General Accounting Information and Recreational Site

It is vital to keep individual personal accounts of debtors and creditors (as seen with the ledger accounts for Anna Butler - a receivable, and Ink Stores and Bettabuys - both parables), so that the business knows at any time to whom it owes money and who owes it money. However, it is often unnecessary to show every individual purchase and sale in the relevant account in the general ledger. Even a moderately sized business may generate many hundreds or thousands of invoices over a financial period, so it makes sense to show them in separate books known as day books.

There will be four day books:
• Purchases
• Sales
• Purchase returns (or 'Returns out')
• Sales returns (or 'Returns in').

At intervals, totals are transferred from the day books to the relevant accounts within the general ledger, thus reducing the number of entries within the ledger accounts. The day books are also useful for resolving queries, as they provide a chronological list of all invoices issued or received and goods returned to or by the business. They also have a role to play in the creation of control accounts  and in recording Value Added Tax (VAT) totals for official returns.


The journal

Occasionally there may be adjustments or corrections to the financial information recorded within the ledger system. Journal entries show which accounts are to be debited and which to be credited (always in that order), with a simple explanation for the entries, known as a 'narrative'.


• Integration of functions, avoiding duplication of effort
• Reduction in costs of professional accountancy services
• Provision of detailed financial reports for management
• Provision of summarised financial information complying with the regulatory framework.

References are given at the end of this chapter to the websites of a number of leading accounting software suppliers. Some might let you download 'demo' accounting programs for evaluation with no obligation to purchase them. Alternatively, try searching the Internet for freeware or shareware accounting software. If possible, download one of these programs. There are many more features available on these programs than can be utilized by this simple example, but it should give you the confidence to explore these further. The widespread use of computerized accounting packages has resulted in far less time spent on the processing of transactions and more on the control and evaluation aspects of financial management. For example, very detailed data can be extracted from the receivables ledger showing precisely the products or services purchased by customers and clients, the frequency of those purchases, changing trends in popularity of different product lines, etc.