Journal Entry
Definition
A journal entry is a record of a financial transaction in a company's accounting system, documenting the accounts affected, the amounts debited and credited, and a description of the transaction.
Explanation
Journal entries are the building blocks of the accounting system. Each entry follows the double-entry accounting principle, recording both a debit and a credit for every transaction. Entries include the date, accounts affected, amounts, and a description.
Common types of journal entries include standard entries (regular transactions), adjusting entries (accruals, prepayments), and closing entries (end-of-period). Journal entries are posted to the general ledger, which forms the basis for financial statements.
Example
A journal entry for a $1,000 sale on credit: Debit Accounts Receivable $1,000, Credit Sales Revenue $1,000, with a description noting the invoice number and customer name.