The Accounting Entries are the notes made in a company’s Book of Accounts. It reflects your expenses and income through the DEBATE and CREDIT columns. These annotations used to be done by hand but, nowadays, digitally, which makes everything easier.
If you want to know more about Accounting Entry, we will offer you some of the things you should know to understand better how it works.
What is the Accounting Entry?
You can define the Accounting Entries, the economic facts recorded in the company’s accounting book. The economic fact is defined as an operation that affects the company’s finances, which means that there is more or less money in the accounts.
Said accounting book is made up of entries that have two accounting entries: DEBE and CREDIT. The first corresponds to the income, and the second to the company’s payments.
What are the accounting entries?
“DEBE” and “CREDIT” must appear in double-entry accounting. In other words, each activity is recorded twice: once in the SHOULD section and the other in the CREDIT section. This is understood because when the “MUST” increases, the “CREDIT” decreases and vice versa.
An example of double entry is the entry generated when paying a supplier. On the one hand, money leaves the bank, and on the other, the debt with the supplier is settled. To make this annotation, countable numbers are used that identify these concepts and are made up of a numerical code and a description. In this way, the accounting entry for the previous example corresponds to the following process: when company “A” makes a payment to a supplier, it uses a bank account 572. X (where X is the personalization) and the supplier’s account 400. Y personalized for this specific provider.
The set of all these accounts is called the Chart of Accounts. The most common is to use the Accounting Plan offered by the Mercantile Registry. Although this, later can be customized if you want more control.
Types of accounting entries that exist
Based on the form, the accounting entries can be:
- Simple: they are those in which there is an accounting account in the DEBIT and the HAVE.
- Composite: refers to the entries in which one of the accounts, SHOULD OR HAVE, has two entries, while in the opposite, only one.
According to its background, Accounting Entries can be classified into the following types:
- Operational entry: operations that, day by day, the company has carried out over a year.
- Opening seat: is the one that starts the exercise.
- Adjustment entry: coincides with the presentation of the balance sheet.
- Regularization entry: this entry makes the appropriate classification between losses and gains.
- Closing entry: with this entry, the accounting accounts are considered finalized.
How are accounting entries made?
For you to make the accounting entries, the most crucial thing will be to collect all the supporting documents that prove the operations. Later you will have to write it down in your account book to review the bank statements to verify that everything matches finally.
At the time of making an Accounting Entry, the essential items that must be included are :
- Accounts in which the operation is carried out.
- Description of the accounts in an abbreviated manner.
Finally, the global computation of the debit must be equal to the credit.
Grouping of accounting entries or accounting records
The set of Accounting Entries can be grouped as follows:
- Tax payment.
- Sales management: issued invoices, collections and remittances.
- Purchase management: transfers, payments and invoices received.
How to carry out Treasury management?
The management of Accounting Entries can be complex or straightforward, depending on how you face this task. You can do it through Excel, managing everything individually without a connection to the rest of your company’s information.
This is the most traditional method, but it can get complicated since we have more and more connections with more banks, more accounts and more information to add.
Although you also have the option of doing it through a billing program. This is an option that will save you time since it will allow you to connect all your information in one place: that is, your banks, the status of your accounts and your management of expenses and income, control of your billing, your taxes and bank remittances.
Here the way of managing each one comes into play and, above all, the will to automate and simplify processes.
You can learn to make accounting entries through a ledger, which has a significant advantage. This only has a structure and order you will not find in any other resource type. Although the information you find on the Internet is beneficial, it is divided into particular topics.
Hence, a person unfamiliar with the subject must learn the order they must follow to get the most out of it. Therefore, anyone entering the world of Accounting Entries can have a reference work with which to understand, at any time, any problem that may arise.