This guide provides an overview of journal entries, a detailed analysis of systematic and manual approach, the management review considerations, and explains some of the common journal entry deficiencies.
A journal entry is an entry to a specific journal or sub-ledger (sales journal, purchases journal, cash receipts journal, cash disbursements journal). A journal is a record that keeps accounting transactions in chronological order, i.e. as they occur. Journal entries are used to construct financial statements at reporting period ends. There are three types of journal entries: system entries, manual entries and top side entries. It is important that auditors understand segregation of duties regarding the authorizing, posting, and reviewing of journal entries, and separation of reconciliation reviews. In addition, what general ledger system and other technologies are used? Are there one or multiple ledgers? How do journal entries roll-up into the financials?