A financial journal is a subsidiary or daybook where transactions relating to entry of stock, purchase, depreciation, interest, revenue, payroll, tax and other related accounting entries are recorded. The content of the journal consists of vouchers, receipts, invoices and journal entries. These are recorded either in real or symbolic value. The value of the transaction is the amount that has been paid or received plus the amount that was outstanding or at the time of the last entry. This means that the journal also records the value of future payments including rent, mortgage, alimony and child support.
Transactions are entered into the journal either by the owner of the property or by an agent on behalf of the owner. The entries relating to the transaction are entered in the account ledger, while those relating to the account debits are entered in the cash account ledger. The journals are arranged so that the transactions entered are recorded in order of their entry. An account ledger and a cash account ledger are separate books. They are the only two accounts that must be kept by each property-owner and each of them will record separately all the transactions entered into the journal.
A journal entry relating to a debit is the first entry for a debit transaction. This debit entry includes the date of generation of the debit, the date of authorization for the debit, the loan to the seller for the purchase of the property and finally the date of repayment of the loan. In a journal entry for a debit, the balance is simply the difference between the opening balance and the closing balance. An entry for a credit is the second entry for a credit transaction. A credit is simply an open line of credit against a property.
For example, if you were the owner of a business, you would have a number of business accounts and your business would enter all its transactions in your journal. However, there would be one journal entry for each of the business accounts. That entry would include the balance, the date of generation of the balance, the date of authorization for the payment of the balance and lastly the date of repayment for the balance. The purpose of this system is to provide a single source for recording the debits and credits. If any of these debits or credits is not recorded in your journal, then the debits or credits will never be reconciled in the books of the company.
The importance of keeping accurate journals cannot be over-emphasized. This is because if the accounting records are inaccurate, the financial statements and reports prepared by the accountant or business manager will also be inaccurate. Therefore, one must ensure that all the transactions entered in the journals are the correct ones.
There are several reasons why a journal may be used for recording business transactions. First, there could be an audit conducted by the CPA for a company. An auditor will check all the accounts and will try to find out if all the transactions have been correctly recorded in the general ledger. A record of all transactions entered in the journal will definitely ease the task of the auditor in finding out whether the accounts have been correctly recorded or not. Secondly, there may be inter-accounts transactions recorded in the journal. For example, when the customer requests for an additional service or property, the manufacturer will forward the transaction details to the retailer’s general ledger account and the retail store will debit the same for the additional purchase.
When you decide to use journal accounting, there are several options available in the market. You can either use the standard accounting software such as Quickbooks, Peachtree or MYOB (Mind Your Own Business Online), Microsoft Money, Quicken Home and Business, Netteller Business, Sage Entry and many more. All these programs are compatible with journal software. However, most of the accounting software comes free of cost depending on the internet marketing. If you go for standard accounting software such as Quickbooks, then you would have to pay an integration fee with regards to journal features. The Quicken Home and Business, Netteller Business and Sage Entry are free software packages designed for accounting purposes.
The last option is to use the free online debiting solutions available in the internet. Some of these are Vera Accounting (vaba). This free solution comes as a hosted software application. Another type of free debiting software is Fast Cash. It is a desktop application.
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