Journal Entry Reversal Integrated into an Organization-Wide Accounting
Essay Preview: Journal Entry Reversal Integrated into an Organization-Wide Accounting
Report this essay
For hundreds of years, accounting has been performed the same way. There are ten steps to get to the end result, a financial statement that balances. Technology is becoming an ever-more important part of accounting today. The above process needs to be updated to better serve those who use it. Instead of thinking of automation as just transferring all the steps into a computer, there needs to be a shift in thinking.
As mentioned earlier, there are many steps in the accounting cycle and one of those steps will be discussed here, step ten, reversing journal entries. This is done to “reverse adjusting entries made at the end of one period and prepare the accounting records for normal processing of business events in the new period. (Moscove, Simkin, and Bagranoff, 2003, p.94) A Journal can be defined as “a chronological listing of the firm’s transactions, including the amounts, accounts that are affected, and in which direction the accounts are affected.” (Journal Entries, ж 1) Journal entries are recorded in the “journal” as a debit and a credit. Debit and credits must balance. A journal entry would be made when cash that cannot be applied to any accounting module, such as accounts receivable, accounts payable, or payroll, has to be reflected in the general ledger.
At Bravo Underground, Inc. journal entries are made manually. For example, expenses and labor are expensed in the month of January for a receivable. The receivable is actually going to be credited into the month of February. In this case one would need to reverse the January entries and put them in February’s accounting date. This occurs because the receivable has a February accounting date and the expenses have to balance. This takes a lot of time and increases the probability for errors.
If a company-wide system that would automatically reverse these entries were to be introduced, in addition to saving time and money, Bravo Underground would have fewer errors.
The authors propose that journal entries be automated. Think of it this way: a monthly or weekly payable that is due at the same day of each month or week for the same amount the “memorize bill” feature is utilized. This function allows the information to be saved and paid automatically on the date requested. The accounting profession needs a program that would work the same way. The authors would also like to see it give a reminder when attempting to open a new month.
It would be integrated into the accounting process when all the information is inputted in the modules. All modules (i.e. A/R, A/P, P/R) are recorded in the general ledger. If there is a transaction that is not recorded to any module, a journal entry will be made. The journal entry has to be done in order to balance to the general ledger, it puts debits