What Are Manual Journal Entries and Their Importance?

Journal entries are systematic and detailed recordings of all financial transactions in the Mezan accounting software. These entries are recorded in the daily journal book as a starting point for the accounting cycle, serving several vital purposes:

• Adjusting entries for depreciation, accrued expenses, and prepaid items
• Error corrections in previous financial transactions and completing deficiencies
• Closing entries and account reconciliation at the end of the accounting period
• Opening entries and opening balances for the new period
• Reclassifications between different chart of accounts
• Recording complex transactions that don't fit with automated processes

These entries are essential for ensuring accuracy of financial reports and financial statements, providing a strong foundation for financial auditing and effective financial control.

Understanding Debit Accounts and Credit Accounts

Journal entries in Mezan follow the fundamental accounting equation: Assets = Liabilities + Capital. Every entry in the journal book must include perfectly balanced debit accounts and credit accounts to ensure accuracy of the general ledger.

Debit accounts increase in the following cases:

• Assets (cash, inventory, equipment, investments)
• Expenses (rent, salaries, utilities, operating expenses)
• Capital withdrawals and distributions

Credit accounts increase in the following cases:

• Liabilities (creditors, loans, accruals)
• Capital and retained earnings
• Revenues (sales, service income, other revenues)

This precise balance in the journal book ensures the integrity of the accounting cycle and accuracy of final financial reports.

Features of Journal Entries in Mezan Accounting Software

Mezan accounting software provides an advanced and integrated system for managing journal entries with comprehensive features for strict financial control:

• Complete integration with chart of accounts for systematic and accurate classification
• Automatic updating of general ledger and all financial reports and financial statements
• Advanced financial auditing system to track all financial transactions and changes
• Advanced and flexible permission management for strict financial control and access management
• Automatic account reconciliation to ensure balance of financial statements and error detection
• Advanced integration with sales and purchasing modules to facilitate commercial operations management

Comprehensive Practical Examples from the Accounting Cycle

![[مثال-توضيحي-قيود-يدوية-يومية-manual-journal-example-sample.png]]

Recording Sales and Cash and Credit Revenues

Scenario: Recording cash sales worth 5,000 SAR and credit sales worth 3,000 SAR in the journal book.

Entry in the daily journal for cash sales:

• Debit: Cash - 5,000 SAR
• Credit: Sales Revenue - 5,000 SAR

Entry for credit sales:

• Debit: Accounts Receivable - 3,000 SAR
• Credit: Sales Revenue - 3,000 SAR

Recording Purchases and Operating Expenses

Scenario: Purchasing raw materials on credit worth 4,000 SAR and paying monthly rent in cash 2,000 SAR.

Journal entries for purchases:

• Debit: Raw Materials Purchases - 4,000 SAR
• Credit: Accounts Payable - 4,000 SAR

Operating expenses entry:

• Debit: Rent Expense - 2,000 SAR
• Credit: Cash - 2,000 SAR

Managing Taxes and Government Obligations

Scenario: Accruing VAT worth 750 SAR and income tax worth 1,200 SAR.

Journal entry for taxes:

• Debit: VAT Expense - 750 SAR
• Debit: Income Tax Expense - 1,200 SAR
• Credit: Taxes Payable - 1,950 SAR

Opening Balances and Opening Entries

Scenario: Recording opening balances for the new year including cash 50,000 SAR and equipment 80,000 SAR.

Opening entries:

• Debit: Cash - 50,000 SAR
• Debit: Equipment - 80,000 SAR
• Credit: Opening Capital - 130,000 SAR

Best Practices in Journal Book Management

Daily Management of Journal Book

Maintain daily and regular recording of all financial transactions in the journal book without delay. Use clear and detailed descriptions for each entry to facilitate future financial auditing processes and periodic reviews. Ensure correct chronological sequence of all journal entries and sequential numbering.

Implementing Effective Financial Control

Apply a strong and tight financial control system that includes daily and weekly regular review of the general ledger and financial reports. Use advanced financial auditing features in Mezan to track all changes, approvals, and modifications. Establish strict controls for access to accounting books according to responsibilities and authorities.

Periodic and Comprehensive Account Reconciliation

Conduct monthly and quarterly account reconciliation to ensure accuracy of assets and liabilities and compliance with reality. Carefully review expenses and revenues to ensure complete compliance with supporting documents and original records. Verify precise balance between debit accounts and credit accounts in each period.

Closing Entries and End of Accounting Cycle

At the end of each accounting period, you need to accurately perform closing entries to properly and systematically complete the accounting cycle:

Closing Revenue and Sales Accounts

• Debit: All revenue and sales accounts
• Credit: Income Summary

Closing Expense and Cost Accounts

• Debit: Income Summary
• Credit: All expense and cost accounts

Transferring Net Profit or Loss

• Debit: Income Summary (in case of profit)
• Credit: Retained Earnings in Capital

These closing entries ensure a clean and organized start for the next accounting period and accurate updating of financial statements and preparation of new opening balances.

Avoiding Common Errors in Journal Book

Carefully avoid computational errors in journal entries by continuously verifying the balance of debit accounts and credit accounts in each entry. Never mix classifications of assets, liabilities, and capital in the chart of accounts. Ensure recording all financial transactions in the correct accounting period to guarantee report accuracy.

Integration with Mezan's Automation Features

Use journal entries to complement Mezan's automated invoicing, purchasing, and payment processes rather than replace them. Manual entries are essential for month-end and year-end closing procedures that ensure accurate financial statements and proper preparation of opening balances.

Conclusion

Journal entries are the solid foundation for sound accounting and accurate, comprehensive accounting cycles. Through correct and systematic use of the journal book in Mezan accounting software and precise application of debit and credit account principles, you ensure correctness and accuracy of financial reports and final financial statements. Start with simple entries for recording daily sales and purchases, and progress toward complex closing entries and adjustments. This systematic and gradual approach in managing accounting books ensures successful comprehensive financial control and effective financial auditing for your company's prosperity.