Summary
Highlights
A journal entry is a record of a financial transaction in an accounting system. A financial transaction involves the transfer of money or monetary value.
A journal entry includes a unique journal number, the posting date, impacted accounts, a short description, and debit and credit columns. In double-entry accounting, every transaction has two equal and opposite sides, with debits on the left and credits on the right. The total of debits must always equal the total of credits.
On May 15th, Legolas's Legal Solutions provides $2,000 in consultation services to Pippin, paid in cash. This transaction increases the cash account (a normal debit account) and increases service revenue (a normal credit account). So, cash is debited by $2,000, and service revenue is credited by $2,000, ensuring debits equal credits.
Journal entries are visualized using T-Accounts. For the example, if cash had an opening balance of $10,000, the debit increases it to $12,000. If service revenue had an opening balance of $5,000, the credit increases it to $7,000.