Journal entry format
/What is a Journal Entry?
A journal entry is used to record a business transaction in the accounting records of a business. It is used in a double-entry accounting system, where both a debit and a credit are needed to complete each entry. These entries are essential for the proper recordation of transactions, so that an organization can issue accurate financial statements at the end of each reporting period. Without journal entries, it would be impossible to judge the financial performance or financial position of a business.
What is the Format for a Journal Entry?
The essential elements of the journal entry format are as follows:
A header line may include a journal entry number and entry date. The number is used to index the journal entry, so that it can be properly stored and retrieved from storage.
The first column includes the account number and account name into which the entry is recorded. This field is indented if it is for the account being credited.
The second column contains the debit amount to be entered.
The third column contains the credit amount to be entered.
A footer line may also include a brief description of the reason for the entry. An entry in the footer line is highly recommended, since there are so many journal entries that it is easy to forget why each entry was made.
The structural rules of a journal entry are that there must be a minimum of two line items in the entry, and that the total amount entered in the debit column equals the total amount entered in the credit column.
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Types of Journal Entries
When a journal entry has just two line items (the minimum), it is called a simple journal entry. When it has many lines, it is referred to as a complex journal entry. When it is used to record the beginning balances in an entity’s accounting records for a new accounting period, it is known as an opening entry. Conversely, when an entry is used to transfer ending revenue and expense account balances to retained earnings at the end of an accounting period, it is called a closing entry. When it is used to adjust the reported amounts in the financial statements, it is known as an adjusting entry.
Example of a Journal Entry Format
Based on the preceding formatting rules, the basic journal entry format is as follows:
|
|
Debit |
Credit |
|
Account name / number |
$xx,xxx |
|
|
Account name / number |
|
$xx,xxx |
Journal Entry Best Practices
There are several best practices that can be applied to journal entries, which are as follows:
Prepare documentation. Develop a thorough documentation package for each journal entry, which is stored in the accounting records. This documentation states the reason for each entry and contains an approval signature. This is quite useful for auditors, who may want to determine the reason for an entry, and investigate whether it was authorized.
Use simpler entries. Break down complex journal entries into several smaller and simpler entries. Doing so makes it easier to understand the reasoning behind each one.
Use templates. Many journal entries are used on a recurring basis, month after month. When this is the case, set up a journal entry template in the accounting software, using a standard set of accounts, and populate them each month as needed. This reduces the number of journal entry errors that might otherwise occur.
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Examples of Key Journal Entries