When a business or company conducts financial transactions, then they record it in an accounting journal. All transactions will be recorded in a general journal or one of the special journals for the most active accounts. The most common specialized journals are sales journals, purchase journals, cash receipt journals, and cash disbursement journals. One of the most difficult things to do when preparing your books is when to use debit and when to use credit. Additionally, if you need to track your income and expenses when you’re traveling, you can hire the service of a mobile bookkeeper.
You can try to follow these simple rules:
You will always use debit and credit for each journal entry. That is the basis of the double-entry bookkeeping system. You have two columns in a journal entry, each of which will have the same entry, one for debits and one for credit. Remember the format of the Asset accounting equation = Liabilities + Equity.
The Asset side is on the left-hand side, and the liabilities (liabilities) + equity are on the right-hand side. When you need to make a journal entry, consider the chart of your account to see if the account you need to use is on the left or right side of the accounting equation.
If the account is in Assets or the left-hand side, then it is the Debit side. Debits will add these accounts, and a credit will reduce them. If the account is on the liabilities and equity side or the right-hand side, then it is the Credit side. Credit will increase the value of the account, while debit will reduce it.
Company Financial Report
The components of the company’s financial statements consist of:
Balance sheet, which is the statement of the financial position of an entity at a certain date, usually at the end of the year.
The income statement, which is the report on the results of operations of an entity for a certain period, for example, one month or one year.
Statement of owner’s equity (capital), which is a report that presents an overview of changes in owner’s equity in an entity for a certain period.
Statement of cash flows, which is a report that describes the amount of cash in (cash receipts) and the amount of cash out (cash disbursements) in a certain period.