What Is a Journal Entry in Bookkeeping?
If you’re trying to keep your business finances organized, you’ll eventually run into the term “journal entry.” It might sound like something out of a diary, but in the world of bookkeeping, it’s one of the most important building blocks of your accounting system.
A journal entry is simply a way to record a financial transaction. It tells the story of what happened with your money — what account was affected, how much, and whether it was a debit or a credit.
It’s the first step in the accounting process and lays the foundation for your financial reports.
Why Journal Entries Matter
Every time money moves in or out of your business — whether it’s an expense, income, refund, or loan payment — a journal entry should capture that transaction.
Without accurate journal entries, your books can’t be trusted. And if your books aren’t reliable, your tax return, profit reports, and decision-making are built on shaky ground.
Here’s what a typical journal entry includes:
- Date of the transaction
- Accounts involved (at least one debit and one credit)
- Amounts being debited and credited
- Description of the transaction
Example: Buying Office Supplies
Let’s say you bought $100 in office supplies using a business debit card. Here’s how you’d record that:
| Date | Account | Debit | Credit |
|---|---|---|---|
| 03/29/2025 | Office Supplies | $100 | |
| 03/29/2025 | Bank Account | $100 |
In the above example: You increased your supplies (an expense), and decreased your bank balance (an asset).
What Accounts Are Affected?
Each journal entry must follow the rules of double-entry bookkeeping, which means for every debit, there must be an equal credit. The accounts used will depend on the type of transaction — income, expense, liability, etc.
Common Journal Entry Examples:
- Customer payment: Debit bank, credit income
- Rent payment: Debit rent expense, credit bank
- Loan received: Debit bank, credit loan payable
- Payroll: Debit wages expense, credit cash and payroll liabilities
Do you need some help generating sample journal entries? Try my free Journal Entry Generator, it builds them for you in seconds.
You don’t need to be an accountant to understand journal entries — but you do need to know they’re essential to keeping your books accurate.
Get comfortable with how they work, and you’ll have a much easier time understanding your reports, prepping for taxes, or fixing mistakes when they pop up.
If you’re unsure how to record a specific transaction, use our Ask a Bookkeeper tool. It’s like having a bookkeeper on standby 24/7 — without paying hourly.