What is Journal Entry?
Nexa Consultancy | Startup & Finance Glossary
A Journal Entry is the first step in the accounting cycle, where a business transaction is recorded in the accounting books. Following the double-entry bookkeeping system, every journal entry has at least one debit and one credit, and the total debits must equal the total credits.
For Startups: While modern accounting software automates many journal entries (e.g., from creating an invoice), manual journal entries are still required for things like accrued expenses or correcting errors. Understanding the concept of debits and credits is fundamental to understanding how financial transactions impact the financial statements.
Example: To record the payment of office rent of ₹50,000, an accountant would make a journal entry to debit "Rent Expense" for ₹50,000 and credit "Cash" for ₹50,000. This increases the expense and decreases the cash asset.