Linked accounts are an integral part of Simply Accounting's inner workings, so this week we'll be taking a look "under the hood" to explore exactly what they do and why they're so important.

The main purpose of linking an account is to keep that account balanced with your sub-ledgers.  For example, Accounts Receivable is a linked account because Simply Accounting will make sure that its balance equals the total of all your owing customer invoices.  By having the account permanently linked to its module, this balance is maintained for you automatically.

You'll notice that when you enter a sales or purchase invoice, you don't have to select Accounts Payable or Receivable.  That's because the system has linked those accounts to the journals, and will update them automatically in the background.  If you want to see this in action, next time you prepare an invoice, click the Reports menu and display the journal entry/transaction details.  Here you will see the debit or credit to AP or AR.  If not for linked accounts, you would have to do this manually.

But what happens at year-end when your accountant sends you a list of adjustments to be made to these accounts?  A common mistake is to go into the General Journal and try to post directly to AP or AR.  But you won't find those accounts in your list, and for good reason.  Remember how the balance has to equal your sub-ledger's total of invoices?  If you were to post to the account directly, no customer or vendor record would be updated, and there would be no invoice to account for it.  It is possible to unlink these accounts, but the result will be a "data inconsistency" with the sub-ledger.  Never unlink accounts, unless there is already a data inconsistency that you need to correct.

To illustrate this, click Maintenance, Check Data Integrity.  The balances on the left side are your accounts, and the balances on the right are the sub-ledgers, or in other words the total of all the invoices posted (There are other modules shown here for other linked accounts, but for now we'll only talk about AR and AP for simplicity's sake).  When you post an invoice, both sides are updated.  If you were to unlink an account and post to it using the General Journal, only the account balance on the left side would be updated.  An inconsistency like that will create an accounting problem and prevent you from advancing into a new fiscal year.

So what is the correct procedure?  Any corrections should always be done in the appropriate journal.  So if you need to adjust the Accounts Payable balance, for example, use the Payables module.  If a correction is required, that means that at some point there was a mistake involving a Purchase Invoice or Payment.