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Accounting Journal: Tricks for Understanding & Compiling Financial Reports
Well, you also need to know that in compiling an accounting journal there is a logic that must be used, just like the preparation of journals for other fields of science. in preparing its own accounting journal, there are two kinds of logic used. Here's the explanation.
Logic of Accounting Journal I (Assets = Liabilities + Equity)
In understanding the journal logic first, there are seven types of components that will be included in the calculation, namely Company Assets (A), Corporate Debt (U), Business Costs (B), Company Liabilities (L), Business Capital (M), Equity ( E), and Operating Income (P). The main objective of the accounting journal logic is to balance the obligations and equity of the company with the value of the assets owned by the company. To calculate it, there are three kinds of balance formulas that can be used in finding asset values, namely:
A = L + E
A = U + M + P + B
A + B + U + M + P
For example, let's say you buy a toaster machine for production needs on credit. So, the logic of this transaction is "the company's wealth increases with the presence of new machines, but on the other hand your company's debt also increases because you have to pay these fees every month which causes the company's revenue to decrease."
Assets owned by the company must be balanced with their obligations. Assets are all company assets including cash, accounts receivable, and other forms of money. Meanwhile, obligations are things that you must fulfill by sacrificing assets. An example is debt.
Logic of Accounting Journal II (Debit = Credit)
This is a quite difficult part in compiling accounting finance journals, especially for beginners. Maybe for those of you who are beginners think that what is issued includes credit and what is produced is called debit. In the logic of compiling a journal, it's not like that. Not everything we spend can be called credit and vice versa, what we get is not necessarily called debit. In compiling an accounting journal, to make it easier to understand, we must apply the law of causation or if-then. Here are five types of accounts that you should know about in accounting accounting journal calculations:
- If the treasure increases, it will be recorded as a debit, and if it is reduced, it will be recorded as credit.
- If the COST increases, it will be recorded as a debit, and if the asset is reduced, it will be recorded as credit.
- If DEBT increases, it will be recorded as credit, and if reduced, it will be recorded as debit.
- If CAPITAL increases, it will be recorded as credit, and if the asset is reduced, it will be recorded as debit.
- If SALES increases, it will be recorded as credit, and if the asset is reduced, it will be recorded as debit.
Also read: 3 Components of Financial Reports You Must Know
By understanding the logic of journals in accounting financial statements, it can make it easier for you to arrange them. This journal will help you in knowing what transactions occur during the period of time running. Therefore, it is important for you to understand the logic tricks of making accounting journals. If you are still confused about understanding this accounting journal, you can use Accounting Online, which will help you to create an accounting journal automatically. Practical, right?
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