How To Write An Accounting Ledger With Pictures

Date Account Description Reference Number Debit Credit[2] X Research source

You need accurate dates for accurate bookkeeping. Find a time at least once a week to log all of your journal entries to make sure you don’t lose any.

Cash: Money that your business has on hand. This is not necessarily hard cash. If someone writes your business a $500 check, for example, it would be an increase in cash. Accounts Payable: These are business expenses you owe. For example, if the $500 check you received is a loan, you need to note $500 under your accounts payable journal. [3] X Research source Accounts Receivable: This is money that your business is owed. General Journal: This journal is essential to capture all weird or one-time transactions, like bad debts, inflation, selling equipment, etc. Sales: The the revenue generated by selling your business’s product. Equipment, Wages, Land These three accounts, usually separate, detail the expenses needed to keep your business running.

The space between numbers (501 and 521) is so you can add new entries in between them. For example, if you are using physical books, or want to start a new journal every year, you might label “Wage Costs” as all account numbers 501-520, one for each of the next 20 years.

”Loan from Liberty Bank. ” ”Money from tax return. ” ”Sale of old oven. ” ”Repairs to factory roof. ”

Debts and credits cancel out. For example, if you spend that $500 on a new oven for your bakery, you would note a $500 debt (Equipment) and a $500 credit (Cash). While you gain $500 in equipment value, you lose $500 in cash. [4] X Research source Common debits include cash, accounts receivable, equipment, land, wages, and personal funds. Common credits include: cash spent, accounts payable, bills, mortgage, and loan payments. Remember– debits are assets and credits are liabilities.

4/20/15, Cash, #101, Check from Friend, $500 Debit Accounts Payable, #201, Loan from Friend, $500 Credit[5] X Research source

At the end of the day or week, take all of your receipts and invoices and check them against your journal to make sure you haven’t missed anything.

If possible, make a record in your ledger immediately after writing in the journal.

Consider making a “Chart of Accounts” table of contents page to help you keep track of each account number. If you have odd expenses, consider a “general ledger” as well, which collects atypical transactions like tax returns, sales gone bad, personal expenses, etc.

Debit refers to money you receive. Credit refers to money you owe or paid. Balance refers to the what you still owe, or the difference between debit and credit.

In other words, the Balance = Credit – Debit. Not every expense will have a balance. If, for example, you receive a $20,000 research grant that you don’t have to pay back, you just note the $20,000 in the debit column and move on.

Turn to the Cash page of your ledger. In the left column (which is used for recording debits), write the date of the transaction, and then write the amount. In this example, the amount is $500. Turn to the Accounts Receivable page of your ledger. Write the date in the right column (which is used for credits), followed by the transaction amount. In this example, the amount is $500. Update these pages as new journal entries arise.

Add the accounts to the ledger in order for easy access.

Remember – any transaction, positive or negative, needs to go into the journal and ledgers. Some beginner accountants often forget the idea of “ownership. ” For example, if you spend $10,000 on the business, then the business technically “owes” you $10,000. If the business was ever sold, you would be paid back your $10,000.

Collect the source documents, like receipts or invoices, that need to be logged. Record the transaction in the journal in chronological order. Post the journal entries to the ledger accounts. Prepare the trial balance. This is a listing of all the ledger accounts pooled together, and it should be prepared at the end of the accounting period. Prepare the financial statements. These can be compiled after adjusting the trial balance properly. [8] X Research source