
of the single entry system then we have a thing called double entry system double-entry bookkeeping system so this
is used to make the debit great entry system which eventually leads to
creation of the complete of the financial statement so according to the
book entry system every transaction has two elements one is called the debit
that is when something is going and another credit when something is coming
in so in simple language what comes in is credit goes out is your debt so this
is the main concept of the double-entry system entities of the double-entry
journal entry system first what you will need is you will need a complete record
you will need a complete record on this let’s try and evaluate that now
double-entry system enables the businessman to keep a complete
systematic and accurate record of all the transactions of detail of any
transaction events can be verified at any time right second entertainment
of profit and loss right so the systematic record maintained under the
double-entry system enables a business to ascertain the results of business
operations for any given period of time so the owners can know the profitability
of the business operations periodically third is the knowledge of financial
positions so with the help of the real and personal accounts the financial
positions of the business can be ascertained with accuracy such as this
is done by preparing what we call as the balance sheet so under the the
double-entry system every debt has a corresponding credit so arithmetical
accuracy the books can be tested by preparing a statement called
trial balance is known as trial balance and there is no scope of fraud over here
the firm we know is saved from frauds and so preparations you know since full
information about all the assets and liabilities will be available so there
are tons of details that goes around in this particular topic there’s no just
one thing but it there are terms of thing I’ll just give you a short example let’s
say you purchase a machine by cash so machine is over here is gonna be a debit
case right because that’s machine is coming it and what is going out that’s
cash so that will be credited and every entry of the financial system you know
for the same will show something like this enough let’s say you bought it for
$5,000 so the we’ll be recorded leaders so that’s it
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