What Is a Journal in Accounting?

You’ll commonly hear:

• Journal entry: the individual posting (the “what”)
• Journal: the set of journal entries, often grouped by type or period (the “where”)

What journals are used for

Journals exist to ensure the financial statements reflect reality, especially when timing and classification matter. Common journal types include:

• Accruals
  • Expenses incurred but not yet invoiced (e.g., utilities, professional fees)
• Prepayments
  • Cash paid for future periods (e.g., annual insurance)
• Depreciation and amortisation
  • Allocating asset cost over its useful life
• Reclassifications
  • Moving costs or balances into the correct accounts for reporting consistency
• Corrections
  • Fixing posting errors, duplicates, or miscodings
• Provisions
  • Recognising liabilities that are probable and estimable (policy dependent)

Why journals matter

Journals are powerful—and risky if uncontrolled. Done well, they help:

• Improve period accuracy
  • Matching income and costs to the correct period supports meaningful monthly reporting.
• Support close timelines
  • Standard recurring journals reduce manual rework.
• Strengthen audit trail
  • Clear narration and attachments explain why entries exist.

Done poorly, journals can create:

• Misstated results (over/under-accruing)
• Hidden “plug” entries with no support
• Confusing reversals and duplicated adjustments
• Audit findings and slower closes

Good practice controls for journals

Strong finance teams usually enforce:

• Standard templates
  • Consistent structure for recurring entries
• Documentation
  • Calculation support attached or referenced
• Approval workflow
  • Maker-checker controls for material entries
• Clear narration
  • Who/what/why in plain language
• Reversal logic
  • Reversing journals used where appropriate (e.g., accruals)

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1. Are journals only used at month-end?
   No. Many journals occur throughout the month (corrections, reclasses), but month-end typically has the highest volume.
2. What’s the difference between a journal and a transaction?
   A transaction often originates from operational processes (invoice, bill, payroll). A journal is a manual or system-generated accounting entry to adjust/classify balances.
3. Should journals affect cash?
   Most journals do not move cash directly. They adjust accounting recognition (timing/classification) rather than bank balances.

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