Journal Entry Meaning And Basics Idea Which You Can Understand Easily
In bookkeeping or accounting system, business transactions are firstly recorded in a journal. Definition of the journal entry is the foundation of all accounting and financial data. This is the first step of the accounting cycle and takes place of all financial transactions when it’s happening. The bookkeeper or accountant recorded the entries as evidence and each transaction has the same value after transactions which are recorded as debit and credit. This is the first book of accounting where we are recording our daily business transactions and the recording books called journal entry.
Day books are used as the daily basis and the books of original entry are taken first place of transactions from the accounting source documents.
Types of journal:
Types of the journal are referring branches of the journal entry and it also found the different knowledge of accounting and different recording system of accounting in the journal. There are two types of accounting, one is the general journal and another is a special journal. these two types of journal discuss in below;
(1) General Journal:
In general journal, accounts are the main journal of a business. Most of the business transaction is entered in these journal entries and then this information of the general journal entries is posted in ledger accounts as known as the general ledger accounts. Journal in a spreadsheet and exercise books as manual which has five columns and the structure is as follows;
- Date of the transactions
- the accounts and amount that will be the debit column
- the credit amount and accounts in column
- summarize the discretion of transactions
- Numbering of the reference number
These transactions are posted the general ledger accounts after that journalized transactions.
(2) Special journal:
Special journal entries are posted which entries do not record in general journal entries. The entries are classified by the sub-point of special journal entries because of on accounts transactions and other transactions.
There have 6 types of special journal as following below;
- Sales Journal
- Cash Receipts Journal
- Sales Returns and Allowances
- Purchases Journal
- Cash Payments Journal
- Purchases Returns and Allowances
we can discuss these six types of the journal detailed in as follows;
- Sales Journals:
Have a look at an example of an entry in general journal entries for sales on credit. Accounts receivable is the head of leader accounts used for sales that not been paid for.
- Purchase journal:
Purchase journal is the same as sales journal and it’s used to record the purchase items 30 to 60 days. The purchase journal entry example is given below;
Accounts payable is the head of the ledger accounts used for recording purchase on credit have not been paid for.
Journal entries examples:
As for easy understanding, here I give an example with the explanation of its transactions. The demo is the basics journal entries examples helps you figure it out easily how to record the daily transaction in recording book or daily book or journalize the transaction.
We can discuss a month of journal entries example with explanations as it given below;
A company is named X was incorporated on January 1, 2009, with an initial capital of 10,000 shares of common stock having $10 per value. During the first month of its start, the company initialized in following transactions:
|Jan 1||An amount of $20,000 was paid as advance rent for two months.|
|Jan 2||Paid $50,000 cash on the purchase of machinery costing $70,000. The remaining amount was recognized as a one year note payable with interest rate of 9%.|
|Jan 3||Purchased supplies for the office costing $16,600 on account.|
|Jan 9||To Provide services to its customers and received $28,000 in cash.|
|Jan 13||Paid the accounts payable on the office supplies purchased on January 3.|
|Jan 14||Paid wages to its employees for first three weeks of January, aggregating $18,100.|
|Jan 20||To provide $50,100 worth of services to its customers. They paid $30,900 and promised to pay the remaining amount.|
|Jan 22||To Receive $15,000 from customers for the services provided on January 20.|
|Jan 25||Received $4,000 as an advance payment from the client.|
|Jan 26||Purchased supplies for the office costing $5,000 on account.|
|Jan 28||Paid wages to its employees for the month of January: $18,100.|
|Jan 31||To Pay $4,000 as dividends.|
|Jan 31||Received electricity bill of $2,000.|
|Jan 31||Received telephone bill of $1,514.|
|Jan 31||Miscellaneous expenses paid during the month totaled $3,575|
The following table shows the journal entries for the above transactions.
|Jan 1||Prepaid Rent||20,000|
|Jan 3||Office Supplies||16,600|
|Jan 13||Accounts Payable||16,600|
|Jan 14||Wages Expense||18,100|
|Accounts Receivable||20 ,200|
|Jan 26||Office Supplies||5,000|
|Jan 28||Wages Expense||18,100|
|Jan 31||Electricity Expense||2,000|
|Jan 31||Telephone Expense||1,514|
|Jan 31||Miscellaneous Expense||3,575|
At the end of the accounting period, the journal entries for the period are posted to the ledger accounts and it is the first process of the accounting cycle.