What are journal entries?

Journal entries are the initial records of all transactions in an accounting system. They serve as the first step in the accounting cycle, capturing the details of financial transactions as they occur. This means every transaction, whether it involves cash, accounts receivable, expenses, or revenue, is first recorded in the accounting journal in chronological order. Each entry includes key details such as the date, accounts affected, amounts, and a brief description of the transaction.

By accurately documenting these transactions, businesses can ensure that their financial records are up to date and complete, which is crucial for preparing financial statements and maintaining compliance with accounting standards. Additionally, journal entries provide the foundational data needed for further accounting processes, including posting to ledgers and preparing trial balances.