Entry

Entry Financial Transaction Accounting Bookkeeping Double-Entry Bookkeeping Ledger Recordkeeping Audit Trail
An entry is a record made in a book of account, register, or computer file of a financial transaction, event, proceeding, etc. Entries are fundamental in the accounting process, ensuring that all financial activities are accurately recorded and tracked.
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Definition

An entry is a fundamental accounting term that refers to the record made within a book of account, register, or computer file of a financial transaction, event, proceeding, etc. Entries are essential for tracking financial activities and maintaining accurate accounting records.

Types of Entries:

  1. Journal Entries: The original records of financial transactions.
  2. Ledger Entries: Summarized journal entries posted to individual accounts.
  3. Adjusting Entries: Made at the end of an accounting period to reflect accrued revenues and expenses.
  4. Closing Entries: Made at the end of an accounting period to transfer balances from temporary accounts to permanent accounts.

Examples

  1. Journal Entry for a Sale:

    • Date: March 15, 2023
    • Debit: Accounts Receivable $1,000
    • Credit: Sales Revenue $1,000

  2. Journal Entry for a Purchase:

    • Date: March 17, 2023
    • Debit: Inventory $500
    • Credit: Accounts Payable $500

Frequently Asked Questions (FAQs)

Q1. What is the purpose of an entry in accounting? A1. The purpose of an entry in accounting is to record every financial transaction a business undertakes, ensuring there is a clear and accurate record which can be used for financial statements and audits.

Q2. How is a journal entry different from a ledger entry? A2. A journal entry records the initial financial transaction detailing debits and credits, while ledger entries are summaries of these journal entries posted to individual accounts.

Q3. What is double-entry bookkeeping? A3. Double-entry bookkeeping is an accounting method where each transaction affects at least two accounts, with one debit and one credit, ensuring the accounting equation (Assets = Liabilities + Equity) remains balanced.

Q4. How often should entries be made in accounting records? A4. Entries should be made as soon as transactions occur to ensure the accuracy and timeliness of financial records. This practice helps in maintaining up-to-date financial statements.

Q5. What are adjusting entries? A5. Adjusting entries are made at the end of an accounting period to adjust revenue and expense accounts so that they comply with the accrual basis of accounting, reflecting what was earned and incurred.

  • Ledger: A book or other collection of financial accounts.
  • Journal: A record that keeps accounting transactions in chronological order, before they are posted to ledger accounts.
  • Debit: An entry on the left side of an account which increases asset and expense accounts and decreases liability, equity, and revenue accounts.
  • Credit: An entry on the right side of an account which increases liability, equity, and revenue accounts and decreases asset and expense accounts.
  • Accrual Basis Accounting: An accounting method that records revenues and expenses when they are incurred, regardless of when cash transactions occur.

Online References

  1. Investopedia - Double-Entry Bookkeeping: Investopedia - Double-Entry Bookkeeping
  2. Accounting Coach - What is an Entry in Accounting?: Accounting Coach - entry
  3. American Institute of CPAs (AICPA): AICPA

Suggested Books for Further Study

  1. “Accounting Made Simple: Accounting Explained in 100 Pages or Less” by Mike Piper - A straightforward guide to accounting basics.
  2. “Financial Accounting” by Walter T. Harrison Jr. and Charles T. Horngren - A comprehensive textbook on financial accounting principles.
  3. “Intermediate Accounting” by Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield - A detailed textbook for advanced accounting students.
  4. “Accounting All-in-One For Dummies with Online Practice” by Kenneth Boyd - A beginner-friendly resource that covers all essential accounting concepts.

Accounting Basics: “Entry” Fundamentals Quiz

### What is an entry in accounting? - [x] A record made in a book of account, register, or computer file of a financial transaction. - [ ] A daily report on all company activities. - [ ] An annual summary of financial statements. - [ ] A notation made outside of business records. > **Explanation:** An entry in accounting refers specifically to a record made in a book of account, register, or computer file of a financial transaction, event, or proceeding. ### Which of the following best describes a journal entry? - [x] The initial record made of a financial transaction, detailing debits and credits. - [ ] A summary of all financial activity for the year. - [ ] The final check before financial statements are prepared. - [ ] A budget planning document. > **Explanation:** Journal entries are the initial records of financial transactions. They detail debits and credits as the transactions occur. ### Why are adjusting entries important? - [x] They adjust revenue and expense accounts to reflect the accrual basis of accounting. - [ ] They summarize account activity over the year. - [ ] They are not necessary if cash basis accounting is used. - [ ] They correct errors found in ledger accounts. > **Explanation:** Adjusting entries reflect revenues and expenses that have been earned or incurred but not yet recorded in the accounts, thereby ensuring compliance with the accrual basis of accounting. ### How does double-entry bookkeeping ensure accurate records? - [x] By requiring every transaction to affect at least two accounts with equal debits and credits. - [ ] By using single-entry logs for each transaction. - [ ] By balancing only the assets and expenses. - [ ] By only recording transactions monthly. > **Explanation:** Double-entry bookkeeping ensures accuracy by requiring every transaction to have equal debits and credits, keeping the accounting equation balanced. ### What is the difference between a journal and a ledger? - [x] A journal records transactions chronologically, while a ledger summarizes these transactions in accounts. - [ ] A ledger records transactions, and a journal summarizes them. - [ ] Both terms mean the same in accounting. - [x] A journal is updated annually, whereas a ledger is updated daily. > **Explanation:** A journal records transactions chronologically when they occur, while the ledger organizes these transactions by account, summarizing them. ### What information does a closing entry provide? - [x] It transfers balances from temporary accounts to permanent accounts at the end of an accounting period. - [ ] It denotes financial transactions that need to be recorded in the next period. - [ ] It provides an annual summary of all transactions. - [ ] It details salaries and wages paid during the period. > **Explanation:** Closing entries are made to transfer the balances of temporary accounts to permanent accounts at the end of an accounting period. ### In what scenario would a ledger entry be necessary? - [ ] To report on quarterly earnings. - [x] To summarize a journal entry for a specific account. - [ ] To correct a previously made transaction error. - [ ] To budget for future expenses. > **Explanation:** A ledger entry is necessary for summarizing a journal entry by posting it to a specific account. ### What does a debit entry increase? - [x] Asset and expense accounts. - [ ] Liability and revenue accounts. - [ ] Amounts in equity accounts only. - [ ] All company accounts. > **Explanation:** A debit entry increases asset and expense accounts. ### What does a credit entry decrease? - [x] Asset and expense accounts. - [ ] Liability accounts. - [ ] Accounts in revenue. - [ ] Amounts in liability accounts. > **Explanation:** A credit entry decreases asset and expense accounts. ### Which of the following is a key element in maintaining an audit trail? - [x] Detailed and accurate entries. - [ ] Monthly financial summaries. - [ ] Quarterly earnings reports. - [ ] Future budget forecasts. > **Explanation:** Maintaining an audit trail relies on detailed and accurate entries which can be corroborated during an audit.

Thank you for embarking on this journey through our comprehensive accounting lexicon and tackling our challenging sample exam quiz questions. Keep striving for excellence in your financial knowledge!

Tuesday, August 6, 2024
Entry Value
Entrepreneurs' Relief (ER)
Brought Forward (b/f) January 1, 1
Cash Receipts Journal January 1, 1
Columnar Journal January 1, 1
Memorandum Entry January 1, 1
Personal Ledger January 1, 1
Source Document January 1, 1
Account January 1, 1
Accounting January 1, 1
Balancing Figure January 1, 1
Book of Account January 1, 1

Accounting Terms Lexicon

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