Definition
The financial accounting term journalization is used to describe the process of recording transactions and events. Journal entries are usually chronological lists of debits and credits to accounts, along with a description of the transaction.
Explanation
Transactions are usually not entered directly into the company's general ledger because they involve both a debit and credit to accounts, which are found in two different sections, or pages, of the ledger. The journal allows a company to retain both the debit and credit involved with a transaction in one place.
An entry in a journal is comprised of four parts:
Date of the transaction or event
Account to be debited
Account to be credited
Brief explanation of the transaction or event
Journal entries are subsequently posted to the general ledger as part of the accounting cycle.
Example
On January 15th, 20XX, Company A purchases $500,000 in meters from its supplier Company XYZ, payable in 90 days. The following entry would be made in Company A's journal.
Date | Account Description | Account Number | Debit | Credit |
1/15/20XX | Meters | 380 | 500,000 | |
Accounts Payable | 232 | 500,000 | ||
Purchase of $500,000 in meters from Company XYZ, payable in 90 days. | ||||
Related Terms
The term accounting cycle refers to the framework and processes followed in each accounting period. The accounting cycle begins with the identification of events and transactions, and ends with the after-close trial balance.
Moneyzine EditorDecember 12th, 2023
The accounting industry generates billions of dollars. Accounting industry statistics indicate the size of the accounting industry was $544.06 billion in 2020. It gives us an idea of how many accounting events and transactions occur every day in the world. In this article, we will explain what are accounting events and transactions. The term accounting event refers to a change in an item that should be reflected in the company's financial statements. Accounting events can be internal or external and usually involve a change in assets, liabilities, revenues, expenses or owner's equity.Moneyzine EditorDecember 12th, 2023
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