Consolidated entries in Practice

Aggregate entries are commonly used in businesses that have many recurring transactions within a short period. A typical example could be an online store that handles numerous daily sales. Instead of recording each individual sales transaction separately, the store can choose to combine all transactions into one entry, such as a daily or weekly aggregate entry.

Here’s an example of how aggregate entries can be used in practice:

• An online store has 200 sales transactions in a day. Each transaction involves a sale, payment through a payment gateway, and delivery of goods.
• Instead of recording 200 separate transactions, the store chooses to make a daily aggregate entry, where the total sum of all transactions, payments, and VAT is combined into one entry.
• The aggregate entry will include a total value for the day, including the total sales amount, the total VAT, and the total payments.

The advantage of this method is that bookkeeping becomes significantly easier while maintaining a clear overview of the company’s financial activities. The specific transaction details still exist in underlying systems (such as the online store system or payment gateway), should it be necessary to review individual transactions.

It's important to note that while aggregate entries make bookkeeping more efficient, the company must ensure that all necessary details for individual transactions are still correctly recorded in the underlying systems. This is particularly crucial for VAT accounting and any need for an auditor to review detailed data.

Advantages and disadvantages of consolidated entries

Advantages:

• Streamlining the bookkeeping process.
• Less time-consuming and lower administrative costs.
• Better overview of total transactions within a period.

Disadvantages:

• Lack of detailed transactions in the accounting records.
• Can create complexity if there’s a need to view or correct individual transactions.

Summary of consolidated entries

Aggregate entries are a method of combining multiple transactions into one entry in the accounts to simplify bookkeeping and create a clearer overview. It is particularly used in businesses with many transactions, such as online stores, to reduce administrative time and costs. While it is an efficient way to record entries, the company must ensure that all necessary data for individual transactions is still properly stored.