What Is A Journal Entry?

Journal Entry (Definition)

A journal entry is a record of a business transaction in your business books. In double-entry bookkeeping, you make at least two journal entries for every transaction.

Because a transaction can create a lot of changes in a business, a bookkeeper tracks them all with journal entries. A transaction might, for example, affect:

• how much cash the business has (revenue or expense)
• how much money it owes (liability)
• what it owns (assets)
• the value of the business itself (equity)
• how tax is treated

Each account that’s affected receives its own journal entry.

What Goes Into An Accounting Journal Entry

Each accounting journal entry should contain the following:

• An entry date and reference number that can be used to find the entry later if needed
• A column showing what accounts are affected (revenue, expense, liability, asset, equity)
• Columns for the debit and credit amounts
• A footer line with a brief description of the reason for the entry

Journal Entry example

The Cosy Cake Shop bought baking supplies worth $300 on 20 January 2021. The bookkeeper increases the balance of the baking supplies account and decreases the cash account.