| If you are in business, you have data-it's just a simple | | | | system. The analysis of business transactions in the |
| fact. It's what you DO with that data that can greatly | | | | form of old-fashioned journal entries is still important; it |
| affect your business success. Do you throw all of | | | | is merely handled in a different (and more efficient) |
| your invoices and receipts into a drawer? Or worse | | | | method as technology has grown over the years: with |
| yet, do you not even keep that information at all? | | | | a computer and software. |
| Doing either of these leaves you in the dark about | | | | Each transaction must somehow be recorded so that |
| your business finances, which can quickly end in the | | | | people may be able to refer back to the details of that |
| demise of your business. This is why general ledger | | | | transaction. The 'journal' serves as a diary where each |
| accounting was created. General ledger accounting is | | | | transaction is recorded. The next step is to take the |
| a system whereby, in a double entry accounting | | | | same transactions and record them into the ledgers. |
| system, each transaction is posted using debits and | | | | Journal transactions are recorded chronologically as |
| credits. The purpose of general ledger accounting is to | | | | units. The ledger is organized into as many different |
| know where you stand financially, so you won't have | | | | accounts as needed to accumulate the pieces posted |
| to guess about your financial position, and you can | | | | from the journal, and are classified according to |
| make better decisions. | | | | significant financial elements. |
| To record, in the formal sense of accounting, means to | | | | Once a general ledger accounting system is set up |
| make an accounting entry in a journal or in a ledger. | | | | and in use, it provides extremely useful information to |
| What has previously handled in a paper journal is now | | | | the business owner, allowing him or her to base future |
| typically handled by a computerized accounting | | | | decisions on solid financial information. |