I would like to include a lesson on journal entries in this vendors and accounts payable
course the reason I need to include a lesson on how to make journal entries is because I would
like to make sure that I've given you every possible piece of information when managing
payables and vendors and expenses in order to do that you have to be able to adjust for prepaid
expenses and in order to adjust for prepaid expenses you have to know how to make journal
entries 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 to 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 account to be able to understand QuickBooks
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 account 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 $1,000 more
in assets that means after you make the journal entry instead of $1,150 as your balance for assets
your balance for assets would be two thousand one hundred and fifty 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 two thousand six hundred twenty dollars 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 to go 2150 and Holden's capital increased to the amount we predicted a moment ago
2,620 example two 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 it's 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 so what did the adjustments checkmark actually do
well anything marked as an adjustment will show up in something called the working trial balance
and the working trial balance is only in the accountants version of QuickBooks as well as in
something called the accountants toolbox so that's something that you can learn about in another
video but if you want to see what it is because I happen to have the accountants version you
can click from the main menu accountant working trial balance and you can see this $20 credit to
Chase Bank shows up in the adjustments column and the same $20 to bank fees shows up in the adjust