Financial and Cost Accounting, Taxes and Economic

On one of my previous post we already talk about double entry book keeping system. If we talk about double entry book keeping system means we will talk about JOURNAL. Double entry implies that transactions are always recorded using two sides, debit and credit. Debit refers to the left-hand side and credit refers to the right-hand side of the journal entry or account.If we make a journal the sum of debit side amount should equal to the sum of credit side amounts.

Actually a journal is a record that keeps accounting transaction in chronological order. All accounting transactions are recorded through journal entries that show account names, amounts and whether those accounts are recorded in debit or credit side of accounts. On the previous post we already learn about normal balance for each account. By reminding the normal balance it can make easier for us to record the transactions.

Did you forget about the normal balance? Ok, now let’s remind again.

** Asset accounts have normal balances on debit side, means if we increase the asset we will journal on the debit side, but if we decrease the asset we will journal on the credit side.

** Expense accounts have normal balances on debit side.

** Liability accounts have normal balances on credit side, means if the amount of liability increase, we will journal on the credit side, but if the amount of liability decreases, we will journal on the debit side.

** Equity accounts have normal balances on credit side.

** Revenue accounts have normal balances on credit side.

After we know about the normal balance for each account, now let’s try to analyse some transactions and make the journal for the transaction it self.

Transaction 1:

A company buy a machine at Rp 20.000.000, - , paid Rp 12.500.000, - in cash and the rest is paid later. From this transaction how to make a journal (pretain that we ignore the value added tax)

Ok, let’s analyse first!

1. A company buy a machine means our asset increase at Rp 20.000.000, - , so we will journal machine on debit side at Rp 20.000.000,-
2. What did company pay? Company paid by cash Rp 12.500.000, - and the rest is paid later, means company have account payable or liability to the supplier. So our asset (cash) decrease at Rp 12.500.000,- and our liability increase at Rp 7.500.000,-
And the journal is:

Dr. Machine Rp 20.000.000,-
Cr. Cash Rp 12.500.000,-
Cr. Account Payable Rp 7.500.000,-

Transaction 2:

Two months later, a company paid the account payable by cash (from the transaction 1). How to record the transactions?

If we pay the account payable to the supplier, means our liability will decrease and our asset (cash) will decrease too. So, the journal is:

Dr. Account Payable Rp 7.500.000,-
Cr. Cash Rp 7.500.000,-


It is very easy, is it right? Ok now I’m sure you can done by yourself.