Revenue and Expense Journal

Revenue-and-Expense-JournalA Revenue and Expense Journal is used to record the transactions of a business. They are recorded as revenues (income) and expenses.

  1. Revenues (income) are the transactions for which monies are received. Equity deposits and loan funds are not revenues.
  2. Expenses are all transactions for which monies are paid out. Owner draws and principal payments on loans are not included.

To make the accounting more effective, you will need to have enough columns in the Revenue & Expense Journal to cover major categories of income and expenses (or create two separate forms, one for revenues and one for expenses). If you have done your homework and figured out the areas of direct and indirect expenses, these divisions will serve as headings in your journal. Usually, a 12 column journal will suffice for most small businesses, but fee free to use more or less, as long as your report is clear and easy to interpret.

Avoiding Errors

The Revenue and Expense Journal is an important part of your bookkeeping. On this form, each entry is recorded twice to help with checks and balances at the end of each month. Every transaction is entered in one of these two columns. The next groups of three and five columns are breakdowns of revenues and expenses. The entry is first recorded as a revenue or expense and then entered in its corresponding breakdown column. For example, an advertising expense of $100 would be entered under the heading Expense and also under the expense breakdown heading Advertising. When the columns are totaled, the amount under Expense will equal the sum of all expense breakdown columns. The Revenue total will equal the sum of all expense breakdown columns. This serves as a check for accuracy and will save hours of searching your records for errors when attempting to balance the books.

Headings in the Revenue and Expense Journal

The column headings in the Revenue and Expense Journal for any business will follow the same format. The first five column headings are:

  1. Check No.
  2. Date
  3. Transaction
  4. Revenue
  5. Expense

Remaining columns are used for individual categories of revenue and expense for which you most frequently write checks or receive income.

  1. Revenue breakdown columns will be divided by source (eg as a publisher and teacher, I have Book Sales, Software Sales, Sales Tax, and Seminar Fees).
  2. Expense breakdown columns reflect the categories for which you most frequently write a check (eg Inventory Purchases, Freight, Advertising, Office Supplies, Vehicle Expenses, etc)

The headings for the individual revenue and expense columns will vary from business to business. Every business is different and may take some time to determine the categories that will best reflect the transactions of your particular venture. If you are coordinating your bookkeeping with a tax accountant, you might ask that person to help you develop your headings. The best rule of thumb is to devote a column to each type of expense for which you frequently write a check.

Miscellaneous Column

The last column in any Revenue and Expense Journal should be Miscellaneous. This column serves as a catchall for any expenses that does not fall under a main heading. For example, insurance may be paid only once a year and therefore a heading under that title would not be justified. Record that transaction first under Expense and secondly under Miscellaneous, with an explanation either under the Transaction column or in parenthesis next to the amount in the Miscellaneous column (eg you write only one check every six months in the amount of $500 for insurance, so you put “$500 [insurance]”). The explanation is a must. This will allow you to group infrequent expenses under one column and still be able to allocate them to the proper expense categories at the end of the month when you do a Profit & Loss (or Income) Statement.

Totals

Each column should be totaled at the bottom of each journal page. Remember to check accuracy. The sum of all revenue breakdown columns = the sum of the column headed Revenue and the sum of all expense breakdown columns = the sum of the column headed Expense. All totals are then transferred to the top of the next page and added in until you have completed a month. At the end of the month, the last page is totaled and checked. The breakdown revenue and expense totals are transferred to your Profit and Loss Statement and a new month begins with a clean page and all zero balances.

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