what if you had a rare and unusual transaction that you needed to enter
into QuickBooks Online well in that case you would have to make a journal entry
if you have any questions about this topic you can leave them in the comment section below and
I'll do my best to help you and of course if you feel the video helped you I hope you will click
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may well ask what is a journal entry well it's a way of changing the chart of accounts directly
without making a transaction document now usually transactions change your chart of accounts as soon
as you record the document but transactions also change at the same time another area of
data in your QuickBooks Online for example if you make a customer invoice then accounts receivable
would change along with the chart of accounts if you entered a vendor's bill well of course the
chart of accounts would change but additional to that the records of vendors and accounts
payable would change at the same time for that very same bill however when you make a journal
entry only the chart of accounts is changing and it changes the accounts directly without needing
to make a transaction document now you may well ask why do we do journal entries well sometimes
we have transactions that are rare and have no preset document and therefore there's no other
way to record that transaction for example if the owner of the company invests or withdraw
a non-cash asset to or from the business like taking equipment home or taking home equipment
and putting it into the business well there's no preset document for that you would have to
make a journal entry to record that kind of transaction what if the owner buys an asset
and assumes a loan for the asset well now the company has more equipment but you didn't pay
cash you now have a loan on your books that would not affect the other areas of peripheral data and
there's no preset document for that the only way to enter that type of transaction is to make a
journal entry and of course the opposite of that what if we owe money in a long term liability
and instead of paying money we give it one of our non-cash assets well that's a very uncommon
transaction we can't just make an invoice or a check or a bill in that case the only
way to record that properly would be to make a journal entry now we also make journal entries
to adjust the accounts this means we make normal monthly accounting adjustments to adjust for the
difference between the results and our bookkeeping and the way we have to report our final numbers we
could also fix mistakes in the chart of accounts without affecting other areas of data if we make
adjustments as journal entries now we will not discuss adjustments in this course adjustments
should be made by your accounting professional after consulting you thoroughly and explaining
what adjustments are needed but if you're the bookkeeper the top three transactions
might come up and of course you need the ability to record them before waiting for
your accounting professional and that's why we will demonstrate them here in this video
so how do we make journal entries well we open the journal entry window the same way
we would open any window in QuickBooks Online and of course the idea is to change the account
balances without changing any other area of data so how do we do that well you just make debits and
credits now let's talk for a moment about this idea of debits and credits you do not need to
learn debits and credits for this video you can enter the transactions the same way you see them
demonstrated here if you have these transactions in your real situation you can learn about debits
and credits and all the other related concepts right here on this very website from a course
called accounting journal entries for kids so if you feel learning debits and credits would help
you it's very easy and it will take very little time to learn the idea but again you don't have
to learn the idea of debits and credits you can just watch how these transactions are
demonstrated and enter them the same way so how do you change the account balances when making
a journal entry well it's very simple you simply put the money amount in the journal entry window
on the side of the account you wish to change for example let's imagine that there is an account
that is normally on the credit side of the trial balance if you want to increase that balance you
would put the money amount on the same side the credit side in the journal entry window but what
if the opposite were true what if there were an account and the trial balance that was normally
on the credit side and you wanted to decrease it well in that case you would put the money
amount in the debit column of the journal entry window because that's the opposite side and that
would lower the balance by the amount that you put in in we'll all become clear as soon as we
show our example we know that assuming a debt or alone for a non-cash asset like equipment would
be a transaction that we would have to record in a journal entry also if we were paying back the loan
or debt with equipment or some kind of non-cash asset would also be a transaction that we would
have to record with a journal entry now in order to do this let's add an account in our chart of
accounts called loan for equipment and make sure the type is a long-term liability so that we can
record this example transaction so how will we do that well we will open the chart of accounts and
we will click new and we know that the account type will be long term liability now the detail
type is not relevant in this case I guess you could call it other long term liability but the
name will be equipment loan or let's put loan for equipment click Save and close and now we have the
loan for equipment in our chart of accounts and this account will represent the money we owe to
staples or whomever we buy the equipment from when we owe this equipment let's imagine on May
16th we assumed a $10,000 loan from Staples for more equipment well we know that equipment is
increasing and as you can see equipment is on the debit side in the trial balance therefore
we will have to put the $10,000 on the debit side when we record this in the journal entry window
if equipment is being debited by 10,000 then logically we must put the credit to the staples
equipment loan that we just created in the chart of accounts and we know when we finish equipment
will be ten thousand more making fourteen thousand five hundred fifteen dollars and the staples loan
will show up in the trial balance for the first time as ten thousand dollars let's take a look
at how to record this we click the plus sign for the new transaction window we go all the way to
the right and we go down to journal entry now the date of this journal entry is actually May
16th of 2017 very important to put the right year the rest is very simple click once under the word
account to bring the pull down arrow and as you can see you can choose any account in the chart of
accounts in this case it's the equipment that's increasing and as we mentioned a moment ago we
have to put it on the debit side push tab Y on the debit side because equipment has a debit balance
and it's increasing so therefore what should we put as the credit well we know that we owe this
loan for equipment and QuickBooks knows if you have a ten thousand dollar debit you need to
balance this entry with a ten thousand dollar credit and people who studied accounting know
that alone for equipment a long-term liability normally has a credit balance after we click
Save and close we can reopen the trial balance and you can see equipment now has a balance of
ten thousand more fourteen thousand five hundred fifteen dollars and the loan for equipment shows
up for the first time on the trial balance as a $10,000 credit to really bring home the
point let's do a second example let's imagine on May 17th we gave back two thousand dollars
of equipment to Staples that means the equipment loan decreases and equipment is on the credit side
therefore we will debit the equipment loan we must then credit the equipment itself and equipment is
on the debit side and it is also decreasing so watch how we would record this transaction as
well we click the plus sign we go over to journal entry and again this time the date is May 17th of
2017 this is our second journal entry click under the word account and this time we go directly to
the loan for equipment now the loan for equipment is on the credit side so if it's decreasing we do
the opposite we put the money amount on the debit side in the journal entry window and of course if
we debit the loan for equipment and the asset account is also changing that means we should
credit equipment equipment equipment is normally on the debit side but if we make a credit it will
decrease can you predict the numbers in the trial balance when we finish well equipment was 14,500
something so it'll go down to 13,500 something and the loan for equipment was 10000 but we're
decreasing it by a thousand so it should be 9000 when we look at the trial balance and
here we are equipment decreases by a thousand and it went down to thirteen thousand five
hundred fifteen and then the loan for equipment decreased by a thousand because we made a debit
and it's normally on the credit side and now the loan for equipment balance is now $9,000