|How to Record Accounting Journal Entries |
|Lesson 3 in the Basic Accounting series: |
Learning how to record journal entries is the foundation of any accounting course.
If you are a student, small business owner, or just wanting to brush up on your accounting skills, understanding the basic accounting concepts of debits and credits and double entry accounting will be the first step you want to take in building your accounting skills.
Let’s go step-by-step through the accounting cycle of double entry journal entries.
First Step in Recording Accounting Journal Entries:Debits and Credits
• In a double entry accounting system(used by most businesses) every business transaction is recorded in at least two accounts. (Learn more about double entry accounting in ourbookkeeping section)
• One account from your small business chart of accounts will be debited which simply means the amount will be recorded on the left side and one account will be credited…amount recorded on right side.
• Debits and credits must balance equal.
• See more about debits and credits in our basic accounting concepts section.
Second Step: Journalizing
Note: Today most accounting is done on computers and the journalizing (recording accounting journal entries) is done in the background; however, it is still important to know the basics of double entry accounting.
• In manual accounting each financial transaction is first recorded in a book called a journal.
• In that accounting journal entry the title of the account to be debited is listed first, followed by the amount to be debited. The title of the account to be credited is listed below and to the right of the debit, followed by the amount to be credited.
• To determine which account is debited and which is credited you have to first determine what kind of account is being...