Steps Toward Developing A Content Strategy 02

8 things you need to know to do journal entry

I know, many of the Accounts student journal entries, they just memorize which is not a good idea to understand accounting very well. Every day I get tons of email, requesting me to write article on journal entries.
To me Journal Entry is very easy. 8 Easy Query will help you to understand, what will be the journal entry. In the transaction you need to query, what happen with your company? Generally there will be eight type of event can happen after one successful transaction.

1. Increase Asset
2. Increase Expenses
3. Decrease Asset
4. Decrease Expenses
5. Increase Income
6. Increase Liability
7. Decrease Income
8. Decrease Liability

Now I will discuss each of the case with some simple example:

Your Company Purchased 1 Laptop worth $ 1,000, on credit from IBM. What happen here? Asset increased (As Laptop purchased) and Liability increased as Company have to pay the sum to IBM

Fixed Asset – Laptop ……… Dr. 1000
Accounts Payable – IBM ……….Cr. 1000

Now company payed cash $ 1000 to IBM to settle the credit. What happen now? Cash (Asset) decrease and Credit (Liability) decrease

Accounts Payable – IBM……….Dr. 1000
Cash………………………………Cr. 1000

Company sold their finished goods to wholesaler on credit worth $ 23000. What happen here? Companies Finished Goods (Asset) decrease and increased Accounts Receivable (Asset) increased.

Accounts Receivable – wholesaler ………Dr. 23,000
Finished Goods ………………………………Cr. 23,000

Company received Cash 20,000 against sale. What happen here? Cash (Asset) Increase and Accounts Receivable (Asset) Decrease.

Cash……………………… Dr. 20,000
Accounts Receivable……….Cr. 20,000

In a nutshell I can summarize the issue as follow and it is golden Golden Rules of Accounting

Increase Asset Debit
Increase Expenses Debit
Decrease Asset Credit
Decrease Expenses Credit
Increase Income Credit
Increase Liability Credit
Decrease Income Debit
Decrease Liability Debit

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