6 Questions
What is the primary purpose of a reversing entry?
To correct errors in a previous journal entry
What is a characteristic of a simple journal entry?
It has a single debit and a single credit
What is the last step in preparing a journal entry?
Record the journal entry
What happens to an asset account when it is debited?
It increases
What type of journal entry has multiple debits and/or credits?
Compound entry
What is the first step in preparing a journal entry?
Analyze the transaction
Study Notes
Accounting Process: Journal Entries
Definition: A journal entry is a record of a transaction that includes the date, debit and credit accounts, and the amounts of the debit and credit.
Types of Journal Entries:
- Simple Entry: A single debit and a single credit
- Compound Entry: Multiple debits and/or credits
- Reversing Entry: A special type of journal entry that reverses a previous entry, typically used to correct errors
Components of a Journal Entry:
- Date: The date the transaction occurred
- Debits: The accounts that increase or decrease with a debit
- Credits: The accounts that decrease or increase with a credit
- Amounts: The amounts of the debit and credit
Steps to Prepare a Journal Entry:
- Analyze the transaction: Determine the type of transaction and the accounts affected
- Determine the debit and credit accounts: Identify the accounts that increase or decrease
- Determine the amounts: Calculate the amounts of the debit and credit
- Record the journal entry: Enter the date, debit and credit accounts, and amounts in the journal
Rules of Debits and Credits:
- Assets: Increase with debit, decrease with credit
- Liabilities: Increase with credit, decrease with debit
- Equity: Increase with credit, decrease with debit
- Revenue: Increase with credit, decrease with debit
- Expenses: Increase with debit, decrease with credit
Journal Entries
- A journal entry is a record of a transaction that includes the date, debit and credit accounts, and the amounts of the debit and credit.
Types of Journal Entries
- Simple Entry: A single debit and a single credit
- Compound Entry: Multiple debits and/or credits
- Reversing Entry: A special type of journal entry that reverses a previous entry, typically used to correct errors
Components of a Journal Entry
- Date: The date the transaction occurred
- Debits: The accounts that increase or decrease with a debit
- Credits: The accounts that decrease or increase with a credit
- Amounts: The amounts of the debit and credit
Steps to Prepare a Journal Entry
- Analyze the transaction: Determine the type of transaction and the accounts affected
- Determine the debit and credit accounts: Identify the accounts that increase or decrease
- Determine the amounts: Calculate the amounts of the debit and credit
- Record the journal entry: Enter the date, debit and credit accounts, and amounts in the journal
Rules of Debits and Credits
- Assets: Increase with debit, decrease with credit
- Liabilities: Increase with credit, decrease with debit
- Equity: Increase with credit, decrease with debit
- Revenue: Increase with credit, decrease with debit
- Expenses: Increase with debit, decrease with credit
Understand the definition and types of journal entries in accounting, including simple, compound, and reversing entries.
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