what is journal entry
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Journal entry is an entry to the journal. Journal is a record that keeps accounting transactions in chronological order i.e as they occur. Ledger is a record that keeps accounting transactions by accounts. Account is a unit to record and summarize accounting transactions.
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In manual accounting or bookkeeping systems, business transactions are first recorded in a journal...hence the term journal entry.
A manual journal entry that is recorded in a company's general journal will consist of the following:
the appropriate date
the amount(s) and account(s) that will be debited
the amount(s) and account(s) that will be credited
a short description/memo
a reference such as a check number
These journalized amounts (which will appear in the journal in order by date) are then posted to the accounts in the general ledger.
Today, 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. The result is we will not see journal entries for most of the business transactions.
However, we will need to process some journal entries in order to record transfers between bank accounts and to record adjusting entries. For example, it is likely that at the end of each month there will be a journal entry to record depreciation. (This will include a debit to Depreciation Expense and a credit to Accumulated Depreciation.) In addition, there will likely be a need for journal entry to accrue interest on a bank loan. (This will include a debit to Interest Expense and a credit to Interest Payable.)
A manual journal entry that is recorded in a company's general journal will consist of the following:
the appropriate date
the amount(s) and account(s) that will be debited
the amount(s) and account(s) that will be credited
a short description/memo
a reference such as a check number
These journalized amounts (which will appear in the journal in order by date) are then posted to the accounts in the general ledger.
Today, 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. The result is we will not see journal entries for most of the business transactions.
However, we will need to process some journal entries in order to record transfers between bank accounts and to record adjusting entries. For example, it is likely that at the end of each month there will be a journal entry to record depreciation. (This will include a debit to Depreciation Expense and a credit to Accumulated Depreciation.) In addition, there will likely be a need for journal entry to accrue interest on a bank loan. (This will include a debit to Interest Expense and a credit to Interest Payable.)
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