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Journalization

Moneyzine Editor
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Moneyzine Editor
1 mins
January 23rd, 2024
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Journalization

Definition

The financial accounting term journalization is used to describe the process of recording transactions and events. Journal entries are usually chronological lists of debits and credits to accounts, along with a description of the transaction.

Explanation

Transactions are usually not entered directly into the company's general ledger because they involve both a debit and credit to accounts, which are found in two different sections, or pages, of the ledger. The journal allows a company to retain both the debit and credit involved with a transaction in one place.

An entry in a journal is comprised of four parts:

  • Date of the transaction or event

  • Account to be debited

  • Account to be credited

  • Brief explanation of the transaction or event

Journal entries are subsequently posted to the general ledger as part of the accounting cycle.

Example

On January 15th, 20XX, Company A purchases $500,000 in meters from its supplier Company XYZ, payable in 90 days. The following entry would be made in Company A's journal.

Date

Account Description

Account Number

Debit

Credit

1/15/20XX

Meters

380

500,000

Accounts Payable

232

500,000

Purchase of $500,000 in meters from Company XYZ, payable in 90 days.

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