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As a business owner, the word “Accounting” or “Journal Entry” might seem daunting as it could mean a complicated minefield. Even the basics of accounting concept may be hard to grasp. Many will think, will I need my accountant to use this function for me? The answer is it doesn’t have to be complicated, we have provided all the tools you will need to navigate it with confidence.
Let us start with the basics of accounting concepts.
What is Accounting?
Accounting is bringing all the elements of a business together. Like a jigsaw puzzle, every piece is necessary to complete the final picture. In other words, it is a recording of your business transactions to monitor performance, financial position and cash flow. Enterpryze provides a list of predefined General Ledger Accounts relevant to your country in your Chart of Accounts. Hence, you can manage the Chart of Accounts and make it fit your business needs. To understand accounting, you must first know that behind every financial transaction, there is a posting taking place which will end up as a Journal Entry. Read further as we will explain what all this means!
What is a Journal Entry?
A Journal Entry is the first step in the accounting process. It is a record of the financial transactions that take place within a business. As the saying goes, there are two sides to every story. Well, this applies to journals as they will always contain postings to Debit and Credit columns. In brief, Debit is the receiver (what money comes in) and Credit is the giver (what money goes out). This is called the double-entry system in accounting, as the total debits and credits must always equal on a journal.
Why do we do Journal Entries?
Journal entries are important within a business as they allow us to sort our transactions into manageable data and build the picture of how our business is doing.
What does a Journal Entry look like in Enterpryze?
All financial transactions added to Enterpryze will automatically create a journal entry for you. For example, the transactions of your Invoices, Credit Notes, Deliveries, Returns, Receipts, Payments, Stock Postings (Goods In, Goods out, Stock Transfer) and manual Journal Entries.
In the illustration below, it shows a journal entry that is created when a Sales Service Invoice is added. The first row shows you the customer that the invoice it relates to. While the second row shows you the tax amount applied to that invoice, and the third row shows you the GL account selected to post the sales amount or revenue to. You can see that the total of the Debit and Credit columns are equal.
With a simple process of Debit and Credit, Enterpryze is able to provide you with reports that show you:
- How well your business is doing?
- What is your cash flow projections?
- Are you making any profit?
- What overheads or costs do you have?
- How much tax do you owe to the revenue?
- What is the value of your stocks and other assets?
- How much money is owed from your customers?
- How much do you owe to your suppliers?
- and so much more…