Question

The accountant for Emerald Lawn Care never includes descriptions when making journal entries. What effect will this have on the accounting system?

Answer 1

Journal entries are recorded in a manner that it provides record of all business transactions in one place on date basis.

Depending upon the nature of the accounting system adopted (Cash basis / accrual basis), the passing of journal entries are determined.

There are different nature of journal entries like, receipt journal entries, accural journal entries, adjustment journal entries etc.In order for any person / auditor to know the details about and behind the recording of an journal entry necessary description is required.

The effect of not writing any description while making journal entries are that :

1) Any person referring the entries will not be able to correctly tell as to what is the nature of the transaction.

2) If there is a mistake in the recording of the journal entry, rectification cannot be done without knowing it's proper details and whereabouts.

3) Tracing any details / an entry becomes difficult in absence of narration.

4) Important audit trial goes off the trial.

5) Increases the scope of goofing up the books of accounts.

6) Increases the chances of Fraud and misappropriation / misrepresentation.