Journal entry definition - AccountingTools

A journal entry is used to record a business transaction in the accounting records of a business. A journal entry is usually recorded in the ... AccountingTools CPECourses CPECourses CPELogIn HowtoTakeaCourse StateCPERequirements Books CollegeTextbooks AccountingBooks FinanceBooks OperationsBooks Articles Articles TopicsIndex SiteArchive Podcast AccountingBestPractices PodcastIndex PodcastSummary Dictionary FAQs About About Contact EnvironmentalCommitment Home AccountingTools CPECourses/CPECoursesCPELogInHowtoTakeaCourseStateCPERequirements Books/CollegeTextbooksAccountingBooksFinanceBooksOperationsBooks Articles/ArticlesTopicsIndexSiteArchive Podcast/AccountingBestPracticesPodcastIndexPodcastSummary Dictionary/ FAQs/ About/AboutContactEnvironmentalCommitment Home/ AccountingTools AccountingCPECourses&Books Articles AccountingTools CPECourses/CPECoursesCPELogInHowtoTakeaCourseStateCPERequirements Books/CollegeTextbooksAccountingBooksFinanceBooksOperationsBooks Articles/ArticlesTopicsIndexSiteArchive Podcast/AccountingBestPracticesPodcastIndexPodcastSummary Dictionary/ FAQs/ About/AboutContactEnvironmentalCommitment Home/ WhatisaJournalEntry?Ajournalentryisusedtorecordabusinesstransactionintheaccountingrecordsofabusiness.Ajournalentryisusuallyrecordedinthegeneralledger;alternatively,itmayberecordedinasubsidiaryledgerthatisthensummarizedandrolledforwardintothegeneralledger.Thegeneralledgeristhenusedtocreatefinancialstatementsforthebusiness.Thelogicbehindajournalentryistorecordeverybusinesstransactioninatleasttwoplaces(knownasdoubleentryaccounting).Forexample,whenyougenerateasaleforcash,thisincreasesboththerevenueaccountandthecashaccount.Or,ifyoubuygoodsonaccount,thisincreasesboththeaccountspayableaccountandtheinventoryaccount.HowtoWriteaJournalEntryThestructureofajournalentryis:Aheaderlinemayincludeajournalentrynumberandentrydate.Thefirstcolumnincludestheaccountnumberandaccountnameintowhichtheentryisrecorded.Thisfieldisindentedifitisfortheaccountbeingcredited.Thesecondcolumncontainsthedebitamounttobeentered.Thethirdcolumncontainsthecreditamounttobeentered.Afooterlinemayalsoincludeabriefdescriptionofthereasonfortheentry. Thus,thebasicjournalentryformatis:   Debit Credit Accountname/number $xx,xxx       Accountname/number   $xx,xxx Thestructuralrulesofajournalentryarethattheremustbeaminimumoftwolineitemsinthejournalentry,andthatthetotalamountyouenterinthedebitcolumnequalsthetotalamountenteredinthecreditcolumn.Ajournalentryisusuallyprintedandstoredinabinderofaccountingtransactions,withbackupmaterialsattachedthatjustifytheentry.Thisinformationmaybeaccessedbytheexternalauditorsaspartoftheiryear-endinvestigationofacompany'sfinancialstatementsandrelatedsystems.TypesofJournalEntriesThereareseveraltypesofjournalentries,includingthefollowing:Adjustingentry.Anadjustingentryisusedatmonth-endtoalterthefinancialstatementstobringthemintocompliancewiththerelevantaccountingframework,suchasGenerallyAcceptedAccountingPrinciplesorInternationalFinancialReportingStandards.Forexample,youcouldaccrueunpaidwagesatmonth-endifthecompanyisontheaccrualbasisofaccounting.Compoundentry.Acompoundjournalentryisonethatincludesmorethantwolinesofentries.Itisfrequentlyusedtorecordcomplextransactions,orseveraltransactionsatonce.Forexample,thejournalentrytorecordpayrollusuallycontainsmanylines,sinceitinvolvestherecordationofnumeroustaxliabilitiesandpayrolldeductions.Reversingentry.Thisistypicallyanadjustingentrythatisreversedasofthebeginningofthefollowingperiod,usuallybecauseanexpensewastobeaccruedintheprecedingperiod,andisnolongerneeded.Thus,awageaccrualintheprecedingperiodisreversedinthenextperiod,tobereplacedbyanactualpayrollexpenditure.JournalEntryBestPracticesIngeneral,donotusejournalentriestorecordcommontransactions,suchascustomerbillingsorsupplierinvoices.Thesetransactionsarehandledthroughspecializedsoftwaremodulesthatpresentastandardon-lineformtobefilledout.Onceyouhavefilledouttheform,thesoftwareautomaticallycreatestheaccountingrecord.Thus,journalentriesarenotusedtorecordhigh-volumeactivities.Journalentriesandattacheddocumentationshouldberetainedforanumberofyears,atleastuntilthereisnolongeraneedtohavethefinancialstatementsofabusinessaudited.Theminimumdurationperiodforjournalentriesshouldbeincludedinthecorporatearchivingpolicy.RelatedCoursesBookkeeperEducationBundle BookkeepingGuidebook  Penetrationpricingdefinition Moralintensitydefinition CPECourses/CPECoursesCPELogInHowtoTakeaCourseStateCPERequirements Books/CollegeTextbooksAccountingBooksFinanceBooksOperationsBooks Articles/ArticlesTopicsIndexSiteArchive Podcast/AccountingBestPracticesPodcastIndexPodcastSummary Dictionary/ FAQs/ About/AboutContactEnvironmentalCommitment Home/ AccountingTools CollegeTextbooksAccountingBooksFinanceBooksOperationsBooks Sendusyoure-mailaddresstoreceivemonthlycoursediscounts * Thankyou! Copyright2021