An accounting journal is an accounting worksheet that allows you to track each of steps of the accounting process, side by side. This accounting journal template includes each step with sections for their debits and credits, and pre-built formulas to calculate the total balances for each column.
General Journal
Thus, For accounting purposes, a journal is a physical record or digital document kept as a book, spreadsheet, or data within accounting software. So, When a business transaction is made, a bookkeeper enters the financial transaction as a journal entry.
Types of Journal in Accounting
- Purchase journal.
- Sales journal.
- Cash receipts journal.
- Cash payment/disbursement journal.
- Purchase return journal.
- Sales return journal.
- Journal proper/General journal.
Journal Entry Example
Book of Original Entry
One important key to journal entries is that they need to contain enough information to clearly reflect the actual transaction. Moreover, instead of only having account balances, we can look back at journal entries to see what really happened and if anything was recorded incorrectly.
Thus, A journal entry has the following components:
- The date of the transaction
- The account name and number for each account impacted
- The credit and debit amount
- A reference number that serves as a unique identifier for the transaction
- A description of the transaction
What Are Debits and Credits?
So, Under the double-entry bookkeeping method, debits and credits in a journal entry must be equal. Therefore, Journal entries must also be consistent with the general accounting equation which describes the balance sheet:
Assets = Liabilities + Owner’s Equity
Using this equation, debits are record on the left, and credits on the right. So, This means that debiting an account on left side of the equation — an asset account — increases that account. Debiting an account on right side of the equation — a liability or an equity account — will decrease the balance in that account.
A credit amount has opposite effect. Crediting an asset account decreases the balance, while crediting a liability or equity account increases it. Thus, Over the income statement, revenue accounts are increase by credits, and expense accounts are increased by debits.
