What is accounting system software

Routes to finance

A journal entry is the record of a financial entry that has been entered in a journal. The journal lists all of the company's financial transactions and notes which accounts those transactions apply to. All journal entries are created using either the double entry or the single posting method.

Journal entries are usually entered in chronological order and debits are entered before credit - debits are entered in a column on the left and balances are entered on the right.

Journal entries are assigned to specific accounts via a chart of accounts and the journal entry is then recorded in a ledger. The general ledger keeps track of multiple accounts.

The purpose of journal entries

Journal entries provide basic information for all of a company's other financial reports. They are used by auditors to analyze how financial transactions affect a company.

Each entry must include the date of the transaction, the parties involved, a charge to at least one account, a credit to at least one other account, a receipt or check number, and a memo with descriptions. other details involved in the transaction - anything that you probably won't remember months or years later.

If you buy and use accounting system software, it will most likely do all of these details for you. But you should be able to handle your journal entries and books with a basic understanding of the process if you think that kind of effort isn't necessary because you are just starting out.

Individual accounting

As the name suggests, each journal entry is created on its own line when using the accounting single entry method. You could deduct what you spent as debit on a new computer system, then you could receive income from a customer as credit on the next line and as another entry.

You have two separate transactions or journal entries, each with its own line. It's easy, not much different than keeping track of the transactions you make from your checking account.

Individual bookings can make sense if you're a sole proprietor running your own small business and your books and transactions aren't complex. Anyone can handle it. You don't need any special training.

Double entry accounting

A journal entry using the double entry posting method contains a lot of information in different columns on the same row. In a double entry system, you might have a computer purchase charge, then a credit or increase in your total office equipment expense would appear on the same line but in a different column to balance the charge. These columns should be the same, e.g. . B. - $ 2,000 for debit and + $ 2,000 for loan.

Depending on the nature of your listing, you may need to use more columns, but at least two, one each for debits and credits. With double-entry bookkeeping, a posting is usually not made for the transaction itself but for the account concerned: assets, liabilities, equity, income and expenses. Debit and credit for each are all noted on the same line.

At the end of the year or any other posting period you choose, all of your direct debit journal entries should match and match your total credit journal entries. This means that your account is "balanced".