While Mclowd achieves a high – and ever increasing – level of automation in the way it facilitates entry of most transaction types, no accounting software developer can ever anticipate and provide for every type of transaction that might be contemplated. To ensure that you are able to maintain your General Ledger correctly, and that final statements show correct balances, Mclowd (like all good accounting software products) provides a JOURNAL ENTRY facility in which you can make entries of less common transactions or correct entry errors.
The Journal Entry facility presumes a basic understanding of double-entry accounting standards. It requires that the debit and credit amounts for every entry are equal.
The rules of double-entry accounting are fairly simple: a DEBIT adds and a CREDIT subtracts.
- Accounts are classified as either BALANCE SHEET accounts or INCOME/EXPENSE accounts.
- Balance sheet account are ASSETS your Fund owns or DEBTS or PAYMENT OBLIGATIONS your fund owes. These accounts carry over from year to year, and are only closed when an asset is sold, a bank account is closed, or a major debt or loan is paid out.
- Income/expense accounts total the income received by your fund and the expenses paid in various categories during a specific financial year. At the end of each financial year, these accounts are cleared to zero and the balances added to Profit and Loss totals and Member Account balances.
- When you pay money out or incur a debt, the amount is DEBITED to an appropriate Income/Expense account and CREDITED to the relevant Balance sheet account.
- When you receive money in, or raise an invoice for monies due, the amount is CREDITED to the appropriate Income/Expense account and DEBITED to the relevant Balance sheet account.
- An EXPENSE paid or incurred, DEBITS the relevant expense account.
- If the expense is paid, the payment CREDITS the bank or cash account it is paid from.
- If the expense is not paid immediately, the debt is a CREDIT to an accounts payable account.
- A credit note or refund received CREDITS the relevant expense account.
- If the refund is received, the receipt DEBITS the bank or cash account it is deposited to.
- If the refund is due but not yet received, the amount DEBITS an accounts receivable account.
- A RECEIPT of income CREDITS the relevant income account and DEBITS the bank or cash account it is deposited to.
- An invoice raised to advise a Debtor of monies due to your Fund CREDITS the relevant income account and DEBITS an accounts receivable account.
- A member contribution received DEBITS the bank account into which the contribution is deposited and CREDITS the relevant Member Account.
- A benefit or pension payment to a Member DEBITS the Member Account and CREDITS the bank or cash account from which the payment was made.
NOTE: You may observe that on your bank statements, deposits are shown as CREDITS and payments and withdrawals are shown as DEBITS.
In your Mclowd accounts, the reverse applies. Deposits are shown as DEBITS and payments or withdrawals are shown as CREDITS.
To assist you in making commonly required journal entries, a number of specific examples have been provided in this chapter, including examples of processing BAS Returns. Please see section 9.5 ACCOUNT MAINTENANCE: JOURNAL ENTRIES -WORKING EXAMPLES.