Manual journal and ledger

This is usually the least expensive solution but the most time consuming. You will need to purchase at least two books: a general journal and a general ledger. You can purchase these from most office supply stores.

The general journal will be a large wire-bound book with eight, sixteen, or thirty-two columns. In it, you will record the details of your transactions. Each column will represent either a balance sheet or income statement item.

The general ledger is usually a three-ring binder containing ledger sheets. Each sheet represents a balance sheet or income statement item. The monthly summaries from the general journal are posted in the general ledger, which keeps a running total of each account balance.

Sample 1, an example of a typical general journal page, appeared earlier in this session. Note that most accounts have only either a debit or a credit column, depending on the nature of the item. For example, revenue is a credit; all expenses are debits. Any unusual transaction, such as returned goods or a refund of insurance premiums, that required a debit to revenues or a credit to an expense would be shown with brackets around it.

Exceptions to this rule are the bank columns. Here you have both a debit and a credit column as well as a balance column, because there can be either debits or credits to the bank with regular frequency. The balance column allows you to keep track of your cash at any moment.

Note also that in this system, each row nets out to zero, meaning that the debits equal the credits, following the basic accounting principles.

At the end of the month, you will total all of the columns and post the totals to the general ledger.

The benefit of this type of ledger and journal system is its low cost; however, you may find that the time that you spent book­keeping could have been spent more profitably on income generating activities for your company. Not only will it take you longer to post the transactions after they have occurred, you must also handwrite (or type on a typewriter) all of your invoices, customer statements, checks, and letters to customers and suppliers.