The Importance of the Humble Journal Entry

Jun 2023
humble journal

‘From little acorns mighty oaks grow’ – Unknown

For any business, receiving timely financial statements which help in taking informed decisions is extremely important. Come to think of it, there is a lot of base work that goes into this before getting these statements out to the management.

Yes, we are talking about the humble journal entry. In plain accounting terms, the first cardinal rule is that everything sprouts from a journal entry. The accuracy of, or lack of it, on your final financial statements hinges on how beautifully and aptly the journal transactions are recorded in your books of account.

Scenario Effect

Booking Capex as Opex

1)Understating net Income

2)Inaccurate representation of Fixed Assets

Posting an expense to P&L instead of amortizing over a specified period

Understating Net Income

Not posting accrual of expenses

Overstating Net Income


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Phew! Just listing the possible effects of these simple sample scenarios taught us how skewed the numbers can look and how misleading they can be. Imagine many more of them happening all together? What would be the state of your books?

So, remember, for a great set of books of accounts and even more meaningful and spot-on reports, it is imperative that the base journal entries are recorded correctly at the time of entry itself. This not only saves the business a lot of time to go back and correct them but also assures the management of robust and reliable financial data to fall back on, today and in the future.

After all, was not the mighty oak nothing but a small acorn once? Enjoy bookkeeping in its purest form always! Remember a stitch in time saves nine! #247Digitize #Bookkeeping