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. You'll post your cash disbursements in a journal of entry . 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. This information will also be used to compute and pay your taxes at the end of the year.