Time to learn the formal recording process! Remember our transaction analysis from last time? Now we'll capture those insights in the official accounting record called journal entries.

A journal entry is like a formal certificate that documents exactly what happened in each business transaction.

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What do you think makes journal entries "official" business records?

Every journal entry follows the same professional format, just like official documents have standard layouts.

The format includes: the date, affected accounts, debit and credit amounts, and a brief explanation. This consistency makes entries clear for anyone to read.

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Why would having a standard format be important for business records?

Here's what a journal entry looks like for our previous example: "Bought office supplies for $500 cash."

Date: March 15
Debit: Office Supplies $500
Credit: Cash $500
Explanation: Purchased office supplies for cash

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Which account is debited here, and why?

The key rule: debits are always listed first, then credits. Credits are typically indented slightly to show the difference visually.

This positioning makes it easy to scan entries and verify that debits equal credits at a glance.

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How does this visual arrangement help you check for errors?

The explanation (sometimes called a memo) provides context that numbers alone can't show.

Good explanations answer: What happened? Who was involved? Why was this necessary? This creates an audit trail for future reference.

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What would happen if journal entries had no explanations?

Journal entries are recorded chronologically - in date order as transactions occur throughout each business day.

This creates a complete story of business activity, like a detailed diary that accountants and auditors can follow step by step.

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Why would chronological order be crucial for tracking business events?

Here's another example: "Provided services to customer for $1,200 on credit."

Date: March 16
Debit: Accounts Receivable $1,200
Credit: Service Revenue $1,200
Explanation: Services provided to ABC Company on account

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What in this entry shows the revenue is still unpaid by the customer?

Type

Fill In The Blanks

Markdown With Blanks

Let's create a journal entry for this transaction: "The business paid $2,000 cash for new equipment."

Date: March 17
Debit: [[blank:Equipment]] $[[blank:2,000]]
Credit: [[blank:Cash]] $2,000 Explanation: [[blank:Purchased equipment]] for cash

Suggested Answers

• Equipment
• 2,000
• Cash
• Purchased equipment