In most research organizations, it is not unusual to have several projects that are being managed simultaneously in grant accounting software. Along with those projects, there are many expenses that are associated with them. These numerous expenses are accounted for in accordance with the award documents and the rules vary among different projects.
Although extreme diligence is placed on accurate reporting, the number and complexity of the grants at hand often lead to unintentional mistakes. These mistakes are normally discovered during the monthly reconciliation process in a grant accounting software such as IT Works. It is imperative that the mistakes be corrected in a timely fashion as to provide accurate reports to funding agencies, PI’s, internal departments and others.
Creating and Modifying Journal Entries
The method used for the corrections is called a journal entry. In accounting terms, a journal entry is a double sided entry of debits and credits that record the monetary transactions of an organization. Journal entries are used to record initial transactions as well as correcting entries. The entries are made in the general ledger system of the organization. Those entries are normally exported from the general ledger system at least monthly and then imported into a grant accounting software. After the exports and imports are completed, a reconciliation process is required to make sure that the general ledger system and the grant accounting system are in sync with the same data.
When corrections are needed to a project, a journal entry is made to reverse the original incorrect entry and to record the correct entry. The correcting entry would credit (reduce) the expense category for the project that was charged incorrectly. To apply the expense to the correct project, a debit (increase) would be made to the expense category for the correct project. These entries would bring the projects back in alignment with their actual expenses as recorded in the grant accounting system. The reporting options would also be accurate at this point.
Journal Entries and Effort Certification
Journal entries are also needed sometimes before effort certification can take place. This would be necessary if the cost of an employee’s time was charged to an incorrect project. In this case, a similar journal entry would be made. An entry would be made to credit (reduce) the payroll expense category of the incorrect project and the payroll expense for the correct project would have a debit (increase). It is imperative that any needed journal entries be made prior to an employee’s time being certified.
Journal Entries and Pay Adjustments
A need for journal entries is also created in the event of retroactive pay adjustments at research organizations. The increase in salary has to be distributed back to the period in which it began through the current period. A series of journal entries would be made in each of the periods to capture that change. If those periods were closed and reported on, there are systems and structures in place within the organization to properly handle those changes.
Grant Accounting Software for your Journal Entries
Research organizations strive for excellence in accounting for the expenses and income received. However, there are times that mistakes are made and need to be corrected. Journal entries are the tool that allows those changes to be made with ease. This tool keeps reporting up to date and accurate in the organization’s general ledger system and grant accounting system. For more on grant accounting software contact IT Work’s team to learn about our grant accounting system.