Importance of Accounting Journal & How to Use It in WordPress
The word ‘Journal‘ is derived from the French word ‘Jour‘ which means ‘day‘. As accounting journal records all the transactional data on a daily basis, it has been named so. If you want to follow the double entry system for the accounting process of your business then the journal will be the foundation regardless of the size of your business enterprise.
However, recording the transactions in accounting journal book for a nonaccountant can be an overwhelming task but with an automated accounting tool, you can get it done with almost no efforts. In this article, we will take a look at how accounting journal is important for your company and how to use it in WordPress to lessen your hassle and save your time and money.
How is accounting journal important for your business?
- Since a transaction is recorded as soon as it occurs, chances are very low that you will exclude a transaction that matters to your small business.
- Accounting journal maintains the chronological approach of recording all the transactions. Therefore, it becomes easier for you to retrieve data regarding a particular transaction on a specified date.
- Not just the transactions are recorded but also they are written in the precise explanation which tells the whole story of a financial event.
- All the transactions are broken down according to their debit and credit nature and then for every debit entry, we assign an equal amount of monetary value to their corresponding credit entry. This ensures mathematical accuracy in your accounting process.
- As journal entries include all the details, it is not important to add those details in ledger again. This is really helpful to keep your ledger concise and tidy.
- If you find any inconsistencies or mistakes in the ledger or trial balance then you can go back to the journal again to correct the mistakes. This means the accounting journal also acts as a reference to your financial statements.
Use the WordPress site as a simple accounting software
If you are already using a WordPress powered website for your business, you can use this free accounting tool to record your company's journal entries digitally instead of analog bookkeeping method.
This accounting tool is basically one of the three modules of WP ERP – One is HRM module, another is CRM module and the other is Accounting module. To use the tool make sure that you clicked on the aforementioned link to download, install and activate the plugin like most other WordPress plugins.
Note: In case you didn't have a WordPress website, not to worry! Read this article to know how to build a WordPress website efficiently.
After completing the activation process, when your accounting tool is up and running, navigate to WP Admin Dashboard → ERP → Accounting → Journal Entry. You will be able to see the following screen:
If you click on the New Entry button, you will get some options to enter your journal entries. After filling out those fields, just click on the Add Journal Entry button. On clicking the New Entry button, you will find the following screen:
Breaking Down Journal Entry in WordPress
Now, let's briefly discuss the options of the new journal entry.
- Reference: You will have to insert a unique reference for each journal entry you enter. The reference can be any text, number or symbol unique to other entries.
- Date: This is a mandatory field. It is recommended to enter the date on which the transaction is made.
- Summary: Journal entries have a proper yet concise explanation. Thus, with this required option, you can input appropriate narration of each of the transaction that you feed into the system.
- Account: The Account drop-down items is convenient enough to insert relevant account items. These items are shown from the list of accounts of the system. However, you can also add as many additional account items as you need.
- Description: You can jot down the reasons behind crediting or debiting an entry here. This option is not mandatory and so you can also skip this field.
- Debit/Credit: With this option, you can enter the monetary value of each of the entries according to their debit or credit nature.
- Add Line: What if a single transaction has more than two entries? Rest assured! You can add unlimited entries for a single transaction by this Add Line option. Pretty flexible, isn't it?
- Add Journal Entry: After filling out the form, finally hit this button to create your first journal entry as a part of the Accounting journal.
On May 17, 2018, Mr. John Doe started his small business with $1000 in cash, $2000 in the bank and with office equipment worth $1500.
Normally, the journal entries would be:
Now, let's insert these data into WP ERP's accounting module and take a look at how it looks like:
When you hit the Add Journal Entry button this newly created entry will be added to the Accounting journal book. Here's a preview:
Now, you can also edit the entry by clicking the Edit option. And if you click on the date, you will be able to see all the details of the entry. A print option is also available!
Please note that keeping accounting journal is not compulsory in the accounting cycle. However, its always recommended maintaining journal entries for the future reference. This reference is pretty useful when any legal issues or mathematical inconsistencies arise in the future.
In addition, the tool can help you save time, money and office space by automating your accounting process and storing data digitally. Once you put a journal entry, the accounting system will automatically pass that entry through all other accounting steps.
You can get an instant hands-on experience WP ERP Demo or download the free version from below right away!