Accounting? You can do it! Follow the 10 steps

All companies are required to record the transactions that affect their assets and activities.

Each accounting entry is necessary to trace the flow of activity, but also to draw up a standardised, reliable and faithful portrait of the company's financial situation.

Whether this is something you're used to doing or something you've never done before, if you're here, it's because bookkeeping is one of your tasks, and you're looking for accounting advice. So how do you record accounting transactions? How do you fill in the accounting journal and how do you enter an invoice?

Follow this guide, co-written by Raphael Berguig, a chartered accountant and statutory auditor at Nexco!

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Accounting entries: definition

An accounting entry consists of recording in your accounts every transaction that comes into or goes out of the company, with an entry in one of the accounting journals.

All the accounting entries, which constitute the accounting entry, are then used as the basis for calculating the result and the balance sheet.

There is no legal requirement as to who should make the accounting entries. Although it is not necessarily necessary to have a degree in accountancy, it is still useful to know a little about bookkeeping.

However, depending on the type of business, this task is generally carried out either by :

• the head of the company, in the case of a very small business,
• the accountant or the accounts department
• a chartered accountant.

How do you record accounting transactions?

Step 1: Collect supporting documents

By law, every purchase or sale must be accompanied by an invoice. And when you make an entry in your accounts, you need to be able to justify each entry with the corresponding supporting document in the event of an audit by the tax authorities.

In addition to sales and purchase invoices, there are also :

• the must invoice, which is a credit note recording a debt owed by the customer to the supplier,
• and the credit note, which is a credit note recording a debt owed by the supplier to the customer.

These invoices are used to rectify potential discrepancies between invoice and reality, either in the case of a commercial discount granted a posteriori (if delivery is late, for example), or in the case of a return of goods.

👉 There are, however, a few exceptions, which do not mean that you do not need to present any document that can be used to justify a purchase or sale in the event of a tax audit: weight sheet, output sheet, slip, bank statements, cash blotter, etc.

A word from the Expert

The rigorous collection of supporting documents is essential to ensure the transparency and verifiability of each accounting entry. This includes not only purchase and sales invoices, but also other documents such as bank slips and statements, which are essential in the event of a tax audit.

Raphael Berguig,

Step 2: Choose the journal

If you opt for the single journal, also known as the centralising journal, you will be able to record all your transactions, whatever their nature, in the same journal. You will therefore record everything relating to purchases, sales, bank or cash transactions, etc. in the same journal.

But the most common option is to use different subsidiary journals to separate transactions according to their type:

• The sales journal, for sales of goods, finished products and services.
• The purchase journal, for purchases of goods, raw materials and certain overheads.
• The cash journal, for recording commercial transactions linked to the cash register. It is essential for retail businesses and sales to the general public.
• The bank journal, for transactions on your bank account. It is particularly useful at the end of each month for reconciling bank transactions.
• The miscellaneous transactions journal (OD), for transactions not related to sales, purchases or cash flow.

A word from the Expert

The choice of accounting journal influences the organisation and efficiency of transaction monitoring. Using specific journals for different categories of transactions, such as sales or purchases, enables better segmentation and more accurate analysis of financial activities.

Raphael Berguig,

Step 3: Enter the elements of the accounting entry

So, what does an accounting entry actually consist of? You need to enter the following information

• the date
• the debit amount
• the credit amount,
• the transaction title
• the account number of the transaction,
• the voucher number.

Forgetting one of these elements can have a considerable impact on your accounting records. To make sure you don't leave anything out, get accounting software: as well as automating your accounting records, it saves you precious time in your accounting and administrative management.

• Indy, for example, is the benchmark accounting software for the self-employed . Ultra-easy to use and fully customisable, it synchronises with your bank and automatically analyses and classifies your transactions in the right accounting accounts, ensuring that your accounting records and profit and loss accounts are clear and accurate.You can also take advantage of tax returns and pre-filled VAT returns , which are automatically uploaded to your AGA or CGA and to the tax authorities, for a one-click tax close.
  
  
• We should also mention Regate, the benchmark financial and accounting management software for SMEs and chartered accountants. Designed as a true financial cockpit, Regate lets you automate your invoicing, easily retrieve supporting documents and carry out bank reconciliations in just a few clicks. 100% integrated with your usual production software, Regate automatically generates the right accounting entries.

