We discuss the key elements to properly post a journal entry
An accounting journal entry is a way of entering transactions into the accounting records of a business by debiting or crediting account balances. This process can be manual or automated.
Journal entries follow the double-entry rule of accounting, which means that for each transaction at least two accounts will be affected, i.e. increased or decreased via a credit or a debit entry.
For example, if you paid $10 in cash for a pen your Cash account will decrease by $10, while your Office Supplies Expense account will increase by $10.
Note: This is an example of a simple journal entry, with only two lines. More complex entries are called compound journal entries and can have virtually unlimited lines.
Balanced Entries - The totals of the debits and credits columns must always equal each other, which will cause the journal entry to be “in balance”. If you are using an automated accounting platform you will not be able to post a journal entry unless it is balanced.
The key elements of a journal entry are:
- Journal entry number – this is unique for each transaction and usually has a limit for the characters allowed, depending on your accounting platform – should be concise and relevant to the journal entry and easy to identify (e.g. Sales 02-10-2022, July Cash Expenses etc.)
- Date of the journal entry – impacts the accounting period in which the journal entry is being recorded
- Accounts – this are the accounts affected by the transaction via a credit or debit
- Debits and Credits columns – this is for the amounts that increase or decrease the account balances
- Description/memo and attachments – a brief description of the journal entry or each individual line and/or attached documents to support the journal entry (e.g. an available scanned receipt if recording an expense)
Note: the location and names of these key elements might vary depending on your accounting platform
See below a QBO journal entry sample to help identify the above elements:
Note: In order to eliminate any potential mistakes or errors, journal entries should be recorded by accounting professionals as they possess a deep understanding of the accounting rules and have a better control over how these entries impact your financial statements.