{"id":271518,"date":"2023-12-06T12:50:11","date_gmt":"2023-12-06T00:50:11","guid":{"rendered":"https:\/\/www.reckon.com\/au\/?page_id=271518"},"modified":"2026-06-09T18:01:40","modified_gmt":"2026-06-09T06:01:40","slug":"journal-entry","status":"publish","type":"glo","link":"https:\/\/www.reckon.com\/au\/glossary\/journal-entry\/","title":{"rendered":"What is a journal entry?"},"content":{"rendered":"

[et_pb_section fb_built=”1″ custom_padding_last_edited=”off|desktop” _builder_version=”4.27.2″ custom_margin=”0px||0px||false|false” custom_padding=”0px||0px||false|false” custom_padding_phone=”0px||||false|false” locked=”off” global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on” da_disable_devices=”off|off|off”][et_pb_row column_structure=”1_3,2_3″ _builder_version=”4.27.2″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” width=”100%” custom_margin=”0px||0px||false|false” custom_padding=”0px||0px||false|false” global_colors_info=”{}”][et_pb_column type=”1_3″ module_class=”table-contents” _builder_version=”4.23″ background_color=”#f3f2f6″ custom_padding=”25px||25px||true|false” sticky_position=”top” sticky_limit_bottom=”section” sticky_position_tablet=”top” sticky_position_phone=”none” sticky_position_last_edited=”on|desktop” border_radii=”on|24px|24px|24px|24px” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text _builder_version=”4.23″ text_font=”||||||||” global_colors_info=”{}” background__hover_enabled=”on|desktop”][\/et_pb_text][\/et_pb_column][et_pb_column type=”2_3″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”Definition description” _builder_version=”4.27.6″ header_2_font_size=”32px” hover_enabled=”0″ header_2_font_size_tablet=”30px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n

A journal entry is a record of a financial transaction in your business\u2019s accounting system. Every entry records debits<\/a> and credits to at least two accounts, which keeps the accounting equation (Assets = Liabilities + Equity) in balance.<\/p>\n

Why are journal entries important?<\/h2>\n

Ultimately, it\u2019s because they create an audit trail of every financial transaction you make. They make sure your financial records are accurate, and your financial reports show the true state of your business\u2019s financial health.<\/p>\n

Without proper journal entries, your account balances would be unreliable. And that has knock-on effects. Good records help you stay on top of compliance with your tax and reporting obligations, as well as help you track cash flow and make smarter decisions.<\/p>\n

How is a journal entry structured?<\/h2>\n

Every journal entry includes five elements: the transaction date, account titles for all accounts affected, the debit amount, the credit amount and a brief description of the transaction.<\/p>\n

[\/et_pb_text][et_pb_image src=”https:\/\/www.reckon.com\/au\/wp-content\/uploads\/2024\/08\/journal-entry.png” alt=”Journal entry requirements are a date, account title, debit, credit, and description” title_text=”Journal Entry” align=”center” _builder_version=”4.27.6″ _module_preset=”default” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″][\/et_pb_image][et_pb_text admin_label=”Definition description + related terms” _builder_version=”4.27.6″ header_2_font_size=”32px” hover_enabled=”0″ header_2_font_size_tablet=”30px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n

The debit is recorded on the left side; the corresponding credit goes on the right. Debits and credits must always balance; total debits have to equal total credits, and total credits have to equal total debits. Every entry also gets its own reference number for tracking.<\/p>\n

How do debits and credits work in journal entries?<\/h2>\n

Debits work by increasing asset and expense accounts. Credits increase liability accounts, revenue accounts and equity, which is how the double-entry accounting system keeps the accounting equation balanced.<\/p>\n

Let\u2019s say you buy $500 in office supplies with cash, you debit the office supplies expense account by $500, and credit the cash account by the same amount. The entry has equal debits and equal credits.<\/p>\n\n\n\n\n\n
General Journal<\/th>\n<\/tr>\n
Date<\/td>\nTransaction<\/td>\nDebits<\/td>\nCredits<\/td>\n<\/tr>\n
10\/07<\/td>\n\n

Office Supplies Expense<\/p>\n

Cash account<\/p>\n

Purchased office supplies<\/em><\/p>\n<\/td>\n

\n

500<\/p>\n

 <\/p>\n

 <\/p>\n<\/td>\n

500<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

What are the different types of journal entries?<\/h2>\n

There are several types of journal entries, the most common of which are:<\/p>\n