As your organization grows, you'll begin using ledgers to track transactions, for example, you'll post cash receipts to a cash receipts journal and checks you write to a cash disbursements journal. As your nonprofit grows and as you begin using the accrual method, you'll likely need more types of journals, for example, a Cash Receipts Journal, Cash Disbursements Journal, Payroll Journal, Accounts Receivable Ledger, Accounts Payable Ledger, Sales Journal, Purchases Journal and General Ledger. Small organizations usually do not have the resources to use an accrual-based system. However, financial statements are prepared on an accrual basis. The double-entry method makes sure that your books are always in balance.
Every transaction has two journals entries, a debit and a credit .
Each transaction effects both sides of the equation. Each posting might refer to accompanying documents that you keep in a file somewhere. When you make a deposit to the bank, you'll file the bank's deposit receipt in a file. You should also generate your own financial statements and financial analysis at least for a couple of months. Having this knowledge and experience helps you develop an instinct for getting the most out of your financial resources.