[Anonymous]

Confession: I have an accounting degree, am 3/4 done with the CPA exams, and still suck at journal entries. My last test is FAR and I know the Sims are going to be fullllll of journal entries. I DO know the account balances (Dr or Cr) for all major accounts so what increases or decreases them, but other than that I really struggle with knowing WHAT accounts to use for different transactions.

Does anyone have ANY tips, tricks, ANYTHING for knowing what accounts to use when? Either in general or for specific/heavily tested transactions in FAR? Since after 4 years of college I still don’t fully under the logic behind most journal entries, I’m really looking for straight up MEMORIZATION tips. Anything easier/catchier than just memorizing every single entry for every single type of transaction.

Embarrassing, I know. But thanks for any assistance!

[hellencpa]

Oh my God i am in the same boat like you.FAR is my last exam and I have no idea about JE's and i am tired of skipping JE's in the hope that the next chapter will not have one. But it looks like there is no way out right? So please help us on how to understand JE. I have no idea on how i passed in college…………For those of you who passed FAR how JE is heavily tested? And help us how to understand it please?

[sarah210]

How are you with T accounts? For some reason, when I get confused by a journal entry, I can make a T account work. I suppose that's more of a way to understand the concept than it is to memorize it, but that is what has helped me sometimes.

REG- 53, 91
BEC- 88
FAR- 62, 85
AUD- 85

Ethics- 93

[make_yourself]

I had a hard time with journal entries as well, didn't understand them in the slightest after college, and really, it didn't click until I started working and actually doing them in real life.

Not sure how well this will work for you, but one thing that helps me when doing journal entries is tracing how each entry should ideally affect the financial statements as a whole, and sort of piecing together how the financial statements work together in general. So figuring out if the entry is creating an asset or a liability on the balance sheet, and how that asset or liability is being created (is it earnings that should go to the income statement? Are we paying out dividends that should come out of equity?)

A simple example (maybe overly simple) would be tracing an entry for, say, the company making a $1,000,000 sale on credit:

You know that a sale creates income, or revenue, which belongs on the income statement. You also know that we have to somehow record either the receipt of payment (cash) or the buyer's obligation to pay us (A/R), which is an asset to our company, so it would belong on the balance sheet.

From there, you know that increasing an asset would have to be a debit to a balance sheet account, meaning the other side of the entry will have to be a credit to an income statement account.

One other tip that tremendously helped me is this: if cash is involved, always record cash first, because it's usually the simplest piece of the transaction, and go forward from there.

Personally, just sitting down and understanding how the balance sheet and income statement function together, as well as the role of cash, was a huge step for me in getting better at journal entries.

I hope this helps, best of luck with FAR! I'm currently struggling with overhead variances in BEC =[

FAR - 81 (07/24/2012)
BEC - 92 (10/06/2012)
AUD - 92 (11/29/2012)
REG - 88 (02/28/2013)

Ethics - 90

California Licensed CPA - 12/2013

[jelly]

The only way I could describe it is visually, like a plus sign (or t-accounts like the old skoolers like to call them), or four quadrants:

|

Balance Sheet DR accounts | Balance Sheet CR accounts

---

Income Stmnt DR accounts | Income Stmnt CR accounts

|

Top half = Balance Sheet [BS]

Bottom half = Income Statement [IS]

Left side = debit accounts [DR]

Right side = credit accounts [CR]

Keep in mind that some debit or credit accounts do live on the other side of where you might normally expect them to be. An example might be a contra-asset account, like an Allowance for sales returns.

Journal entries, or almost any transaction, is removing or adding something from one or more of the quadrants. You want your CR amounts = DR amounts.

An easy example is buying office supplies with cash, so the movements are between the cash account in the BS and the office supplies expense account in the IS:

DR Office Supplies [IS]

CR Cash [BS]

A slightly more complex one might be paying for 12 months of insurance, but having 11 months be considered prepaid:

DR Prepaid insurance [BS]

DR Insurance expense [IS]

CR Cash [BS]

How about paying back a monthly loan with interest:

DR Interest expense [IS]

DR Loan payable [BS; we're reducing this account that is normally a credit account]

CR Cash [BS]

Let's accrue for the telephone bill, and then release the accrual when the telephone bill is paid:

DR Telephone expense

CR Accrued payables

[Wait a month or so]

DR Accrued payables

CR Cash

It starts getting hairier when you have sales of goods or inventory, depending on the perpetual or periodic method:

DR Cash or A/R

CR Sales

DR COGS

CR Inventory

Okay, this is just a very small slice of the millions of transactions out there, but this is how to consider what journal entries are about, and how they impact parts of the BS or IS. Hope this helps.

Couldn't pass again!

[Roxwella]

I like all the above suggestions and I have one more that works for me…

When studying this type of information I first start with all of it that I can consistently muddle through..based on previous experience, wording, whatever. I find these pieces by simply going through the problems and picking out the hard entries to keep for later. I will never study these easy concepts or the information that underlies them. On the rest of the info I create two work papers, a spreadsheet that has cribbed wording of all important details of each entry (beginning source docs, description of process, whatever I think could be pertinent/testable in the way of concept), and then a handwritten version of a ledger that works a transaction (which I will then rework regularly with differing starting amounts).

[Author]

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