everything you need to know about this accounting record
Keeping records in the journal is essential for you to comply with your company’s accounting obligations. This is why we created a basic guide where you will learn about the importance of the book, its structure, characteristics, common mistakes and more. Let’s get started!
What is the journal?
Also known as a general journal, the daily book is a mandatory accounting record in Spain. It records all the economic operations carried out by a company, a self-employed professional , an association or a public institution in chronological order.
It is one of the most important books within the General Accounting Plan , since it represents the basis for other records such as the general ledger .
The responsibility for preparing the journal falls on any company or person who carries out economic activities, including businesses, associations and public institutions. In practice, accountants or accounting professionals carry out this task, although it can also be outsourced to accounting firms.
Difference between journal and ledger
Although both registers are essential to improve the financial management of a business, only the daily book is mandatory under Spanish law. The general ledger is only used as a complement.
The main difference is that the general journal records are made chronologically, indicating the accounts that it affects. The general ledger, on the other hand, records are divided by accounts, which can be accounts such as “banks”, “cash”, “sales”, etc.
Features of the journal
Each entry made in the journal is known as an accounting entry. Each of them must have the following characteristics:
- The order of each transaction recorded in the journal must be chronological and error-free.
- Accounting entries are detailed, as they must provide enough information to understand the nature of the transaction without resorting to another document such as an invoice.
- Each accounting entry must comply with the double-entry oman email list principle, that is, for each “debit” there must be a “credit” of the same amount.
- All economic operations carried out must be included, without exceptions.
Format and structure
The accounting journal consists of a table with different vertical columns where the information of each operation is recorded. It must include the following:
- Date : This specifies exactly when the transaction took how to embed instagram feed in wordpress (5 easy steps) place and allows you to identify patterns in economic activity.
- Description : As we mentioned, a short description needs to be added to show the nature of the operation.
- Affected accounts : every activity affects at least two accounts, which must be identified with a number and their respective name.
- Debits : In this column, enter amounts that show an increase in assets, income or capital, as well as a decrease in liabilities.
- Credits : on the other hand, the decrease in assets or expenses and the increase in liabilities are recorded here.
- References : This is an optional column where you must telemarketing forum include some reference to other accounting documents related to the transaction.
Importance of journal in accounting
You already know what the journal is, so you can easily understand its importance for accounting. Being the first accounting record, it becomes the basis for making the balance sheet , the income statement, the cash flow statement , the general ledger, etc.
Furthermore, this accounting book helps to detect any accounting errors, as well as the omission of relevant information from any transaction. It works as a means to comply with current regulations and avoid committing any form of tax fraud.
We also cannot fail to mention the fact that the journal allows you to perform analyses to find out the financial health of your business. Through the record, you will obtain patterns of expenses or income that will help you improve your future planning and thus obtain better results.
Legal obligations related to the journal
The General Tax Law, in its article 29 , establishes that all companies must keep their accounting books, whether physical or electronic, in order to verify the accuracy of the tax returns made during a specific tax period.
In this same sense, the Commercial Code, in its article 30 , mentions that accounting records must be kept for at least six years from the date of the last accounting entry. Both regulations apply to the journal.
Failure to comply with these regulations or not properly record financial transactions may result in consequences such as:
- Administrative sanctions imposed by the Tax Agency or the Commercial Registry. These include fines, the amount of which will depend on the severity of the infringement.
- Without daily books, it becomes difficult to defend yourself in cases of litigation or legal disputes.
- Tax deductions cannot be claimed, since each one has to be duly recorded in the journal and other accounting records.
- It is difficult to obtain financing, since financial organizations require access to accounting books.
Formal requirements for preparing the journal
Both the Commercial Code and the General Accounting Plan establish some requirements for preparing this register in Spain, such as:
- Accounting records must be made in the official language of the country;
- The book must have the company’s identification, as well as its NIF ;
- Must include date, description and account affected by the transaction;
- It must comply with the double-entry principle;
- It must be signed and sealed by the person responsible for making the registration;
- All transactions are recorded in Spain’s official currency, the euro.
How do you make a journal?
The steps to make accounting entries in the accounting journal are simple, as long as you organize all the operations in chronological order. In this sense, you only have to:
- Identify and organize each of the economic transactions carried out;
- Note the date on which the operation was performed;
- Write a short and precise description;
- Indicate the accounts involved and whether they are debited or credited;
- Record the debit and credit amounts of each account.
Let’s now look at a small example of what a daybook should look like, in the context of a small shoe store.