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What is a journal entry?

Author:
Harold Averkamp, CPA, MBA

Definition of a Journal Entry

In manual accounting or bookkeeping systems, business transactions are first recorded in a journal…hence the term journal entry.

Journal entries that are recorded in a company’s general journal will consist of the following:

  • the appropriate date
  • the account(s) and amount(s) that will be debited
  • the account(s) and amount(s) that will be credited
  • a short description/memo/reference

The journal entries appear in a journal in order by date and are then posted to the appropriate accounts in the general ledger.

Computerized accounting systems will automatically record most of the business transactions into the general ledger accounts immediately after the software prepares the sales invoices, issues checks to creditors, processes receipts from customers, etc. Hence, we will not write journal entries for most of the business transactions.

Examples of Journal Entries

Even with computerized accounting systems some general journal entries are necessary. Common general journal entries are the adjusting entries. For example, prior to issuing the company’s financial statements there will be an adjusting entry to record depreciation. This journal entry will debit Depreciation Expense and will credit Accumulated Depreciation.

Another example of a general journal entry is the adjusting entry to accrue interest on a bank loan. This journal entry will debit Interest Expense and will credit Interest Payable.

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About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

Learn More About Harold

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