![]() Dateįinally, we record a debit for the amount that went towards the principal. In the expense journal, we record a debit for the amount that went towards interest separately from the amount that reduces the balance. Cash journalįor the cash side, we record the $1,000 leaving the account (a credit). Let’s look at a payment of $1,000 with $800 going towards the loan balance and $200 being interest expense. This happens when the debit or credit amount is made up of multiple lines. This is called loan principal and interest. When you make a payment on a loan, a portion goes towards the balance of the loan while the rest pays the interest expense. Dateįinally, you stop at the bank to make your loan payment. Since we credited the cash account, we must debit the expense account. ![]() Just as every action has an equal and opposite reaction, every credit has an equal and opposite debit. But now money is leaving the account, so we credit the account for the amount leaving. When the invoice was paid, money entered the cash account, so we recorded it as a debit. On the way back from meeting with your client, you stopped to pick up $100 worth of office supplies. Here, the credit amount and debit amount are the exact same. The money is being removed from accounts receivable-your client doesn’t owe you $600 anymore-so it’s listed as a credit (written in parentheses). In this case, there’s no money being paid out.Īt the same time you make this entry, you’d make another in the accounts receivable (aka money clients owe you) ledger account: Accounts Receivable Journal Date In this case, it’s the invoice number.ĭebit notes that $600 is being added to your cash account.Ĭredit notes money leaving cash. Cash Journal Dateĭate lets you know when the entry was recorded.ĭescription includes relevant notes-so you know where the money is coming from or going to. When you’re visiting with your client, they pay the $600 invoice you sent them. You get paid by a customer for an invoice You’re going to meet up with a client, pick up some office supplies, and stop by the bank to make a loan payment. ![]() No manually inputting journal entries, thinking twice about categorizing a transaction, or scanning for missing information-someone else will do that all for you. But with Bench, all of your transaction information is imported into the platform and reviewed by an expert bookkeeper. Going through every transaction and making journal entries is a hassle. Suggested reading: How to Read (and Analyze) Financial Statements How Bench can help They let you see, at a glance, how your business is performing. It’s used to prepare financial statements like your income statement, balance sheet, and (depending on what type of accounting you use) cash flow statement.įinancial statements are the key to tracking your business performance and accurately filing your taxes. Your general ledger is the backbone of your financial reporting. Think of “posting” as “summarizing”-the general ledger is simply a summary of all your journal entries. Once business transactions are entered into your accounting journals, they’re posted to your general ledger.
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