Expert: Arthur Naman - 10/22/2011

Question
Hi, I have a question on journal enteries.  I work with invoice processing and we are told to tell our accountants to make a journal entry if an incorrect GL code was assigned to the invoice in last month's business, or if an invoice got entered under a wrong Buisness Unit location.  I don't quite understand how a journal entry fixes this problem? Could you please explain?

Answer
Accounting transactions are categorized and summarized by use of a general ledger code. A journal entry is used to move transactions between account, simply to take an amount from one account and place it into another.

For asset accounts, a debit entry increases that account; the opposite is true for liabilities, credits increase the balances and debits decrease the balance.

Accordingly, to take an amount out of an asset account and place it into another asses account, credit or reduce the first asset account and debit or increase another asset account,That process is called a journal entry.