What Is an Accounting Journal Used for In Business

What Is an Accounting Journal Used for In BusinessWhat Is an Accounting Journal Used for In BusinessNew geschftlicher umgang owners and aspiring entrepreneurs wont get far in business without understanding what an accounting journal is and why its so fundamentally important to success. Youll need an accounting journal for day-to-day operations, for budgeting, and- of course- for tax purposes. And youll need to keep track of all those things as soon as you open your doors to clients or customers and begin engaging in commerce. Recording Financial Transactions of Your Business An accounting journal is just what it sounds like- its a place to record the details of all the financial transactions of your business. And it keeps a record as to which of your accounts these transactions affect.In accounting terms,a journal refers to a financial record kept in the form of a book, spreadsheet, or accounting software. It contains all the recorded financial transaction information about a bus iness. Its also known as abook of first entry. Keeping an accounting journal can prevent your business from overspending in some areas while underspending in others. It can also prevent you (and your executives) from overdrawing funds, and it can help you spot any irregularities before they get out of hand. In short, although its just a simple book or a computer spreadsheet, an accounting journal can prevent a potential crisis from starting or spreading. Before computers, an accounting journal was a physical log book with multiple columns to record financial transactions for a company. Today, most businesses use sometype of financial accounting software to record and manage their business transactions. These transactions are then assigned to a specific ledger class using a chart of accounts number to prepare profit and loss statements, financial statements, and other important financial reports. How to Create an Accounting Journal An accounting journal is created by entering inf ormation from receipts, sales tickets, cash register tapes, invoices, and other data sources that show financial transactions that have occurred- including returned, damaged or stolen inventory. Business transactions should be presented in the journal in chronological order. Entries are initially recorded using thedouble-entry methodor the single-entry methodof bookkeeping.Typically, although transactions are basically entered in the order in which they occur, debts are entered in their own order, before credits are entered. You dont have to stick to this format, but everyone who recordsin the journal should adhere to the same agreed-upon guidelines to prevent confusion. Each listed transaction is referred to as a journal entry.Information from the journal is then recorded in the businessledgers. Getting Started If you havent already started your business, think about which individuals in your company you want to have access to your accounting journal. Obviously, it should only be people you trust and individuals with designated financial or management roles within your organization. This is definitely a situation where less is more and it might mean only granting access to your chief financial officer or treasurer, or- in a simpler organization- you and your bookkeeper. Although you dont want too many individuals to have access to your accounting journal, its also a bad idea to let just one person have oversight of it. A select few should know the contents of the journal to prevent any inappropriate spending or budget shortfalls from wreaking havoc on your companys finances.