Accounting Best Practices, Fifth Edition

12–6. Automate Recurring Journal Entries

The average financial statement many require several dozen journal entries before it is completed. Some of these entries can be quite large, perhaps to redistribute payroll costs to a large number of departments or to allocate occupancy costs in a similar manner. If they are substantial, it is easy to incorrectly enter them occasionally, resulting in revenues and expenses being sent to the wrong accounts, making the financial statements very difficult to compare from month to month. If the journal entries have been highly inconsistent over time, it may even be necessary for the general ledger accountant to review all of them and create new journal entries to correct the original entries. All of this work takes time, of course—and time is in short supply during the financial statement closing process.

Many general ledger accounting software packages have a feature that allows one to avoid the continual reentry of journal entries every month by setting up recurring journal entries which the system will automatically generate every month, with no further manual interference. This type of entry is only for those situations where the exact amounts of the entries do not change from month to month (e.g., for the allocation of occupancy costs), so it will only apply to a portion of the total number of journal entries. Nonetheless, by setting up recurring entries in the computer, there are fewer journal entries to make.

The only problem with using ...