What is a journal entry?
- By Book Keeping Pros
- Sources checked 15 Oct 2026
Definition
A journal entry is a record of a transaction in the books that lists the date, the accounts affected, the amount debited or credited to each, and a short description. In double-entry bookkeeping the debits in every journal entry equal the credits, so the books stay in balance.
Accounting software creates most journal entries behind the scenes when invoices, bills and bank transactions are entered. Manual journal entries are still used for adjustments no other screen handles, such as moving an amount posted to the wrong account or recording an expense at the end of the year that has not yet been billed.
Each manual journal should carry a description of why it was made, because the debits and credits alone do not say. Attaching or pointing to the working behind it, such as a depreciation schedule, a loan statement or an email confirming a correction, lets anyone looking at the books later follow the reasoning. Because a manual journal can move an amount between any two accounts, many businesses have a second person look over manual journals before a period is closed.
A single journal entry can touch more than two accounts, as long as the debits and credits still total the same. One loan repayment, for example, might be split between a reduction in the loan balance and an interest expense, with the bank account credited for the full payment. Entries that repeat every month, such as depreciation, can be set up once and reused, and period-end accruals are often marked to reverse on the first day of the next period.
In Australia
The Corporations Act 2001 defines a company's financial records to include documents of prime entry, and the working papers needed to explain adjustments made in preparing its financial statements. Section 286 requires a company to keep its financial records for 7 years after the transactions they cover are completed.
Journals are where transactions are first recorded, so a company's journal entries and the notes explaining its adjustments are part of those records.
The definition goes on to include working papers that explain the way a company's financial statements were compiled. Section 286 makes it an offence to contravene either its record-keeping requirement in subsection (1) or the 7-year retention period in subsection (2), and it sets out both a fault-based version of that offence and a strict liability version.
Worked example
| Account | Debit (AUD) | Credit (AUD) |
|---|---|---|
| Office supplies | 120.00 | |
| Repairs and maintenance | 120.00 | |
| Total | 120.00 | 120.00 |
Illustrative example only: these rows show the method and are not sourced data.
Common mistakes
- Posting a journal with no description, so no one can later tell why it was made.
- Using a manual journal just to force the bank balance to match the statement, without finding and documenting the difference behind it.
- Swapping the debit and credit sides of a correction, which doubles the original error instead of fixing it.
- Recording a customer sale with a manual journal instead of an invoice, so the customer's balance and the receivables list do not show it.
- Dating a correcting journal in a period that has already been reported without telling your accountant, so the figures they worked from change.
Common questions
Is a journal entry a debit or a credit?
What is the difference between a journal entry and an adjusting entry?
What is the difference between a journal entry and a journal voucher?
Related terms
Related service
Small business bookkeeping
Your books kept current, every month.
Sources
- Corporations Act 2001, sections 9 and 286
Federal Register of Legislation, Office of Parliamentary Counsel. Compilation No. 149, 19 September 2026, released 19 September 2026. Checked 15 October 2026.
Based on content from the Federal Register of Legislation at 15 October 2026. For the latest information on Australian Government legislation please go to https://www.legislation.gov.au. Licence: CC BY 4.0.