Accounting Best Practices, Fifth Edition

12–20. Restrict the Use of Journal Entries

Journal entries can be the bane of the general ledger accountant who is desperately trying to issue accurate financial statements. The reason is that in the midst of cleaning up the general ledger in preparation for the issuance of financial statements, this person will sometimes find that a journal entry has miraculously appeared in the ledger, requiring a hurried investigation to determine who entered it, why it was made, and whether it was already duplicated by the general ledger accountant. After this added work, there is always the chance that even more entries will be made prior to the closing of the books for the reporting period. A particularly irritating problem is when a journal entry is made between the time when the financial statements are issued and the accounting period is closed in the computer system, since the change appears in the beginning balance for the next month, but does not show up in the financial statements! These problems are caused by allowing multiple people to create journal entries.

A much simpler approach is to restrict the task of making journal entries to a single person, the general ledger accountant. Even the controller should not be allowed to create journal entries. By using this approach, there is a single easily controlled point of entry into the general ledger, ensuring that the information entering the ledger has been verified in advance. The inevitable result will be fewer problems with the ...