What Is a Journal Entry? Types and Worked Examples

A journal entry is the unit of record in double-entry bookkeeping: one dated, described, balanced set of debits and credits that captures a single business event. Everything in the books — every balance, every statement line — is the sum of journal entries and nothing else. If an event didn't become a journal entry, as far as accounting is concerned it didn't happen.

Anatomy of an entry

Every journal entry has the same parts:

• Date — the date the event belongs to, which decides its accounting period. Not necessarily the date it was typed in.
• Description — what happened, in words a reviewer will understand two years later.
• Lines — at least two, each naming a postable account from the chart of accounts with a debit or credit amount. Total debits must equal total credits.
• Reference — the source document: invoice number, payroll run, bank statement line. The link that makes the entry auditable.

A minimal example — customer pays invoice S-1038, amounts in euros:

Account	Debit	Credit
2710 Bank	2,400
2410 Trade receivables		2,400

Compound entries

Entries are not limited to two lines — they balance in total, not in pairs. A monthly payroll for gross salaries of 5,000 € posts as one compound entry:

Account	Debit	Credit
6204 Salary expense	5,000.00
6205 Social insurance expense (employer)	88.50
4460 Net salaries payable		3,025.00
4461 Personal income tax payable		1,000.00
4463 Social insurance payable		1,063.50

One event, five lines, still balanced: 5,088.50 on each side — salary expense plus the employer's social insurance on the debit side; net pay, withheld income tax, and social insurance (employee's withheld plus employer's own) on the credit side. Splitting this into artificial two-line pairs would only obscure that it is a single event. (Rates simplified for the example.)

The types of journal entries

Standard entries record day-to-day events — sales, purchases, payments. In modern systems the overwhelming majority are generated from documents automatically: issuing an invoice creates its entry, importing a bank statement creates payment entries.

Opening entries carry balances into a new financial year or seed a new system with the closing balances of the old one — the one time a long list of balances posts in a single entry.

Adjusting entries align the books with economic reality at period end: depreciation, accrued and deferred income and expenses, provisions. Typically dated the last day of the period.

Closing entries zero out income and expense accounts at year end, rolling the difference — the year's profit — into equity (3420 in the Lithuanian chart). After closing, the P&L accounts start the new year empty; the balance sheet accounts carry forward.

Reversing entries are the mirror image of a prior entry, posted to cancel it. In an append-only ledger this is how corrections work: the wrong entry stays on record, the reversal stays on record, and the audit trail shows both. Deleting is not correcting — it is erasing history.

Manual entries are the residual category: anything a person posts directly rather than through a document flow. In a healthy setup they are rare, and each one deserves a description good enough to survive an audit question.

Worked example: from event to entry

The company prepays 1,200 € on 1 July for a year of insurance. Two entries, six months apart, tell the whole story:

On payment (1 July) — an asset, not an expense; eleven months of coverage are still an economic resource:

Account	Debit	Credit
29 Prepaid expenses	1,200
2710 Bank		1,200

Each month end, an adjusting entry converts one month of coverage into expense:

Account	Debit	Credit
6209 Administrative expenses	100
29 Prepaid expenses		100

This is accrual accounting in miniature: the cash left in July, but the expense belongs to each month that consumed the coverage.

Journal entries in an API

In Nordlet a manual journal entry is one call: POST /v1/ledger/journal/transactions/create takes a date, a description, and 2–200 lines of { accountCode, debit, credit }, with optional cost-center and project dimensions per line. The API validates everything the bookkeeping rules require — accounts must exist and be postable, debits must equal credits, the date's period must be open — and rejects the entry otherwise. Posted entries are immutable; corrections are new entries. Document-driven entries (sales, purchases, payroll, bank imports) post through the same mechanism via posting rules, so the general ledger has one shape of record regardless of source, and POST /v1/reports/general-journal lists them all chronologically.

FAQ

What is a journal entry in simple terms?

A dated, balanced record of one business event: at least two lines, each debiting or crediting an account, with equal totals on both sides. Journal entries are the only way anything gets into the books.

How many lines can a journal entry have?

Two at minimum; beyond that, as many as the event needs — payroll and VAT entries routinely carry five or more lines. The requirement is that total debits equal total credits, not that lines come in pairs.

What is the difference between a journal entry and a transaction?

In practice the terms are used interchangeably. Some systems (Nordlet included) call the dated event a transaction and its lines entries — same structure, either vocabulary.

Do I write journal entries for every sale?

You don't — the software does. Issuing an invoice, receiving a bill, importing a bank statement all generate their entries through posting rules. Manual journal entries are for what no document flow covers: adjustments, corrections, opening balances.

How do I fix a wrong journal entry?

Post its reversal, then post the correct entry. In an append-only ledger the mistake, the reversal and the fix all stay visible — which is exactly what an auditor wants to see. Editing or deleting posted entries destroys the audit trail.