Making Journal Entries
When bookkeeping used to be done manually, there were separate books for recording each type of business transaction. These books were called journals. There could be a Cash Journal, Sales Journal, Accounts Payable Journal, etc. Thus, the entries within a transaction became know as journal entries. As we discussed earlier, the journal entries must balance the debits with the credits.
In addition to the specific journals, there was also a General Journal for recording infrequent transactions that couldn’t be put into one of the journals. For example, you could record sales of stock here. After all entries were posted to each journal, they were summarized in the General Ledger.
In today’s accounting systems, having different tables to mimic the journals isn’t necessary. Depending upon the database model and the expected volume of transactions, it is reasonable to have a single table for tracking all journal entries.
Since journals were paper based, they weren’t big enough to store entries for more than a single year in them. New journals were used and year-end journal entries were made to prepare them for the next year. Certain balances were carried forward into the new journals so that the accounts wouldn’t lose their values. Other transactions were recorded to make adjustments to accounts with accrued balances.
Similar to the paper journals, most accounting systems archive data after one or two years. This keeps their performance optimal so you can access the data quickly. Year-end journal entries are still necessary to keep current balances accurate and to make year-end adjusting entries. When creating reports, you need to examine the tables to find out what date range the entries span. Knowing whether there is archived data and how account balances are carried forward is important for setting the correct date filters.
If you want more information about how accounting works, you can read a fun online tutorial at:
