J is for Journal

Journal entries are the backbone of accounting records. Despite the shift from quill pens to wi-fi chips, from clay tablets to vellum sheets to a blinking data entry screen, the accountants have always had to keep track.

Reducing Eggs Payable

Historians generally saw the ancient cuneiform notations as some of the earliest examples of writing–and accounting–in the world. The large-scale management of taxes, grain allotments, and army rations for the burgeoning Sumerian and Egyptian empires took a lot of tablets.

But local farmers had to keep track on their own, so researchers think that “primitive” bookkeeping, even based on barter, would have still included writing in a ledger. A neighbor might agree to take three chickens in exchange for a bag of seed when the harvest is completed. Or, suppose another neighbor made a sturdy cabinet for the kitchen in exchange for a year’s worth of eggs.

There would still need to be journal entries:

Bought one sack of seeds : Three chickens payable to Farmer Jones
Bought one kitchen cabinet: Year’s supply of eggs to Farmer Kozlowski

Then, one of the kids had to be sent over every day to Kozlowski with the day’s supply of eggs, while someone would make the daily journal entry. Because if something happened to the parties in the transaction mid-year, Mrs. Kozlowski would want to know that she was still owed 183 eggs. On your books, that would be sitting as eggs payable.

Gimme that old-timey journal! Photo at Fredrikstad museum.

Using money would make that easier. Not only would you be able to equate your remaining eggs to the same valuation as the cabinet, say $183, but it also would allow seeds, chickens, eggs, and furniture to all be logged in the journal combined. Otherwise, you’d need separate columns for all the items you were bartering, and those books would get heavier than they already are. Money made it easier, and more eggs-act. (you knew that was coming, didn’t you?)

Old-time business manual, photo at Pinterest.

What Keeping the Books Looked Like

Keeping the books was an intense task that required daily diligence and painstaking attention to detail. Most of the formal business keepers into the 20th century were men, with women never pictured in the earliest photos, even though women were long-known to keep household accounts.

San Francisco Mint accountants, @19th century. Photo at business-case-analysis.com.

If your business were somewhat shall we say “unconventional,” involving oh say opium dens, smashing parking meters, or running “protection” rackets for the local deli owners, you needed very savvy accountants to keep two sets of books. There was one set used for public consumption, in case any forensic accountants were trying to “follow the money.” Then, there might be another set.

My ex-stepmother was an auditor for Coopers & Lybrand (modernized now as PwC), and she once told me the funniest accounting joke ever:

First auditor: What would you do if you found your company had two sets of books?
Second auditor. Well! I’d only audit one of them…

My ex-stepmother was also homecoming queen as a senior at the high school when David Letterman was a freshman. Not all accountants had large moustaches.

Don’t all accountants look like this? My ex-stepmother, a fine woman and a very funny auditor. Photo courtesy of kajmeister.

Hard-working, Long-Suffering. At Least There is Symmetry.

They all worked hard, though. She would spend long evenings at the kitchen table with a lot of papers. Many accountants work long hours because handling all those journal entries is time-consuming. Accountants have to close the books at the end of the quarter and the year. All the revenue and expense accountants which added up over the days now have large balances which have to be zeroed out.

But, not so fast!

Before you can clear out all the revenue and expense accounts, you have to run a Trial Balance to make sure all your debits and credits balance. If they don’t, you have to track through the year’s worth of entries to find what’s off.

Then, you have to log any accrual journal entries for those categories business people invented to spread things over time and to make accountant lives difficult. For instance, once a year, you might enter the amortization of your relocated Irish patents or depreciation of equipment. After all the accruals and the closing entries, you run another Trial Balance and pray to whatever gods you have that you still balance.

And…you have to do this either right before New Year’s or right after it. So, while everyone is partying like it’s 1999, you’re late in the office trying to find out who lost a debit.

By the time you’re done, you just want to rip up every piece of paper in sight. Which is where New Year’s confetti comes from.

Confetti, i.e. after the books are closed. Photo from atlasobscura.com.


One Reply to “J is for Journal”

  1. I think we need to look back at our ancestors. This post alone shows the money isn’t everything that we can all get have what we need just by the kindness of bartering with what we have. Great post!

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