A review of basic accounting principles.
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Transactions, Entries, Journals, and Ledgers
Account Types, Normal Balance, and Examples using Accrual Basis Accounting
More Examples of Account Types (including Contra Accounts)
Multiple and Manual Transactions in the Connect General Ledger app
Bank Reconciliation - Journal Entries to Transfer from One Bank Account to Another
Cash Basis vs Accrual Basis Accounting
See how transactions are recorded in Connect General Ledger. You can see the debit amount and offset amounts in a multiple transaction entry. Many of Caselle's apps use multiple transaction entries. For example, when you enter invoices in Accounts Payable, normally, you'll have several invoices to enter on the same day, the invoice will update as a single transaction for every expenditure and then one large transaction for the liability account. So, in General Ledger you will see multiple expenditure entries and the one large liability entry. If you prefer a one-to-one entry, you can use a manual entry in a CRJE journal, for example, bank interest, transfers between bank accounts, and items that are not recorded as standard items through other Connect apps.
You'll need to make four entries to transfer money from one bank account to another bank account. The biggest mistake is using a revenue account or an expenditure account, which could work if you do it correctly, but the problem is that you don't want to increase revenues or expenditures when you transfer money from one account to another because that is money that you have already earned. So you're not making money, so it's not a revenue, and you're not spending it, so it's not an expenditure, you're just moving it.
First, move the transfer amount to a suspense account. The first entry for a full accounting is a suspense account, for example, a miscellaneous account, which could be a revenue or expenditure account as long as you use the same account for the second entry. The two entries will balance to zero as if nothing happened to that account.
CD |
CRJE |
+ misc |
|
|
- misc |
Second, transfer the amount to the transfer to bank account. The first entry is for a cash disbursement account, to remove money out of one bank, and then enter a second journal entry in a CRJE account to show money is added to another bank.
CD |
CRJE |
+ misc |
+ bank 2 |
- bank 1 |
- misc |
Watch a video (2m39s)
Cash may not be received at the time of service. For example, you earned the money in January but you didn't collect it until May.
The five account types are assets, expenditures, equity, revenue, and liability. Every account in the general ledger is assigned to one of the five account types. Assets and expenditures are debit balance, which means their normal balance is a positive balance. Equity, revenue, and liability are credit balance and that means the normal balance for these accounts is a negative balance.
There are multiple accounts that can fit under asset accounts, most notably, cash and accounts receivable. There are such things as contra accounts. A contra-asset account is an asset that incurs a credit balance because it's offset by another existing account. Instead of recording an expenditure or recording against a revenue, equity, or liability, you would use a contra-asset and they would balance themselves out. These are usually accounts that are not connected to your regular every day operation, for example, long-term assets, specialized note payable items that are going to be really long. They don't have a set part in your every day operations.
You can have multiple expenditure accounts, for example, office supplies, wages, property maintenance, and so on. You can create different expenditures for multiple departments.
Equity is your retained earnings, for example, your fund balance. This is where at the end of the year you add all of your revenues and expenditures to see how much net revenue or net expense you've had for the year. Profit and loss. And then that balance moves forward into the next year through your equity accounts. You can have restricted equities, where you have money that is set aside, and regular equities, where if you have to make correcting entries or use capital to push forward into a project.
Revenue includes all of the different ways your earning: sales, taxes, permits, other services such as utilities, and so on. A revenue includes anything you're giving or providing to the customer to earn money for the organization.
Liabilities include all of your payables: loans, reimbursements to customers, payroll expenses, and unpaid expenses.
Cash is collected at the time of service. For example, you earned the money in January and you collected it in January.
Debits are positive and credits are negative. A bank will record debits as negative and credits as positive, this is the opposite from the way an organization records an entry. Remember, when you look at your own books, you will record debits as positive and credits as negative.
A single item that is recorded in the general ledger.
When a positive transaction and negative transactions are combined in the general ledger to balance to zero. You can have more than one transaction in an entry.
The entries that are filled out, create a journal.
The general ledger holds all of the journals.
The normal balance assigned to an account type is determined by what is happening to your cash.
Published 7Sep2017