Double Entry Accounting Bookkeeping Question

by Eunice
(Manchester UK)

Double Entry Accounting

Double Entry Accounting

In double entry, why do we enter the wages paid by cheque into the credit section of the Bank Account and not the wages paid in cash?

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Oct 10, 2023
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Double-Entry Bookkeeping Wages
by: BB

In double-entry bookkeeping, every transaction affects at least two accounts. When you pay wages by cheque, the cheque comes out of the company's bank account. This is why the bank account is credited, indicating a decrease in the company's assets.

Here's a breakdown for both scenarios:

Wages Paid by Cheque:

1. **Debit Wages Expense**: Increases the expense account to reflect the cost of labor.
2. **Credit Bank Account**: Decreases the bank account to show that money has been taken out to pay wages.

Journal Entry:
Debit: Wages Expense
Credit: Bank Account

Wages Paid in Cash:

1. **Debit Wages Expense**: Increases the expense account for the cost of labor.
2. **Credit Cash**: Decreases the cash account to indicate that cash has been used to pay wages.

Journal Entry:
Debit: Wages Expense
Credit: Cash

In both cases, the wages expense is debited to show an increase in costs. The difference lies in what is credited. For cheques, it's the bank account, and for cash, it's the cash account. Crediting these accounts shows a decrease in the company's assets used to pay the wages.

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Double Entry Payroll

by Deanna
(Chicago)

Double Entry Payroll

Double Entry Payroll

I've noticed I have been double entering a payroll check through General Ledger and Accounts Payable.

The Direct Labor account was getting debited twice and the Accounts Payable account was getting credited twice.

In order for the company to pay a net check out of bank account it needs to be booked out of checking account ( CR) and Debited into Direct Labor.

When I write the check it gets posted as Debit Direct Labor Credit Checking.

In order to post the direct deposits and gross income into the appropriate accounts I will need the net checks also to be in the spreadsheet that gets entered into general ledger once a week.

How do I avoid the double entry into direct labor and accounts payable without offsetting the checking account?

Thank you,
Deanna

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Jul 17, 2023
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Payroll Double Entries
by: Stephanie

To avoid the double entry into the Direct Labor and Accounts Payable accounts without offsetting the Checking account, you can follow the following steps:

Review your payroll process: Ensure that your payroll system or software is set up correctly to handle the appropriate account postings. Check if there are any duplicate entries or incorrect mappings that are causing the double entry.

Separate the entry for net checks: Instead of including the net checks in the spreadsheet that gets entered into the General Ledger, keep them separate. This way, you can enter the net checks directly into the Checking account as a credit without impacting the Direct Labor and Accounts Payable accounts.

Adjust the General Ledger entry: When entering the gross income and direct deposits into the General Ledger, exclude the net checks from the spreadsheet. Only include the necessary entries related to gross income and direct deposits.

Regularly reconcile accounts: Periodically reconcile your accounts, including the Direct Labor, Accounts Payable, and Checking accounts, to ensure accuracy and identify any discrepancies or errors.

By following these steps, you can avoid the double entry into Direct Labor and Accounts Payable while correctly recording the net checks into the Checking account and ensuring accurate financial reporting.

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Double Entry Refund

by Owusu Tuffour Silas
(Ghana)

How will refund rate be shown in the double entry bookkeeping?

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Oct 10, 2023
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Refund Rate Double Entry Bookkeeping
by: BB

In double-entry bookkeeping, a refund rate usually pertains to the percentage of returned products or canceled services, which must be accounted for financially. Let's say you're issuing a refund to a customer who returned a product or canceled a service.

Here's how you would record it:

Refund Issued to Customer:

1. **Debit Accounts Payable or Refunds Payable**: Increases the liability account to indicate that you owe money to the customer.
2. **Credit Sales Revenue or Service Revenue**: Decreases the revenue account to show the refund.

Journal Entry:
Debit: Accounts Payable or Refunds Payable
Credit: Sales Revenue or Service Revenue

When the Refund is Actually Paid (either via cash, check, or credit card refund):

1. **Debit Accounts Payable or Refunds Payable**: Decreases the liability account, showing that you have paid the customer.
2. **Credit Cash or Bank Account**: Decreases the cash or bank account to show the actual payment of the refund.

Journal Entry:
Debit: Accounts Payable or Refunds Payable
Credit: Cash or Bank Account

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Double Entry Format

I drew a cheque for 500 pounds and recorded it in the cash account. Is this the correct way to handle the transaction in double-entry bookkeeping?

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Oct 10, 2023
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Double Entry Bookkeeping Cash Account
by: BB

In double-entry bookkeeping, when you draw a cheque for 500 pounds to be converted into cash, it's a transfer of funds from one form to another (from bank to cash), rather than an expense or income. Here's how you would record it:

When you draw the cheque:

Debit Cash Account: Increase the cash account by 500 pounds to show you've added cash.

Credit Bank Account: Decrease the bank account by 500 pounds to show the money has been taken out.

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Rent Payment Debit

by maham
(kuwait)

What account would be debited when letting out part of the premises and receiving rent by cheque for $75?

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Oct 10, 2023
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Rental Income Double Entry
by: BB

When you receive rent by cheque for $75 for letting out part of your premises, the following journal entry would be made in double-entry bookkeeping:

Debit Bank Account: Increase the bank account by $75 to reflect the received rent payment.
Credit Rental Income: Increase the Rental Income account by $75 to show you've earned that money.

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