Being able to automate recurring journal entries can translate into a large time savings to your company. Perhaps you have heard the term ‘Recurring Journal Entry’ before and maybe you have also heard ‘Memorized Journal Entries’. Have you ever wondered what the difference is between the two? While they both translate into time saved, they are useful in different circumstances.
The main difference between these two types of automated journal entries is that one can be changed before it is posted and the other cannot. We will explain the two types using real life examples of specific scenarios where they would be useful.
Each and every month company ABC Inc pays bank charges on their numerous bank accounts. Month after month Janet is required to manually create Journal Entries for the $5 bank fee on each bank account. This is both monotonous and time consuming. Imagine setting up a process that would create this Journal Entry at the end of each month automatically! Because the amount of the bank charge is set and doesn’t change often, Janet would set up a Recurring Journal Entry in this case. Once the setup is completed Janet needs not do a thing! Every month, without fail, this charge will be automatically be made and post with no user interaction whatsoever!
Another Journal Entry that requires creation monthly at ABC Inc is one for the income coming in from interest on the bank accounts. The main difference between this monthly charge and the bank fee charge is that the amount of the interest income can change from month to month. For example, in March the income might be $26.34 but in April it might be $30.80. Because the value of this entry is subject to frequent change a Recurring Journal Entry would not be a good fit. Instead Janet will set up a Memorized Journal Entry for this monthly charge. Every month when the Journal Entry is created Janet will have the opportunity to go into the transaction to enter the correct amount based on the actual amount of interests earned.
Whether Memorized or Recurring, both types of Journal Entries translate into the same thing for you and your organization…Time Saved!