Accounting 101 Part 08 Journal Ledger

Eighth in series of 17 videos describing the essential ideas typically covered in early weeks of a university-level accounting principles course. This discusses the general journal and general ledger.

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Education

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• bookkeeping
• recordkeeping
• financial
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• business
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• basics
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• enlightenup

[enlight09]

With no other info, entries look right to me.

Most often, these are "accruals". But, in your earlier prepaid phone card example, the asset might be called a "deferral".

Watch out for the specific phrase "accrued expenses" -- it's often used to specify a liability account!

"Accrual" involves activity leading up to a cash transaction; "deferral" involves activity related to a past cash transaction.

[mustafasohail456]

For Example We have telephone for office use .... we pay in advance $100 And They Give Us 100 Minutes ...... So Debit "Asset" (Prepaid Expense) & Credit "Asset" (Cash Decrease) ........ Imagine We used 50 Minutes ....... So usage of 50 minutes increases expense and decreases 50 minutes (asset ) ..... My journalizing is correct or not?

[enlight09]

Nice example!

Expense happens when you talk on the phone, not when you pay the bill!

Again, that is true whether you pay the phone company before or after dialing numbers. If you pay before, you are buying an asset; if after, you are reducing a liability.

[mustafasohail456]

When We Pay Some Expense , So Expense Must Decrese .... For Example "Paid Electric Bill Rs $200" ...... So Expense Must Decrese Why Expense Is Increasing

[enlight09]

Events seem mixed.

Event #1: We turn on lights; that alone causes Expense. We don't pay for electricity at the moment we use it, so we also incur a Liability.

Event #2: We pay Cash. Paying Cash only reduces our Liability.

Imagine we own huge batteries; we charge the batteries only once a year by connecting to the electric companys power. Expense would still happen only when we turn on a light - NOT when we pay for the electricity; it's true whether cash is paid before or after using power.

[mustafasohail456]

a question in my book is troubling me: " Mr Jamil Purchased Stationary For Office Use" ..... According to me the answer should be "Stationary (Asset) Debit Cash(Asset) Credit" But in the book it is written like this "Stationary Expense Debit And Cash Credit" Which one is correct ...

[enlight09]

Both can be correct. In the "real world," the choice is firm-specific. Generally, the more quickly the thing is consumed, the more practical it is to debit Expense.

That is not easy to decode in a textbook problem which creates exactly the question you raise!

Try viewing parts 10 and 11 & you will see that, whether you debit Asset or Expense, it will need to be adjusted anyway.

That is why there is no RIGHT answer to your question. But both ways should lead to the RIGHT financial statements!

[vinsont]

Finally someone that knows how to make this simple. Thanks Dude!!

[exd11183]

geez much easier to retain than reading books again. thnx :)

[GaryMonro]

An excellent series of videos, well explained and so useful. Thank you for creating and sharing them. One complete beginner's question if I may: does your ADE and LER principle apply to UK accountancy practice too?

[HEIRofTHRONE]

This one SIMPLE UNCOMPLICATED video explained to me in a matter of minutes what my teacher could not in 4 months ...THANK YOU SO MUCH!!!!!

[adelle0001]

thanks much! very useful to my research!

[chandragini]

This is fantastic.............thank you so much

[spaden2112]

@enlight09 this is a good video, but doesn't this guy sound like he is living in his parents basement and trying not to wake them up?

[smokenfly514]

Reminds me of my fundamentals of business class haha, so elementary

[sabelilah]

@enlight09 3:35 how is rent increasing if we have paid for it? do i need to know this? or can i just memorize that dividends and expenses always get debited and equity and revenue always get credited?

thank you so much for uploading all this

[gralvien]

well the wordings on the screen are small and blurry.....

[yunggunna1024]

Honestly, this has been the most helpful accounting 101 lesson ever. After reading the same chapters in my book 1000 times and never getting it, and after just 1 view of each part of these videos I finally get it. Thank you so much enlight09(whatever your real name is =D )

[ToiYeuDatNuocCuaMinh]

Asset increase=debit decrease= credit

Liability increase=credit  decrease=debit

equity increase=credit decrease=debit

Revenue increase=credit decrease=debit

Expense increase =debit decrease = credit