Understanding Debits and Credits
Every entry is input as a Debit or Credit, without exception. However, this can be confusing because, in some cases, our every-day meaning of “debits” and “credits” are different from their accounting definitions. Therefore, in order to create your entries correctly, you’ll want to understand how debits and credits affect each type of account.
Assuming you are using Cash Basis Reporting, here is a quick graph showing account types and what effects debits and credits have for each:
As always, because this is an advanced accounting activity, we recommend that you consult with your accountant or a CosmoLex Certified Consultant for better understanding.
Creating a Journal Entry
1. Click the Accounting Tab
2. Click Journal Entries
3. Click Add to add a new entry
4. Complete the “Add Journal Entry” screen.
- Entry#: Choose an entry # or keyword to identify the entry, this is a required field but the numbering or naming convention is left up to you
- Adjusting Journal Entry: Check this box if you need to adjust an existing journal entry. After the journal entry is saved, you will see a paperclip icon letting you know the journal entry was adjusted.
- Date: This will default to today’s date
We provide you with 2 rows to make your journal entry (every credit must be accompanied by a debit), but you can click Add to add two more rows at a time if you would like to add additional entries as part of a group.
- Account: Choose the account from the drop down menu. If this journal entry will affect multiple accounts, you can use the Add button to add more rows
- Debit/Credit: Enter the amount under Debit or Credit
- Name and Memo, if applicable
You will notice a “Difference” field at the top of the grid. All journal entries must balance with a difference of $0.00 in order to be saved.