TIP: An Audit Trail is simply a detailed log of every financial transaction in your business.The two principal financial statements required by all companies are their Balance Sheet and Income Statement.
Your Trial Balance, Balance Sheet and Income Statements simply manipulate and display the totals in your Chart of Accounts. That's important, but what if somebody says "Prove it!". What if the government wants you to prove the total in a tax Account? What if your accountant wants to know exactly how your inventory shrinkage Account got that way?
That is what an Audit Trail is for. An Audit Trail is simply a detailed list (or log) of every accounting transaction you entered in your system. To visualize what an Audit Trail is, pretend that you had a secretary sitting beside every workstation in your shop. Every time someone walked up to a workstation and did something, the secretary would write down in a log every detail of every transaction.
He or She would write down things like:
the date and time of the transaction,
what kind of transaction,
the amount of the transaction, and
what GL Accounts were affected by the transaction.
TIP: An Audit Trail is simply a detailed log of every financial transaction in your business.
To review, an Audit Trail is simply a detailed log of every financial transaction in your business.
In most instances, however, you want to view only those transactions that affect one GL Account - for instance Unemployment Insurance Deductions. A list of transactions that affect only one GL Account is called an Account Journal.
In traditional accounting, all transactions that affected one Account were listed in a ledger book called a Journal, then the totals from each of these ledger books were combined in a master book called the General Ledger.
TIP: An Account Journal is a filtered view of your Audit Trail - filtered to show only those transactions that affect one Account.