Why Journal Entries are a Bad Idea

You should never use journal entries!

In QuickBooks, everything is transaction based. Meaning, there are two sides to every transaction. When you write a check, you post that check to an expense. The other side of that transaction shows it coming out of your bank account. When you use journal entries to enter these expenses, you lose some of the detail that goes along with a transaction and the ability for some reporting features. For instance, was this check to pay a bill? Maybe it’s a customer refund?

Without good documentation, we as accountants are not sure of the nature of the entry. That’s why you should leave the journal entries to the professionals.

That being said, there are some exceptions to the rule. There are times when we will provide you a list of journal entries to make. We would appreciate if you actually make these entries into your books. If you are uncertain, call us! Depreciation is an example of an entry we would ask you to do a journal entry for. This is a unique item that does not have a natural transaction. Other times might be after the tax return is complete. We need your ending balance to match the tax return. If you fail to enter the entries into your software, then your balance sheet will show incorrect figures.

 

Terra