A word from the Expert

Each entry must clearly show the date, the debit and credit amounts, the transaction title and the voucher number. Accuracy here is essential to maintain the integrity of the accounts and facilitate audits.

Raphael Berguig,

Step 4: Follow accounting principles

Recording an accounting entry is a relatively simple operation. However, there are a few accounting principles to be observed:

1. record transactions in chronological order ;
2. follow double-entry bookkeeping, which means that the debit and credit columns must balance;
3. use the reverse entry to cancel an entry, then make a new entry if necessary;
4. each accounting entry must refer to a numbered supporting document in order to provide proof of its existence.

A word from the Expert

Respecting the principles of double-entry bookkeeping and the chronological recording of transactions are fundamental to accurate and reliable accounting. This ensures that all the accounts are balanced and that the records faithfully reflect the economic reality of the business.

Raphael Berguig,

Step 5: posting a purchase invoice

How do you book a purchase invoice?

1. Find the following information on the invoice: amount excluding VAT, amount including VAT, amount including VAT (and any other charges such as postage).
   
   
2. Record them in the corresponding accounts:
   • credit the Trade account for the amount including VAT.
   • debit account 4456 Deductible VAT by the amount of the VAT,
   • debit the purchase expense account (class 6) for the amount excluding VAT.
     
     
3. Then record the corresponding bank transaction when the debt is paid:
   • debit account 401 Suppliers for the amount including VAT,
   • credit account 512 Bank for the amount including VAT.

Step 6: Enter a sales invoice

How do I enter a sales invoice?

1. Locate the following items on the invoice: amount excluding VAT, amount including VAT, amount including VAT (and any other charges such as postage).
   
   
2. Record them in the corresponding accounts:
   • debit the revenue account (class 7) for the amount excluding VAT,
   • debit account 4457 Collected VAT for the VAT amount,
   • credit the Customer account with the amount including VAT.
     
     
3. Then record the corresponding bank transaction when the debt is paid:
   • credit account 411 Customers by the amount including VAT,
   • debit account 512 Bank for the amount including VAT.

Step 7: booking a discount

For the customer to book a discount obtained from a supplier, you must :

1. debit account 401 Suppliers,
2. credit account 765 Discounts obtained,
3. credit account 44566 VAT on other goods and services.

For the supplier to record a discount granted to a customer, you need to :

1. credit account 411 Customer,
2. debit account 665 Discounts granted,
3. debit account 44571 output VAT.

Step 8: Record a supplier credit note

Making a credit note to correct the difference is therefore common practice. But how do you record this credit note?

During the accounting period

Recording a discount

1. debit account 4011 Suppliers - Purchases of goods and services,
2. credit account 44566 Input VAT on other goods and services,
3. credit account 609 Discounts and rebates on purchases,
4. ensure at year-end that account 609 is balanced and that the amount has been transferred to the purchase account.

👉 In the case of a fixed asset, debit account 4041 and credit accounts 44562 and the relevant class 2 account.

Posting a return

Credit the credit note to the expense account debited at the time of purchase.

At the end of the accounting period

In other words, when the credit note will not be received until the next accounting period.

Posting a discount or return

1. debit account 4098 Discounts, rebates and refunds to be obtained and other credit notes not yet received,
2. credit account 44 586 Sales tax on invoices not yet received,
3. credit the corresponding class 6 account.

Step 9: recording a customer credit note

How do you book a credit note granted to a customer?

During the accounting period

Posting a discount

1. debit account 709 Discounts and rebates granted by the company,
2. debit account 44571 Collected VAT,
3. credit account 4111 Customers - Sale of goods or services,
4. at year-end, ensure that account 609 is balanced and that the amount has been transferred to the purchase account.

👉 In the case of a fixed asset, debit accounts 775 and 4571, and credit account 4111.

Accounting for a return

Debit account 672 Exceptional charges from previous years.

At year-end

Accounting for a discount or return

1. debit the corresponding class 7 account,
2. debit account 44587 Sales tax on invoices to be issued,
3. credit account 4198 Discounts, rebates and refunds to be granted and other credit notes to be issued.

