Definition
A journal entry, also called a voucher, is the record of one business transaction in the books. It has a date, a description and two or more lines that debit and credit accounts by equal totals. Journal entries are the only way amounts reach the ledger, so every report is built from them.
How it works
A complete entry answers four questions: when it happened (date), what happened (description and reference such as an invoice number), which accounts changed (lines) and by how much (debit and credit amounts). Many entries also carry a party, a cost center or a project on each line, and an attachment with the source document.
Entries are first saved as drafts and then posted. In Ledgeriano each entry gets a sequential number within its fiscal year, the system refuses to post an entry that does not balance, and a posted entry can only be corrected with a reversal entry, which keeps the audit trail intact.
Typical mistakes are lumping unrelated transactions into one entry, leaving descriptions vague ("misc"), and booking the gross amount of an invoice to revenue without splitting out VAT. Our journal entry template shows the standard columns.
Example: a credit sale with VAT
A company sells services for 10,000 plus 5% VAT on 30 days' credit. The customer owes 10,500; 10,000 is revenue and 500 is VAT owed to the tax authority.
| Account | Debit | Credit |
|---|---|---|
| Accounts receivable (customer) | 10,500 | |
| Service revenue | 10,000 | |
| VAT payable (output VAT) | 500 | |
| Total | 10,500 | 10,500 |