For our accounting basics video series we did a brief overview of journal entries. In order to understand journal entries you should be able to recall the types of accounts and their normal balances. Even though the accounting programs do the majority of the journal entries for you you may occasionally need to enter a journal entry. You also need to understand what is going on behind the scenes to make sure there are no errors in the set up of the program.
Some journal entry basics:
You should always have the same monetary value of debits and credits, however you can have compound entries that have multiple accounts getting debited and/or credited. When you come across a transaction you need to record take a minute to ask yourself what is being increased and decreased and what type of account is it? What is the normal balance for that account?
Once you decide what accounts you need to debit and credit take a minute and make sure the entry makes sense. Are you really increasing and/or decreasing the items that should be getting adjusted? Does the transaction make sense?
Our video has some examples of basic journal entries. Timing for journal entries for sales and expenses varies with cash and accrual accounting. We will be covering this next week.