👉 If trade receivables are in credit at the year-end, adjust by debiting account 4111 and crediting account 4197.

Step 10: recording the appropriation of profit

Recording a loss

If you have a loss at the end of the financial year, you will need to carry the loss forward to the following financial year.

1. debit account 119 Deficit carried forward,

2. credit account 129 Loss for the year.

Accounting for a profit

When a company generates profits at the end of the financial year, it must allocate them :

• to the legal reserve (minimum 5% of profits),

• to other optional reserves (such as the statutory reserve),

• dividends to be paid to shareholders.

Here's how to do it

1. 1. debit account 120 Profit for the year,
   2. credit account 1061 Legal reserve,
   3. credit (as appropriate) account 1068 Other reserves,
   4. credit (as appropriate) account 457 Dividends payable,
   5. credit (if retained earnings debit in year N-1) account 119 Retained earnings debit.

Example of an accounting entry

Let's take the example of a company engaged in a purchase and resale activity. This allows us to see both the entries relating to the purchase and those relating to the sale:

• it buys a stock of goods worth €5,432.89 excluding VAT from its supplier,

• then resells each unit to its customers at €49.90 including VAT.

💡 Are you sometimes unsure which accounts to record your expenses and income in? See our article dedicated to the general chart of accounts and download our PCG.

Accounting entry for the purchase

Accounting entry for the bank transaction corresponding to the purchase

Accounting entry for a sale

Accounting entry for the bank transaction corresponding to the sale

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Software to automate accounting entries

All those accounting entry mechanisms seem a bit complex to you? We understand!

So why not use software to make this tedious task easier? By automating processes such as accounting entries and bank reconciliations, you can :

• save time
• reduce errors
• make it easier to check and control.

A word from the Expert

Automating accounting entries using software such as Indy or Regate simplifies data entry, reduces errors and increases efficiency. These tools also facilitate tax compliance and bank reconciliation, making monthly and annual closings smoother.

Raphael Berguig,

Here are a few examples:

• Dext is a pre-accounting software package that collects and centralises your purchase invoices and converts all the data into accounting entries, making it easier to record them. It can handle a very large volume of supplier invoices and integrates perfectly with your accounting management solution.
  
  
• iPaidThat is accounting management and automation software that will make your day-to-day life a whole lot easier.Using artificial intelligence and machine learning, it collects your invoices, enters them in the accounts and reconciles them with the bank, all automatically. So you can be more efficient and reliable, with a tool that's incredibly easy to use.
  
  
• Macompta.fr is an online solution designed for the self-employed and very small businesses. It offers good value for money and is easy to use, making it possible to automate a wide range of operations, including bookkeeping and bank reconciliation. The platform is comprehensive, with advanced features such as balance sheet and profit and loss statements, as well as cash management and tax returns.
  
  
• Pennylane is a comprehensive accounting software package that is perfectly suited to the needs of SMEs and their accountants. On the accounting side, the tool automates your operations as far as possible and reduces manual actions. So you can focus more on tasks with higher added value! But Pennylane goes even further, taking care of all management (invoicing, purchasing, etc.) and cash management. So you save precious time and make better decisions about your finances.
  
  

• QuickBooks will save you time on your bookkeeping! This software, designed for the self-employed, VSEs and SMEs, automates your accounting processes: from entering expenses and monitoring budget forecasts to recurring payments and bank reconciliation. Take advantage of free customer support to get to grips with the tool at its full potential.
  
  

• Sage Business Cloud Compta is 100% cloud software tailored to the needs of VSEs and SMEs. As well as giving you the benefit of Sage's solid expertise, the solution saves you precious time. For example, it automates the generation of purchase, sales and cash flow entries (importing your invoices and bank statements), as well as checking and validating them. All with the help of a modular, easy-to-use tool.
  
  

• Spendesk is a solution that centralises all your company's expense management. It automates data entry, invoice collection and bank reconciliation, and interfaces with your accounting software to export your data in a click, with the peace of mind of knowing that you have reliable data and all the supporting documents associated with your expenses.

Check out our comparison of the best accounting software to find the right tool for your needs and budget.

You can also use an online chartered accountant, an online accounting management solution that includes both an automation tool and personalised support from an expert.