Diary book

Daily Book , also known as an “original entry” Book, is where the economic transactions carried out by the entity are recorded for the first time, unlike the Mayor, which is a “final entry” book.

Summary

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  • 1 The Diary
    • 1 Rules for journal entries
    • 2 Forms of the Diary
    • 3 Record of transactions in the Journal
    • 4 Composite journal entries
      • 4.1 Passes to Major
    • 2 Trial Balance
      • 1 Main objectives of the Trial Balance
      • 2 Procedure to take the Trial Balance
    • 3 Sources

The newspaper

In each entry or entry made in the Journal, the analysis of the transaction is recorded: accounts affected in debits and credits and a brief explanation of the operation, which allows observing and evaluating the volume and nature of activities in a given date or during a certain period.

Rules for journal entries

In journal entries, the double entry rule must be met: the sum of the amounts of debits must be equal to the sum of the amounts of credits .

Journal Shapes

The form of the Journal is conditioned by the information that must be collected when recording each transaction:

  • Transaction date.
  • Account to debit and its amount.
  • Account to be credited and its amount.
  • A brief explanation of the transaction made.

Record of transactions in the Journal

The first and most fundamental part of accounting operations is the analysis of transactions to determine their debit and credit elements. This analysis operation is followed by the registration or entry in the Journal. In this analysis process, care must be taken that in each transaction, the amount of debits must be equal to that of credits. The practical rule of double entry expresses the mathematical principle of journal entries. To be sure of this equality, the two columns of amounts in the Journal are added at the end of each page. These totals, with a single line above and double lines below them, must be written at the foot of the page with the legend “To the next page” and then must be written on the other page, without special lines, with the legend “From the page ”(You can also write“ To folio x ”and Del folio x).

Composite journal seats

The journal entry that has only one debit and one credit, that is, that affects only two accounts, is a simple journal entry. However, transactions generally affect three or more accounts. The entry for such transactions is a composite entry. Compound seats have two or more debits and two or more credits.

The double entry practice rule applies to single entries as well as compound entries and the total debits of a compound entry must equal the total credits.

Passes to the Mayor

After the company’s transactions have been analyzed and recorded in the newspaper, it can be affirmed that all the information that the company’s management needs on those transactions has been collected . However, it is not available in the best way. The information contained in the Journal must be transferred to the Mayor, with the exception of the explanations of the entries, to be classified in the affected accounts.

This operation of transferring the journal entries , original entry book, to the Mayor , final entry book, is known as “passes to the Mayor”. It constitutes a mechanical operation, but it offers the Accountant the opportunity to review the analysis made and recorded of the transaction.

Although the passes to the Major can be made at any time, it is recommended to set the opportunity in which they will be made. It is best to dedicate the first hours of each day or the last hours to this task before leaving the office. Passes must be made daily to keep the Mayor up to date.

Checking balance

The Trial Balance is nothing more than a list of all the G / L accounts on a columnar sheet of paper. Two columns are enabled on the right for the amounts in the G / L accounts. If the account has a debit balance, the amount of the debit balance is written in the first column, or “Debit” column; If the account has a credit balance, the amount of your balance will be written in the second column, or “Credit” column, the totals of both columns must match, as long as the work of analysis and recording of the transactions has been carried out correctly, from the mathematical point of view.

However, the Trial Balance only tests the arithmetic accuracy between debits and credits. It does not prove that all annotation work is correct. For example, a debit may have been posted to an account that is not correct and the Trial Balance does not discover that error. The Trial Balance only proves that the total of the Major’s debit balances is equal to the total of the credit balances.

Main objectives of the Trial Balance

The Trial Balance tests the following objectives:

  • It provides proof, as already stated, that the total of the debit balances of the accounts is equal to the total of the credit balances .
  • If the Trial Balance at the end of a month shows this equality, the error that exists is limited to that month and, therefore, it is not necessary to search for it in the annotations of previous months. This is true, provided that Trial Balances have been drawn up in all the months and have shown that equality between the debit and credit balances.
  • Determination of the balances of each account. These balances are necessary to prepare the financial statements of the company.

All Trial Balances that follow the first month of the economic period, contain the account balances calculated on a cumulative basis. The Trial Balance at the end of February , for example, will contain the cumulative amounts for January and February ; the one at the end of March will contain the cumulative amounts for January , February, and March , and so on, until the end of December , which will contain the cumulative amounts for all accounts for the year .

Procedure to take the Trial Balance

After the last transaction of the period has been recorded, the balance of each G / L account must be calculated.

The next step is to list all the Mayor’s accounts with their balances. In order to reduce the risk of omitting an account, it is convenient to list in the same order in which the accounts appear in the Ledger. The last step is to determine the totals of the two columns and check the equality of debits and credits.

 

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