This lesson is designed to illustrate this concept. Keep in mind that at the end of the entry all debits must equal credits.
The first illustration is a simple purchase of materials with a discount from the supplier, i.e. cash is paid. The entry is recorded in the purchases journal as follows:
Notice both debits and credits are equal. This is an example (simple example) of a complex entry.
Now let’s take a look at an entry where both debits and credits have multiple lines of data. In this example the company purchases two pieces of equipment from the same company and paid some cash and used a long-term loan for the balance:
Again notice both debits and credits are equal? Also both debits and credits have multiple lines of information and that the respective ledgers are different.
Now let’s complicate this some more and illustrate a highly complex entry with multiple lines of both sides with multiple ledgers (accounts) and some of the ledgers are the same. Here is an example of a payroll entry:
As stated before, both sides (debits and credits) are equal. Notice there are three payroll tax expense lines and seven payroll tax liability lines? This is done to keep the respective lines separated as each line is a function of a different tax.
With bookkeeping the payroll entry is usually the most complicated entry. It is rare to have a more complicated entry in a small business set of books.
This lesson teaches you that the dual entry system means that debits equal credits and the journal entry may have more than two lines of information. Multiple lines of entry even multiple lines for the same ledger account refers to a complex entry. ACT ON KNOWLEDGE.
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