Journal Entry – Definition

Definition of journal (accounting):
An accounting record of a single transaction, in the ‘double entry’ accounting format.

What is a journal?

In simple English, a journal entry is an instruction to an accounting system to record a transaction. The journal entry (often shortened to ‘journal’), which provides it with the information it needs to record a transaction or multiple transactions.

A journal could be entered which represents a batch of individual transactions (for example, a days cash takings). This could save processing time, but as the information was entered on a single journal, the accounting system will treat this as a single larger transaction.

The data requirements of every accounting system will differ, but these are common fields that an accounting system will remember for each journal posted:

  • The balancing double-entry – i.e. the general ledger account codes being affected by the transaction, and amounts (which must balance to zero).
  • Effective date – i.e. when did the transaction physically take place.
  • Posting date – the date the journal was posted into the accounting system.
  • Description – a text field where the user can explain the purpose of the journal.
  • Document type or journal type – an automated field which describes the nature of the entry, such as a manual user-created journal, or a journal created by the system.

How is the word journal used in a sentence?

By posting the deferred consideration journal entry in this period, the balance sheet will reflect the total obligations of the joint venture.

The acquisition accounting journal entries will show the appropriate goodwill and equity balances in the consolidated financial statements.”

How does the definition of journal relate to investing?

Journal entries are the building blocks of the financial statements which you, as an investor, will encounter.

It is useful to gain a practical understanding of how double-entry bookkeeping works, to allow you to gain more insight when reading the annual reports of listed companies.

For more information, consider buying a financial accounting or management accounting book. Either of these will typically cover the topic of journals in their introductions.

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