Journal entries

This topic has 3 replies, 2 voices, and was last updated 3 weeks ago by Kim Smith.

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July 22, 2022 at 12:08 pm #661636
jangodango
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How necessary is it to understand journal entries in order to pass FR?
How do I learn it quick?
July 22, 2022 at 12:19 pm #661637
Kim Smith
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I’m not quite sure what you’re asking – the syllabus doesn’t specifically mention “journal entries” – which is a way of recording “debits and credits” – this is the foundation of financial ACCOUNTING (as opposed to financial REPORTING) and is assumed knowledge of Financial Accounting.

What is it you don’t understand?
July 23, 2022 at 4:17 am #661673
jangodango
- Topics: 6
- Replies: 3
For instance:
Dr. Current tax
Cr. Deferred tax liability
Cr. Current tax payables

It all seems confusing to me. So I just wanted to know how important is it to understand debit and credit for FR
July 23, 2022 at 9:05 am #661682
Kim Smith
Keymaster
- Topics: 91
- Replies: 6237
It depends on whether you are seeing it as someone’s explanation of something – or you are seeing it in a published answer to a past Q. If you’re seeing it in answer to any of the questions in the practice platform you should really be understanding it.

If there is more than one Dr/Cr it means the entries are being summarised. For example:

Current tax for the year is 100:
Dr Tax expense (P/L) 100
Cr Current tax liability (SoFP) 100

Deferred tax for the year is 200:
Dr Tax expense (P/L ….. but could be OCI in the case of revaluation) 200
Cr Deferred tax liability (SoFP) 200

So over journal:
Dr Tax expense (P/L) 300
Cr Current tax liability (SoFP) 100
Cr Deferred tax liability (SoFP) 200
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