Accounting entries: what are they, their types, and how to record them?

Accounting entries: what are they, their types, and how to record them?

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Accounting entries are an integral part of the accounting system, as they determine the rules and procedures for financial reporting for companies. However, these restrictions may sometimes become an obstacle for companies and restrict their ability to achieve growth and innovation. Among the common accounting entries: The traditional accounting rules can be mentioned as relying on general accounting principles, which require the application of strict rules for registration and financial reporting. It is worth noting that these rules may be useful for maintaining audits and transparency, but they are sometimes an obstacle for emerging and innovative companies that need greater flexibility in registering and submitting reports on their financial activities. So here comes the role of the Qoyod program, which will simplify the difficulties for you and help you achieve what you desire.

What are accounting entries?

If you are wondering: What are entries in accounting? It plays a vital role in organizing and documenting the financial and economic operations that occur in the facility and aims to ensure the accuracy and reliability of the financial information recorded in accounting records.

It is worth noting that by properly documenting and recording financial transactions, accountants and managers can use accounting data to evaluate an entity’s performance, analyze profits and losses, identify financial strengths and weaknesses, and make informed decisions based on accounting information.

Types of accounting entries

Accounting entries are used to record financial events in the accounting records of companies and institutions and aim to ensure the audit and balance of financial information. The types of these entries include the following:

Journal entry

The journal entry is the simplest type of accounting entry, as it records daily financial transactions individually. For example, when the company purchases raw materials, an entry will be recorded reflecting an increase in raw materials and a decrease in cash.

Debt Credit Statement
3000 3000 From /(the bank)

To /(capital)

Simple entry

A simple entry is used to record financial transactions that affect only one account in the daily ledger. For example, when recording cash sales revenue, a simple entry is then used to increase the cash account and record revenue.

Debt Credit Statement
12000 12000 From /(workers’ wages expenses)

To /(Bank)

 

Reverse entry

The reverse entry is one of the types of accounting entries that is used to correct accounting errors that were discovered after closing the books of accounts. The reverse entry is recorded in an amount that reflects the effect of the error and ensures the balance of financial information.

Compound entry

It is one of the types of accounting entries that are used to record financial transactions that affect two or more accounts in the daily ledger. For example, when the company purchases raw materials on credit, a compound entry is then used to increase the raw materials account and the credit account. Examples of this type of entry include the following:

If the entry is compounded by the debt:

Debt Credit Statement
10000

55000

65000 From/ (the bank)

/ (cash)

To /(Debtors/Client X)

If the registration is compounded by the credit:

Debt Credit Statement
4700 4000

700

From  / (assets – Furniture)

To 

/ (cash)

/ (the bank)

If the entry is compounded by the debt and the credit:

Debt Credit Statement
2000

1000

7502250 from

/(Internet expense)

/ (gas expense)

to :

/ (the bank)

/(cash)

 

Closing Entry

The closing entry is used at the end of the accounting period to close temporary accounts and transfer the balances to the closing account. It is worth noting that the expenses closing entry is recorded to transfer temporary expenses to the closing account, as shown in the following table:

Debt Credit Statement
xxx xxx From / (Profit and Loss)

To / (expense)

(Closing the expense)

The revenue closing entry is also recorded to transfer the temporary revenues to the closing account, and it appears as the following figure:

Debt Credit Statement
xxx xxx From / (revenue)

To /(Profit and Loss)

(Closing revenue)

 

Opening entry

The opening entry is one of the types of accounting entries. It is used at the beginning of the accounting period to record the opening balances of the financial accounts and create a balance at the beginning of the accounting period. Its form appears as follows:

Debt Credit Statement
xxx xxx From  / assets)

To /(capital)

Adjusting Entry

The adjusting entry is used to adjust the financial balances and achieve balance at the end of the accounting period. Examples include:

Adjusting accrued revenue

It is an important process in accounting that aims to record the money that the company is entitled to when it provides services or products to customers and has not yet received the receivables, and it is recorded in the company’s accounting records. To ensure that it is properly documented and monitored.

