The Beginners Guide to GL Journal Entry
I know that most of our readers are very familiar with accounting terminology and function, but occasionally we receive questions that many take for granted. So, this week, we are going to take a step back to basics and look at journal entries.
The journal is where business transactions are entered into accounting systems. All accounting transactions are recorded through journal entries to show account names, amounts, and whether they are debit or credits
**Cougar Mountain Software handles these transactions behind the scenes, or you can enter the journal entries manually.
John Day’s February newsletter highlights the journal entry and he presents six steps to writing a journal entry.
Step 1 – Review the physical events that took place.
Step 2 - Identify the appropriate GL accounts to be used and which of the five sections of the accounting model they fall within. (Cougar Mountain this is already set up when you first set up your company, in your transaction Codes)
Step 3 - Convert what happened into terms of increases and decreases.
Step 4 - Determine what side of the ledger each GL account in the transaction requires, i.e., debit or credit.
Step 5 – Write the General Journal entry.
Step 6 – Verify that the debit entries equal the credit entries of the transaction.
** With Cougar Mountain Software, all of this is done automatically.
Most accounting software systems, including Cougar Mountain Software, practice Double-Entry Accounting, which means that every transaction is recorded using two sides, debit and credit. CMS Professional takes special precautions against allowing unbalanced entries, to ensure that everything is always correct.
Double-Entry Accounting is:
The sum of the debit side amount should always equal the sum of the credit side amount. This is called a “balanced” journal entry.
Debit Credit
Increase in Asset Decrease in Asset
Increase in Expense Decrease in Expense
Decrease in Liability Increase in Liability
Decrease in Equity Increase in Equity
Decrease in Revenue Increase in Revenue
Image courtsey from: www.accountrain.com
Cougar Mountain Software’s jounral entry screens.
Just remember, the golden rule in GL journal entries ALWAYS KEEP IT BALANCED!
March 2nd, 2009 at 3:45 pm
I loved the chart here…nice!