A journal entry, in accounting, is a logging of transactions into accounting journal

Specialized journals

Journals record transactions over a specified time in DATE ORDER using double-entry bookkeeping. Each transaction is also recorded in the ledger, which helps detect transcription errors. All transactions are classified by type into appropriate journals....

 items. The journal entry can consist of several items, each of which is either a debit or a credit. The total of the debits must equal the total of the credits or the journal entry is said to be "unbalanced". Journal entries can record unique items or recurring items such as depreciation

Depreciation

Depreciation refers to two very different but related concepts:# the decrease in value of assets , and# the allocation of the cost of assets to periods in which the assets are used ....

 or bond amortization

Amortization

Amortization is the process of decreasing, or accounting for, an amount over a period. The word comes from Middle English amortisen to kill, alienate in mortmain, from Anglo-French amorteser, alteration of amortir, from Vulgar Latin admortire to kill, from Latin ad- + mort-, mors death.When used...

. In accounting software, journal entries are usually entered using a separate module from accounts payable

Accounts payable

Accounts payable is a file or account sub-ledger that records amounts that a person or company owes to suppliers, but has not paid yet , sometimes referred as trade payables. When an invoice is received, it is added to the file, and then removed when it is paid...

, which typically has its own subledger

Subledger

The subledger, or subsidiary ledger, is a subset of the general ledger used in accounting. The subledger shows detail for part of the accounting records such as property and equipment, prepaid expenses, etc. The detail would include such items as date the item was purchased or expense incurred, a...

 that indirectly affects the general ledger

General ledger

The main accounting record of a business which uses double-entry bookkeeping. It will usually include accounts for such items as current assets, fixed assets, liabilities, revenue and expense items, gains and losses. Each General Ledger is divided into debits and credits sections. The left hand...

; journal entries directly change the account balances on the general ledger.

Some data commonly included in journal entries are: Journal entry number; batch number; type (recurring vs. nonrecurring); amount of money, name, auto-reversing; date; accounting period; and description. Typically, accounting software imposes strict limits on the number of characters in the description; a limit of about 30 characters is not uncommon. This allows all the data for a particular transaction in a journal entry to be displayed on one row.

The balance sheet

Balance sheet

In financial accounting, a balance sheet or statement of financial position is a summary of the financial balances of a sole proprietorship, a business partnership or a company. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A...

 is a statement showing net worth on a particular date. Journal entries are used to record injections and ejections to such net worth. After recording the transactions through journal entries the revised balance sheet can be prepared.

Suppose the financial position of a company is as follows:

Balance Sheet
As on 19 July 2009

Liabilities Amount Assets Amount
Capital 50000 Machinery 30000
Bank Loan 20000 Building 25000
stock 10000
cash 5000
---- ----
70000 70000
---- ----

Some furniture is purchased for $ 2000 in cash so a journal entry is created:

Furniture A/c debit 2000
Cash A/c credit 2000

After the above transaction the updated balance sheet would be:

Balance Sheet
As on 19 July 2009

Liabilities Amount Assets Amount
Capital 50000 Machinery 30000
Bank Loan 20000 Building 25000
furniture 2000
stock 10000
cash 3000
---- ----
70000 70000
---- ----


Journal entries are an easier means for perpetrating financial statement

Financial statement

A financial statement is a formal record of the financial activities of a business, person, or other entity. In British English—including United Kingdom company law—a financial statement is often referred to as an account, although the term financial statement is also used, particularly by...

 fraud than adjusting the subledgers. The former requires only a management override, while the latter requires collusion with other departments. False journal entries figured prominently in the frauds at WorldCom, Cendant

Cendant

Cendant Corporation was a New York-based provider of business and consumer services, primarily within the real estate and travel industries. In 2005 and 2006, Cendant broke up and spun off or sold its constituent businesses...

, and Xerox

Xerox

Xerox Corporation is an American multinational document management corporation that produced and sells a range of color and black-and-white printers, multifunction systems, photo copiers, digital production printing presses, and related consulting services and supplies...

.