A “Recurring Journal” is a journal that needs to be repeated and processed periodically. Recurring Entries are business transactions that are repeated regularly, such as fixed rent or insurance to be paid every month. Learn the various methods that can be used to generate recurring journals. See some examples and explore the generic process to create recurring journals in any automated system.
A “Recurring Journal” is a journal that needs to be repeated and processed periodically. Recurring Entries are business transactions that are repeated regularly, such as fixed rent or insurance to be paid every month. Each accounting period the journal should have the same accounts but the amounts could be different. A recurring journal entry enables you to automate similar or repeating entries. For users who need to post certain transactions frequently with few or no changes, it is an advantage to use recurring journals.
Recurring entries allow for common repeatable transactions to be saved in a template and created in multiple accounting periods upon request, making it unnecessary to retype the entire transaction thereby improving productivity. The Auto-generation of recurring accounting entries minimizes the occurrence of errors and omissions. Systems allow the generation of recurring entries at weekly, monthly, or any other frequency.
Needs to be entered periodically
The same set of accounts are included every period
The same number of Journal Lines
Logic exists to define the line selection criteria
Simplifies the process of recording repetitive journal entries
Creates same journal entries with varying or same amounts in different accounting periods
This is useful when the same accounts need to be used every period however the amounts get changed every time. In this scenario, the template is defined with no amounts, and amounts are entered manually every accounting period for which the entry needs to be generated.
This is useful when both accounts and amounts can be pre-determined. A good example of this scenario is fixed rent payable each month on a specific date. In this case, the template is defined with actual amounts, and journals are created and posted for relevant accounting periods.
This is useful when accounts can be pre-determined and amounts will be based on some logic or pre-defined formula. A good example of this scenario could be defining salesmen accounts as the pre-determined accounts. The commission is to be paid to these salesmen as a fixed percentage of sales made by each salesman during the month and sales for each salesman are recorded in separate accounts. A recurring journal can be defined that can look for the balance in respective sales accounts at the end of the period and automatically calculate the commission and create the required accounting entry for commission payable.
This method works best for repeatable transactions. For example annual expenses that can be charged through twelve equal monthly entries such as, rent or insurance expense allocation or annual lease rentals. Each month 1/12th of the total annual expense can be debited and credited to the appropriate accounts and appear as the current month’s actual transaction. Users can benefit by creating a recurring entry for some of the business scenarios listed below:
Users need to define recurring journal formulas for transactions that they want to repeat every accounting period, such as accruals, depreciation charges, and allocations. The formulas can be simple or complex but need to have some logic of ascertaining the amounts for each of the accounts that need to be repeated. Each formula can use fixed amounts and/or account balances and period-to-date or year-to-date balances from the current period, prior period, or same period last year. Given below is a generic process flow to define recurring journals:
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