Accounting glossary
Journal entry
A journal entry records a transaction in the books as debits and credits of equal amount. In practice a journal voucher is used for entries that involve no cash or bank movement, such as provisions, depreciation, adjustments between ledgers and corrections.
Why it matters to your business
Most of your books write themselves from invoices and payments. Journal entries are the exceptions, and they are where judgement comes in: how much to provide for an unpaid expense, when to write off a customer who will not pay. A few wrong journals can change your profit more than a hundred invoices, so they deserve a narration and a second look.
How it works
A journal entry names the ledgers, the amount on each side and the reason. For rent of ₹30,000 for March that will be paid in April:
| Ledger | Debit | Credit |
|---|---|---|
| Rent | ₹30,000 | |
| Rent payable | ₹30,000 |
The expense is counted in March, where it belongs, and the amount owed shows as a liability. When the rent is paid in April, a payment entry clears Rent payable.
Common mistakes
- Using a journal for a bank or cash movement, which then never matches the bank statement.
- Entries without a narration.
- Passing a journal straight to a customer’s or vendor’s ledger without linking it to the bill it settles.
Questions about Journal entry
When do I need a journal voucher?
When no money moves. Typical cases are a provision for an expense due but not billed, depreciation, writing off a bad debt, moving an amount posted to the wrong ledger, and year-end adjustments your CA advises.
What is the rule for debit and credit?
Debit what comes in, expenses and losses; credit what goes out, incomes and gains. For a person or business, debit the receiver and credit the giver. Every entry has equal debits and credits.
What is a narration?
A short note on the entry that says why it was made. A good narration lets someone understand the entry a year later without asking you.
Can a journal entry be changed after it is posted?
It should be corrected, not erased. Good software keeps the original in the audit trail and posts the change, so there is a record of who changed what.
Updated .