Category: journal entry

Depreciation and Fixed assets
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Depreciation and Fixed Assets

Fixed assets must be differentiated from current assets and investment assets. Current assets are assets with a value available to the business in the short term, which is usually taken to mean up to a year. These are cash and assets used in the course of business, such as stock and debtors(money owing by customers). […]

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Double Entry Accounting
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Double Entry Accounting

At the first look, it seems single entry is very easy way to record your financial transactions but single entry has many disadvantage. double entry has strong structure and protect you from some basic mistakes in balance sheets so learning and practice double entry principle is recommended to have a perfect double entry accounting for your business.

what is Double Entry Accounting

To understand it, it's enough to pay attention to word "Double". so you will see two columns for each row of voucher. in single entry you need only record amount in on column as name: "Amount" but in double entry you have two columns as names: "Debit" and "Credit".

Double entry accounting in iGreen software

Journal entry form in iGreen Accounting software

Double Entry System

Basically, this type of entry system has been invented by Luca Pacioli but it has been improved by accountants in pass of times. Nowadays we have a modern double entry systems in accounts departments with advanced accounting software so it could generate very useful reports and statements.

 

What is Double Entry Bookkeeping

When you listen about double entry, it seems that you should waste too much times everyday for recording financial transactions but with modern accounting software, actually you enter a single amount of any voucher and the accounting program will adjust double entry exactly in journal book. by Hand a double entry journal will takes a much time but with accounting software it is very fast and accurate. so why we should know about double entry if accounting software will it for us? It is a hot question !. usually operator and bookkeepers don't need it and it will do by software automatically but auditors need to know about double entry systems to help themselves to find mistakes in non-balanced sheets.

Double Entry Bookkeeping Examples

Here we show you some examples of double entry accounting from a mobile shop:

  • Receive 2200$ from  client: Jack Smith
  • Pay 25$ for Telephone bill of office
  • Buy some food for staffs as amount of 45$
  • Purchase 11 New mobiles, each mobile 260$
  • Sell one mobile of above models for 370$ for cash
  • Sell 5 mobiles of above models for 310$ to Jack Smith

Note: We did these example by iGreen Accounting Software

 

Receive 2200$ from  client: Jack Smith

Receive 2200$ from  client: Jack Smith

Receive 2200$ from client: Jack Smith

Purchase 11 New mobiles, each mobile 260$

Purchase 11 New mobiles, each mobile 260$

Purchase 11 New mobiles, each mobile 260$

Pay 25$ for Telephone bill of office

Pay 25$ for Telephone bill of office

Pay 25$ for Telephone bill of office

Sell one mobile of above models for 370$ for cash

Sell one mobile of above models for 370$ for cash

Sell one mobile of above models for 370$ for cash

 

 

Buy some food for staffs as amount of 45$

Buy some food for staffs as amount of 45$

Buy some food for staffs as amount of 45$

Sell 5 mobiles of above models for 310$ to Jack Smith

Sell 5 mobiles of above models for 310$ to Jack Smith

Sell 5 mobiles of above models for 310$ to Jack Smith

 

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Bookkeeping of VAT
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Value Added Tax in Bookkeeping

VAT is a simple concept that has somehow managed to get very complicated in practice. Its complexities once led to a celebrated court case to establish whether a jaffa cake is a cake or a biscuit. If you enjoy a jaffa cake with your afternoon tea, you will be pleased to know that you are eating a cake which […]

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Stock Bookkeeping
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How to Post Sales & Stocks in Bookkeeping

Businesses operate by selling goods, services or both. A business that only sells services does not have account for stock, but businesses that sell goods like a shop (either bought in or manufactured by itself) must keep stock accounts and should carry out periodic stock-takes.

 

Stock Accounts

  • Stock Account

    • The cost of goods purchased or manufactured is debited to this account, which is of course an asset account. This cost is transferred out when the goods are sold, scrapped or otherwise disposed of.
  • Returns Inwards Account

    •  This is for the cost of goods returned to the business by its customers. The a propitiate sum is debited and increases the value of the stock held by the business.
  • Returns Outwards Account

    • This is for the cost of goods returned by the business to its suppliers. The appropriate sum is credited
      and reduces the value of the stock held by the business.

There must be at least one stock account (possibly incorporating returns inwards and returns outwards) but many businesses have a number of them, perhaps even hundreds or thousands. This is to identify accurately the different categories of finished goods, and perhaps of raw materials, components and work in progress. Keeping different accounts may assist in stock control, stocktaking and the efficient management of the business. Some businesses have a stock purchases account for stock acquired and a stock sales account for stock sold. If this is done, the value of stock held by the business is the difference between the two, after adding the opening balance of course.

Shown below are illustrations of the double entry postings for different types of transactions involving stock.

 

Purchase of stock for cash

Goods costing £8,000 are purchased on 4 April. Stock (the asset account) is debited and cash (which is being diminished) is credited.

Stock Account    8000 DB
Cash Account                            8000CR

 

Purchase of stock on credit

 

Goods costing £5,000 are purchased on 6 April on credit from Dennis Clinton Ltd. Stock (the asset account) is debited and Dennis Clinton Ltd (a liability account) is credited. Dennis Clinton Ltd is a creditor because money is owed to it.

Stock Account   5000 DB
Payable Accounts (Dennis Clinton)     5000 CR

 

Goods returned inwards for credit

 

Goods with a cost value of £1,000 that had been supplied to Hannah Smith Ltd are returned for credit on 7 April. Stock (the asset account) is debited and Hannah Smith Ltd is credited.
This money is owing to Hannah Smith Ltd and it must be paid to her, or it may of course reduce the amount that Hannah Smith Ltd owes.

Returns Inwards Account     1000  DB
Payable Accounts (Hannah Smith Ltd)    1000 CR

 

Goods returned outwards for credit

 

Goods that had been purchased for £2,000 are returned by the business to Cilia and Green (the supplier) on 8 April.
Stock (the asset account) is credited and Cilia and Green is debited.

Payable Accounts(Cilia and Green): 2000 DB

Returns Outwards Account: 2000 CR

 

Real Journal Entry in Accounting software

We use iGreen accounting to practice above transaction in double entry form

Example of Sales Bookkeeping and returns

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How to Sales Journal Entry

Almost any business has sales of items and services and sales journal Entry for invoice is a most too. some of company use accounting software to record their sales and some company intend to have a record on paper too because they cloud not trust of data lost in computer systems. Any sales for cash […]

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