Please Stop Doing Journal Entries!

For the love of accuracy, I beg my fellow accountants to please stop making so many journal entries in Quickbooks. Most transactions in Quickbooks can be made using forms based data entry. Quickbooks is designed to use these forms for most transaction details. Generally, journal entries should be used as the exception, not the norm.

Amortization, depreciation and reclassifying entries are all valid reasons for journal entries in Quickbooks. Adjusting A/R, Cash or A/P are NOT best suited to journal entries.

AP and AR entries should always be made to specific customers or vendors and by using invoices, credits or bills. These allow the client to understand what vendor or customer is affected whether or not it’s a correct entry.

When CPA’s make unnecessary journal entries these (often vague) adjustments can sit for years because the client does not know what to do with them. I’ve seen many A/R adjustments that are extremely old that never were adjusted and the original transaction has long been cleared out. This can lead to over or understated income.

Further, journal entries don’t always give enough information as they usually have inadequate notes and the data may not be included in all reports. For example, using a check with a vendor name to record casual labor as opposed to using a journal entry will allow the 1099 processing feature to work properly. Customer and vendor related reports may be inaccurate as well if journal entries are used rather than the forms.

I understand we are usually just trying to get a tax return done or prepare financial statements under time pressure. However, I think we have to take a few extra moments ensure that clients understand the journal entries and why they are required, particularly in the case of A/R, A/P and cash. Most importantly, these entries should not create transactions that are vague or that don’t either reverse out or get cleared by a subsequent transaction.

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