A recurring journal entry is a journal entry that is recorded in every accounting period. For example, a company issuing monthly financial statements might record depreciation by debiting Depreciation Expense for $3,000 and crediting Accumulated Depreciation for $3,000 each and every month. If the accounts and the amounts are identical each month, the recurring journal entry might be referred to as a memorized entry if the accounting software produces and records the entry. Some accountants refer to this type of recurring journal entry as a standard journal entry.
The term recurring journal entry can also refer to monthly journal entries where the accounts are identical but the amounts vary by month. For example, the journal entry to record property insurance expense might involve Insurance Expense and Prepaid Insurance every month, but the amounts will change when the amount of the prepaid insurance premiums change. Other recurring entries will involve the identical accounts, but the amounts will be different in each accounting period. An example is the payroll entry. Each payroll entry will have the same accounts but different amounts due to the number of hours worked. Other examples of recurring entries with amounts that differ each period include sales, interest earned, interest expense, bank service charges, and so on.
One company's recurring entry with differing amounts is generated by its software. Each month its computer system debits Freight Expense and credits a liability Accrued Freight for the pounds shipped multiplied by a freight cost per pound. When the freight bills are received and paid, the liability and its cash are reduced. As long as its cost per pound is accurate, the company's computer system is routinely achieving the matching principle and the accrual method of accounting with little professional effort.
Keep in mind that accountants may have different definitions of recurring journal entries.
