Difficulty level: Beginner
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Journal entries
Once you know how your accounts are affected, you will need to record the transaction into your journal. Think of a journal like a book where business owners record everything that goes on in their business as it happens. In today’s world, most business owners no longer do this by hand but use computers to record transactions that happen in their business. A common software used by small businesses is QuickBooks.
The information that goes into the journal comes from a source document. A source document is the evidence a transaction took place. For instance an invoice from a vendor. The bookkeeper will take the invoice and enter the information from the invoice into the journal (or computer). Each entry made in the journal is called a journal entry.
Journal entries are transferred to general ledger through a process called posting.
An example of a journal entry.
Uncle Joe pays $1 cash in exchange for a cup of lemonade
Debit cash $1 (cash an asset account increases)
- Credit Revenue $1 (revenue also increases)
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