Journal Entry

A journal entry is the initial record of any business transaction in the accounting system, acting as the first step in the accounting cycle. It chronologically logs financial activities and is foundational to maintaining accurate financial statements. Each entry adheres to the double-entry bookkeeping method, meaning every transaction affects at least two accounts with equal and opposite effects, one as a debit and the other as a credit.

These entries are posted to the general ledger, where they are summarized by account. The categories for these accounts are defined in the company's chart of accounts (COA). Journal entries are essential for tracking revenue, expenses, assets, and liabilities, and they form the basis for trial balances and the entire financial close process.