Journal entries refer to written records in a company's or individual's bookkeeping system that document financial transactions. These entries are used to track income, expenses, and other economic events, and they provide an accurate picture of a person’s or businesses financial position over time.
In accounting, journal entries serve as the foundation for generating financial statements such as the balance sheet, income statement, and cash flow statement. The process involves recording debits and credits in a general ledger to reflect the effects of transactions on various accounts.
Journal entries can be made at any time during the period being reported on, but they are typically recorded at the end of each accounting period (e.g., monthly or quarterly). The process involves identifying the transaction, determining its type (debit or credit), and posting it to the appropriate accounts in the general ledger.
Overall, journal entries play a critical role in maintaining accurate financial records for businesses and individuals alike, helping them make informed decisions about their finances and stay on top of their economic situation.