Glossary
What is a journal entry?
The basic unit of the books. Most are written by your invoices and bills; a few you write yourself.
Updated
In short
A journal entry is a dated set of debit and credit lines to accounts, with debits equal to credits and a note of why. In SimpleERP documents post their own journals, and posted manual journals are reversed, never edited.
A journal entry is the basic record in double-entry accounting: a dated set of debit and credit lines to accounts, with total debits equal to total credits and a note of why. Most entries are created by business documents such as invoices, bills and payments. Manual journal entries cover the rest, such as loan instalments, bank charges, provisions or year-end adjustments.
Journal entry: a worked example
Lakshmi Steel Furnitures pays its monthly term loan instalment of ₹25,000, of which ₹3,500 is interest. There is no document for this, so the accountant posts a manual journal:
| Account | Debit | Credit |
|---|---|---|
| Term loan | ₹21,500 | |
| Interest on loan | ₹3,500 | |
| Bank | ₹25,000 |
The loan falls by ₹21,500, the P&L carries ₹3,500 of interest, and the bank falls by the full ₹25,000.
FAQ
Questions, answered
What is the difference between a journal and a ledger?
The journal lists entries in date order, each with its debits and credits. The ledger groups the same lines by account, so you can see everything that hit, say, the bank account. Every ledger figure comes from a journal entry.
When should I use a manual journal entry?
Only when no document fits: loan interest, bank charges, provisions, corrections between accounts, year-end adjustments. Sales, purchases, payments and stock should go through their own documents, so customer balances, stock and GST stay in step with the ledger.
How do I fix a wrong journal entry?
Reverse it with a new entry dated in an open period, then post the correct one. The history then shows what was posted, when it was reversed and why. Editing a posted entry in place hides what happened and breaks the audit trail.
Can a journal entry have more than two lines?
Yes. A compound entry has several debits, several credits or both, like the loan instalment above. The only rule is that the debit total equals the credit total. A typical GST invoice posts four or more lines at once.
Related
Keep reading
Double-entry bookkeeping
Every transaction recorded in two accounts, with debits equal to credits.
Read moreChart of accounts
The organised list of every account a business records transactions in.
Read moreAccounting
A double-entry ledger with journals, bank registers, statements and a lock date.
Read more
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