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After opting for accounting as your career, you might come to know the life of business and the importance of financial year. You might get confused at some point of time and want to clear all your doubts.
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Introduction to opening Journal entry:
With the available records in Journal, it is possible to record different transaction details related to the company’s business processes. In this context, you should know what to do for opening journal entries.
Here, you have to consider accounting equation as follows,
Assets = Liabilities + Capital
(Debit) (Credit) (Credit)
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How to enter data in Journal record?
For entering the value in different sections of Journal, you have to look for previous balance sheet. Before opening Journal entry, you should make lists of all assets and all liabilities. And then, you have to enter all the value in the Journal.
- After completing the Journal entry, you should make the total.
- If the total of assets is greater than liabilities, this value will be entered as Capital in theCredit section.
- Suppose the total assets are less than total liabilities, it will be debited and the excess assets are termed as goodwill.
In other words, when thedifference of assets and liabilities comes positive, this value will be entered as Capital in Credit section. Similarly, when thedifference of assets and liabilities comes negative, this value will be entered in Debit section.
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