A journal is where financial transactions are first recorded in chronological order. Each transaction is called a journal entry. The journal is called the book of original entry. Journal entries are later posted to the ledger.
A journal entry is recording a business transaction in a company’s accounting records. A list of journal entries is called a journal. In accounting, journal entries are made using a system of debits and credits. In each journal entry, debits must equal credits.
Journal entries use the five types of accounts.
In accounting, the five types of accounts are:
- Assets – resources owned by a business; what the company owns
- Liabilities – debts of the company; what the company owes
- Equity – claim on the assets by the owners; calculated as assets – liabilities = equity; equity is the net worth of the company
- Revenues – when a business receives assets from selling products and services
- Expenses – when a business uses or consumes assets to create revenues
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