I'd like to include a lesson on journal entries in this accounts receivable customer Advanced
Course the reason I'm including this is because I want all my students to be able to adjust for
unearned income and you will only be able to adjust for unearned income if you know how
to make journal entries actually adjusting for unearned income will be the last video in the
series and it will be the video that follows this one you need very little accounting knowledge to
understand what a journal entry is maybe about three beginning chapters of any beginning basic
accounting course but if you don't know what it is I will do my best to show you just enough
about journal entries for you be able for you to be able to make them when you need to a journal
entry is the way to adjust or correct the account balances for the accounts that are in the chart of
accounts without actually entering transactions these Corrections are usually called adjustments
now the journal entry window is not only used to adjust the accounts there are very very few
transactions that require a journal entry and we're going to give you two examples in this
video but remember usually the journal entry window is meant for adjustments and corrections
that your accountant not the bookkeeper will put in we all remember the main report is the trial
balance and I have told the students at the very beginning and basic level you don't need to have
any accounting knowledge to be able to understand quick the trial balance is simply a list of the
ending balance or the accumulated result in every account in the chart of accounts but what
non accounting students might have noticed is that some of the account balances are listed on
the left side which is called the debit side and some of the account balances instead are listed
on the right side which is called the credit side now I can promise you if you only want to
study QuickBooks and you don't want to study any accounting you don't need to know the reason why
some of these accounts are listed on the left side as debit balances and the other accounts
are listed on the right side as credit balances that would be knowledge that you would get at
the very very beginning of an introductory basic accounting course but you don't need to know why
the only thing you need to know is QuickBooks will know which accounts belong on the left
side as debit and which accounts belong on the right side as credit now this is Holden's entire
trial balance but if we just take the piece of the trial balance that we're going to be working with
let's say the top half and we compare the trial balance to the make journal entry window what you
will notice is that both the trial balance and the make journal entry window have a debit side and a
credit side now why is that well it's very simple if you want to adjust one of the accounts on the
debit side it means you either want to increase it or decrease it so it's a very simple rule if
you want to increase one of the okay for example for a debit side account here's what you would do
if you want to increase one of the accounts that's listed on the debit side of the trial balance you
would record the money amount that you want to increase it by in the debit side of the journal
entry window but if you wanted to decrease one of the debit side accounts you would put that
money amount the money amount that you want to decrease it by you would put that in the credit
side of the make journal entry window in order to decrease it because it is a debit side account and
the opposite is true for credit side accounts if you wanted to increase one of these credit side
accounts then in the journal entry window you would record that increase on the credit side
but if you wanted to decrease one of these credit side accounts in the make journal entries window
over here you would record that decrease on the debit side and we're going to show you an example
right now let's imagine on August 7th Holden the owner of the company invested into the business
some furniture which counts as under the account of assets and that was furniture he was using in
his home until today August 7th we're pretending today is August 7th now the fair market value of
that furniture today which we're pretending is August 7th is $1000 usually an official licensed
appraiser would give you the fair market value but let's assume we know the fair market value on
August 7th of the asset that Holden is investing into the business well what should be the result
if Holden takes $1,000 of his personal assets and invests it into the business well this is
what the trial balance looks like or at least the top half this is what it looks like before
you record this transaction if the company has a thousand dollars more in assets that means after
you make the journal entry instead of one thousand one hundred fifty dollars as your
balance for assets your balance for assets would be 2150 dollars and because Holden is investing
from his personal personal assets that means that this number Holden's capital should increase by
the amount he invests a thousand dollars so if it were recorded properly Holden's capital will
increase to 2006 under $20 and after we make the journal entry properly assets will also increase
to this two thousand one hundred fifty dollars once you see how to record this first journal
entry it will be clear and you will understand from the main menu click company make journal
entry and the journal entry window opens up don't worry about assigning numbers we're not dealing
with that now this is our first journal entry and we're gonna put number one now be careful
about this check mark this journal entry that we are about to make is not an adjusting entry
it is a transaction and as I said before usually you make adjustments in this window and you would
click this adjusting entry box and we'll show you what effect that has in a moment but because
this is a transaction it's one of the very few transactions that you should make in the journal
as a journal entry leave this unchecked the date of the transaction was August 7th V now what do
we do well we know that if you're investing an asset that the asset account will change click
directly under the account the title heading in this column then you get the arrow click on the
arrow and you get all of the accounts in your chart of accounts this asset account is the
one that's increasing and if you remember from a moment ago assets are on the debit side so
because we're increasing something on the debit side we click in the debit column and we type
the money amount to save the money amount in the field without closing the window look on the left
side of your keyboard and push the tab key now on the next row under assets click and the computer
knows for every debit there's an equal credit so what should be the account that goes on the
credit side well if Holden is investing anything in his business that means his capital in the
business goes up so you choose Holden's capital which is an equity account if you remember from
a moment ago capital is listed on the credit side the right side and Holden's capital is increasing
because he invested more into the business so it would be debit the assets a thousand and credit
the capital for a thousand because they are both increasing after you click Save and close you can
open the trial balance and you can see assets have increased to the amount we predicted a moment ago
2150 and Holden's capital increased to the amount we predicted a moment ago 2,620 example 2 let's
imagine on August 8th our bank charges charged us a fee for something unexpected $20.00 what will be
the result well if we have $20 less and Chase Bank then instead of 1300 after we record this it'll go
down to 1280 and if we just paid $20 additional and bank fees bank fees will increase to $77 and
just on a side note let's click the adjustment box in this one just to see what happens from
the main menu click company make journal entry click OK for the journal entry number and the
date is August 8th now we'll click this just to show you something after we're done with this
entry however let's talk about this the Chase Bank is on the debit side and we are decreasing it so
if we're decreasing an account that's normally on the debit side we have to put that decrease
here on the credit side so we choose Chase Bank and on the credit side because Chase is going
down we put $20 on the next row we put the bank fees now let's think about this should the bank
fees be on the debit side the way the computer is putting it to balance out well we know that
bank fees are normally on the debit side and bank fees are increasing so because we're increasing
something something that's normally on the debit side we should put that increase on the debit side
the left side so if the bank takes money for a bank fee its credit the bank account balance to
decrease it and debit bank fees to increase it after we click Save and close you can see the
numbers are exactly what we expected Chase Bank went up to 1280 and bank fees went up to $77