Accounting Journal Entries: Required Data, Formatting, and Examples

Accounting Journal EntriesAccounting is known as the language of business. It is the measurement and maintenance of financial records for an organization or an individual, and encompasses a range of related fields, from financial and tax accounting to management accounting.

Accountants keep special journals, within which they log details of a company or individual’s various financial transactions. In this guide, we’ll take a closer look at accounting journal entries, what they’re used for, and what they look like.

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What is an Accounting Journal Entry?

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Unlike a general ledger, a special journal is kept for the purpose of recording detailed financial transactions, rather than just a general overview. These special journals can come in the form of cash receipts journals, purchases journals, sales journals, and cash disbursement journals.

Recording transactions and analyzing their financial data is step one in the accounting cycle, the process of managing a company’s accounting events.

There are eight steps to the accounting cycle, including:

  1. Carrying out of transactions
  2. Recording of financial transactions in accounting journal entries
  3. Posting transactions to the impacted accounts
  4. Calculating a trial balance at the close of the accounting period
  5. Marking adjustments to trial balance calculations on a worksheet
  6. Posting adjusting entries in the journal
  7. Preparing financial statements
  8. Closing the books

Large companies often perform multiple transactions throughout the day. Journal entries are necessary because accountants can sift through the source documents these transactions are recorded on, such as invoices, and transfer the data into a comprehensible, contextualized, and analyzable form.

Because the point of journal entries is to organize, record, and analyze the impact these transactions have on a company’s accounts, it is important that they are kept in chronological order.

Bookkeeping is a specific types of accounting where accounting journal entries are commonly used. Find additional information and useful tips on bookkeeping with this handy accounting course.

What should an Accounting Journal Record?

Accounting journal entries should log each and every transaction made by a company, listed in chronological order, whether it is a debit or a credit. Information that is most often recorded in accounting journal entries include:

  • Type of transaction (either recurring or nonrecurring)
  • Name
  • Money amount
  • Accounting period
  • Date
  • Journal entry number
  • Batch number
  • Description

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How to Format a Journal Entry

The format of an accounting journal entry is specific. To start off, the journal’s page numbers are recorded in the upper right corner.

As for the actual transaction records, journal entries should have a separate column for the date, account title and description, reference number, debit, credit, and description, if necessary. To keep data minimal and brief, it’s best to record the year and the month of each transaction on a single row at the top, with succeeding rows indicating the day, rather than repeating the month.

The debits should be written at the top, while the credits remain on the line below that, and slightly indented to the right. The total amount of debits must equal the total amount of credits, otherwise the journal entry is unbalanced. Debits must always be recorded first, before credits.

If you have a reference column, it will be left blank only until the process of posting. If you aren’t familiar with the process of posting, check out this course on financial accounting for additional training.

Accounting Journal Entry Example

The following is an example of an accounting journal entry, formatted in the way we described above. For more experience with accounting journal entries,

ACCOUNTING JOURNAL EXAMPLE                                          P1
| 2013 |                            |       |           |            |
|July 3| Cash                       |       |   $75,000 |            |
|      |   Notes Payable            |       |           |    $75,000 |
|      |                            |       |           |            |
|     9| Furniture                  |       |   $20,000 |            |
|      |     Cash                   |       |           |    $20,000 |
|      |                            |       |           |            |
|    15| Equipment                  |       |   $90,000 |            |
|      |     Notes Payable          |       |           |    $70,000 |
|      |     Cash                   |       |           |    $20,000 |

You can find more accounting journal entries examples in this post. If keeping an accounting journal manually seems like too much work, check out this QuickBooks Pro 2013 training course for an in-depth guide on the handy accounting software.