journal accoumt

[saibaba]

what is meant journal accounting and flow

[SIVAKUMAR_G]

Hi

There were two types of accounting system

a) Single Entry Accounting System
b) Double entry accounting system

Single entry accounting system is now of limited Use

Under Double entry accounting system every transaction
is entered through a Journal and posted to ledgers.This is
recognised and worldwide accepted system of accounting now.

There are two types of ledgers
a) Primary Ledgers
b) Secondary Ledgers

Primary Ledger comprise of General Ledger and Cash Book.

Secondary ledger comprise Sales Day book, Purchase Day book,
Debtors Ledger, Creditors Ledger, Petty cash and Asset Register etc.,

Journal accounting means recording of any financial transaction or Monetary Transaction in the form of a journal entry with a Debit and Credit account under double entry system of accounting.

Due to evoultion of ERP system and the redundancy of data entry involved in recording a every financial transaction in Journal Register
and then posting to Subledger again has been totally removed

Nowadays the Transactions affecting Subledger are directly entered and
transferred to General Ledger which has the Supporting Documents
without journalising the transaction in Journal Register.

Example

Prior to evolution of ERP or when the Double entry system of accounting is under evoultion stage, when they need to record a sale for 1000 USD
They create a Journal as follows

Step 1) Receivables A/c Dr
Revenue A/c Cr
enteredin the Journal Register

Step 2)
Receivables A/c Dr (Entered in Debtors Ledger and then a consolidated balance at end of month posted in General Ledger) with Page reference No of Journal Register
Revenue A/c Cr (Entered in General Ledger) with Page reference No of Journal Register

After evolution of ERP the Sales Invoice is created in system which creates this transaction and entered in Sales Register which has a supporting document and the Journal entries are created in receivables Subledger and transferred to GL which means step 1 in the above example is totally eliminated.

At present, Journal Register is used to record only when there is no cash element is involved and entered in General Ledger.

Example

Booking the Dividend expense

Dividend A/c Dr
Proposed Dividend A/c Cr

The Financial Transactions which are created in subledgers are now transferred to General Ledger in any ERP system and Trial balance is made for both Cash and Non Cash charges (Journals entered directly in GL as per given examples above) which is called as Flow

From the Trial Balance, Profit and Loss Account and Balance Sheet are prepared which are referred to as Financial Statements.

Regards
Sivakumar