For example, when a company provides consulting services worth 35,000 riyals to a client and does not receive the amount until the end of the accounting year, the following steps are implemented to settle these due revenues, and their form appears as follows:

 

Debt Credit Statement
35000 40000 From  / (environmental consultation revenue due)

To  / (consulting revenues)

Adjusting accrued expenses

When we talk about adjusting accrued expenses, we refer to expenses that belong to a specific accounting period, have not been recorded in the accounting books, and have not been paid for yet.

Adjusting these expenses is important to maintain the accuracy and reliability of accounting records and final accounting reports. Let us illustrate this with an example: Let us assume that the value of the wages of employees in a company amounts to 250,000 riyals, but it has not yet been recorded in the company’s records. In the audit budget, it was found that the balance of wages recorded was 210,000 riyals. In this case, the form is as follows:

Debt Credit Statement
40000 40000 From / (wages)

To / (wages due)

Adjusting prepaid revenue 

It is an important process in accounting and one of the types of accounting entries that requires dealing with revenues that you previously received before providing the service or product corresponding to this revenue.

In this context, the revenue provided is recorded in the accounting books, and it is important to know how to determine and settle the portion that belongs to the current financial year, while the excess amount should be classified as a current discount in the statement of financial position.

Adjusting Prepaid Expenses

An amount of 200,000 riyals was paid as a rental advance for two years by one of the companies. According to this process, the recording will be as follows:

Debt Credit Statement
100000 100000 From  / (rent expenses)

To /(rent paid in advance)

How to write an entry in the journal

When writing the entry in the journal, there are several main points that must be taken into consideration, which are as follows:

Debt and credit

The accounting entry consists of two parties: the debtor and the creditor, as the debtor is the party to which the financial value is granted or deducted from it, while the creditor is the party to which the financial value is transferred or added.

The appropriate financial account must be determined for each party, and the debit amount must be recorded on the debit side and the credit amount on the credit side.

Statement

The reason and nature of the accounting entry must be explained in the statement, as the statement can be a brief description of the financial transaction that is recorded in the entry.

Cost center

Sometimes, a cost center is designated for the accounting entry. Therefore, this means that the financial transaction affects a specific account in a specific area or a specific department in the organization, and the appropriate cost center must be identified if necessary and recorded in the book.

Registration number

A serial number is assigned to each accounting entry according to its chronological order. The registration number helps determine the sequence of transactions and track them easily in the book.

Ledger page number

The page number in the ledger to which the entry will subsequently be posted must be determined, and the ledger is used to compile relevant accounting information in an organized manner.

the date

The date of the financial transaction must be recorded in the entry, and it is preferable that the recording date of the entry be the date the transaction occurred. The form is as follows:

 

Debt Credit Statement
xxx xxx From  / (assets)

To 

/ (the bank)

/ (cash)

Accounting entries: your comprehensive guide to their concept and types.

The best integrated accounting program

Conclusion

We can say that accounting entries constitute an essential part of the accounting process and may represent a challenge for companies at times. However, we should not view these limitations as an obstacle to growth and innovation. Rather, they can be an opportunity to improve financial performance and excel by exploiting advanced technology. Companies can go beyond traditional entries and use them as a platform for innovation, and this can be achieved by adopting advanced and intelligent accounting systems that rely on data analysis and artificial intelligence, such as the Qoyod program, which enables companies to achieve accurate, transparent, and timely financial reports and also adheres to the correct accounting standards. And achieves the required financial reports.

Let us look at accounting entries with a positive eye and use them as an opportunity for improvement and innovation by taking advantage of technology and using the Qoyod accounting program. It is worth noting that the program offers all its clients electronic invoice systems, as well as points of sale systems, stores, customers, and so on. Which makes it the best accounting software to achieve sustainable success in today’s business world.

After knowing what accounting entries are and their types, try Qoyod now for free for 14 days. It is an accounting program that achieves outstanding financial performance today and in the future.

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