A journal entry is the record of one transaction in the books: a date, the accounts affected, debit and credit amounts that add up to the same total, a description and a reference to the evidence. Once posted, it updates the balances in the general ledger.
What is a journal entry?
Every change in the books is recorded as a journal entry. Under double-entry bookkeeping each entry has at least one debit and one credit, and the debits always equal the credits. That is why the trial balance balances.
Most entries are created automatically: posting a sales invoice, a supplier bill or a payroll run makes the journal behind it. Others are typed by hand, such as accruals, corrections, reclassifications and month-end adjustments. Manual journals carry more risk, so they get more scrutiny.
How do debits and credits work?
| Account type | An increase is a | A decrease is a |
|---|---|---|
| Assets | Debit | Credit |
| Expenses | Debit | Credit |
| Liabilities | Credit | Debit |
| Equity | Credit | Debit |
| Income | Credit | Debit |
- Standard entries come from subledgers: sales, purchases, payroll, bank.
- Recurring entries repeat every month, such as rent, depreciation or a management fee.
- Accruals and their reversals put income and costs in the right month. See accrual accounting.
- Adjusting and reclassification entries correct balances or move them to the right account.
What does a journal entry look like?
| Date | Account | Debit | Credit |
|---|---|---|---|
| 10 May | Trade receivables | 50,000 | |
| 10 May | Revenue | 50,000 | |
| 9 June | Bank | 50,000 | |
| 9 June | Trade receivables | 50,000 |
Why do journal entries matter for finance teams in the GCC?
Manual journals are where errors and overrides enter the books, so auditors test them closely. Good practice is simple: every manual journal has a reason and evidence attached, one person prepares it and another approves it under the four-eyes principle, and nobody approves their own entry. Our guide to approval matrices and segregation of duties covers how to set the limits.
Questions people ask
What is a reversing entry?
An entry booked on the first day of the next period that cancels an accrual from the period before. When the real invoice arrives and is posted, the net cost lands in the right month without double counting.
What is a compound journal entry?
An entry with more than two lines, such as a payroll journal that debits several expense accounts and credits the bank and payroll liabilities. The rule is the same: total debits equal total credits.
Who should approve manual journal entries?
Someone other than the preparer, with authority for the amount. An approval matrix sets the limits, and the approval should be recorded with the entry.