- Published: Tuesday, 28 February 2012 03:44
In the accounting cycle, you have five journals, four of which handle most of the transaction processing your company will have. The cash receipts journal, which includes deposits from customers and invoices billed to customers, is one. You also have your sales journal, used to record cash sales receipts from customers, and for fully paid invoices from customers. There is also the purchases journal, used to record any inventory purchased and paid for by the company. The cash disbursements journal (accounts payable journal) keeps all purchases of items or bills paid on account. Finally, your general journal takes care of everything else that does not go in any of these other journals. Why are the journals so important to understand? Well, because they keep your financial information recorded in separate places unique to the transactions, and you can identify deficiencies in your business by looking at the balances of the specific vendors or customers accounts in your journals, or by seeing open invoices, clarifying slow paying customers. These are important concepts to be aware of in managing any business.