The journal, the accountant’s “book of original entry,” is the chronological record of the financial events of the business. The events, referred to as transactions, are recorded in the journal as a financial quantity and the relationships that this quantity has components of the company. Within the journal, all of the data that is every used by accountants is recorded in one place. Everything other piece of data in the financial world is simply a copy or a summation of the data found in the journal.
From the primitive information found in the journal, accounting is able to generate new information that tells managers and investors:
1. The total income that was made by the business in a new given time period;
2. The total assets and liabilities of the business at a given point in time;
3. The flow of the company’s cash assets during a given time period;
4. The relative growth of the business during a given time period.
Given a journal, and no general ledger, an automated program is able to produce all of the data used in financial analysis. And, without the burden of a general ledger, the journal can produce this information for any arbitrary period of time.
See Banking the Past, page 43.
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