(Being sugar purchased with cash and credit) Compound Journal EntryĪ journal entry involving more than two accounts is called a compound journal entry. Journal entries with only two accounts are called simple journal entries. We saw an example of this earlier. Both debit and credit values should be equalĮxplore RazorpayX Types of Journal Entry Simple Journal Entry.There must be a minimum of two accounts in the transaction.Here are the rules that a journal entry must follow: Pay’s sugar purchase would be recorded in the Journal. Now, if you rename “bucket” to “account”, you have the double entry system. Pay bought sugar, he transferred Rs 50 from her cash bucket to her sugar bucket. It is easier to understand the concept of debits and credits if you visualize different buckets. In Razor Bakery’s example, sugar is debited, and cash is credited. Read more: Double Entry System of Accountingĭebit is any value that is added to the business, and credit is any value that is deducted from the business. Both sides have equal importance, and both must be recorded.įor example, if the owner of Razor Bakery buys sugar worth Rs 50, she is deducting Rs 50 from her cash balance, but adding Rs 50 worth of sugar to her sugar balance.Ī journal entry records both sides of this transaction in the form of a debit and credit value. In short, this means that every transaction has two sides. Journal entry works on the double entry principle. Wondering how the journal entry pulls this off? Let’s take a look at how journal entries work. Journal entries, like all books of accounts, follows the double entry system of accounting, ensuring consistency and uniformity. It is the perfect story, telling you everything with no extra fluff.įollows the double-entry system of accounting The journal forms the basis of all financial statements prepared for a business as all entries are transferred to other account books.Ī journal entry contains all information needed to understand a financial transaction. It is the simplest way to understand complex transactions. * a) Bank/Cash b) Expense c) Accounts Receivable d) Accounts Payable e) None of the above.Journal entries are the first record of any business transaction. When a business pays off an expense that was owing, we credit the _ account. * a) Bank/Cash b) Expense c) Accounts Receivable d) Accounts Payable e) None of the above.Ĩ. When a business pays off an expense that was owing, we debit the _ account. Which of the three main elements of the accounting equation decrease when a business pays off an expense that was owing? * a) No overall change to any element. * a) Bank/Cash b) Expense c) Accounts Receivable d) Accounts Payable e) None of the above.Ħ. When a business has an expense and does not pay for this immediately, we credit the _ account. * a) Bank/Cash b) Expense c) Accounts Receivable d) Accounts Payable e) None of the above.ĥ. When a business has an expense and does not pay for this immediately, we debit the _ account. Which of the three main elements of the accounting equation increase when a business has an expense and does not pay for this immediately? * a) No overall change to any element. Another common term used instead of accounts payable is _. Accounts payable falls under the category of _. This Form cannot be submitted until the missingįields (labelled below in red) have been filled in Accounts Payable Journal Entries Mini Quiz: Please note that all fields followed by an asterisk must be filled in.ġ.
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