What is a journal in accounting

In a previous  post we had a look at the concept of recording a transaction based on events that happen. In accounting terms we would use an journal to record these events.


So what is a journal and what data is in it?

You can find number definitions in accounting books and website on what a journal is. Here are a few examples.







You will see a few terms mentioned in the definitions so let’s explore these and see what is included in a journal.

Firstly a journal is usually a chronological entry of events. This is an important concept because chronological means time and in accounting terms this is dates. I need a date because accounting statements are prepared at a date. And that is what financial and management accounting is looking at information at points in time. So if I don’t have a date I can’t locate my transactions as of the dates.


I need a reference number to be able to use to identify the event. This can be used later for researching what journal created an entry in the ledger. We can also use the reference number to link entries together to see a whole picture of a transaction.

Description. It’s helpful to record some information about the entry for later review an discovery. Sometimes this might be brief text or long details if you can’t keep the journal after it’s posted to the ledger so the description you will want enough information to make some sense of the transaction later in the ledger without having to drill back to the journal.

Amount of Debit or Credit. The assumption is we are recording financial transactions and not a journal about our daily life so we need to have an amount of the transactions. This will have to be represented in the concepts of an accounting entry so we have to record is this is a debit (DR) or a credit (CR). The assumption I’m going to make here is that we are talking about the double entry accounting system. Which means that we have to record a journal that is in balance of the sum of the DR and CR. Different systems will record or show DR and CR differently this could be a column that you enter the amount in either the DR or the CR column or one column and you enter a positive amount for DR and a negative amounts for CR. You will find both concepts used in different places in Dynamics that we’ll see later when we apply this to the application.

Account number. When we eventually post the journal to the ledger. We need a reference for what account we want our amount to debit or credit to hit. The account number could be simple string or letters or numbers. Or it could be a complex set of numbers and segments (Dimensions in Dynamics) that allow use to analyze the transaction later.

Currency. We need a unit or a symbol to represent the value of that amount. In an explanation of journal that you will see in the websites above for example you won’t see the mention of the currency. That is because they make an assumption that you are working in a specific country and therefor the currency is assumed. However in a large accounting system we can’t make the assumption of currency because we could be recording transactions in many different currencies if we do business with different currencies or we are managing the companies for different countries. We’ll explore this further in other posts because with currency comes the exchange rate to value the amount at a point in time.

Legal entity. For most of this explanation we’ll make an assumption that we are posting journal entries for one legal entity. However in a large accounting system that spans multiple countries or many legal entities you might be posting transactions between legal entities when for example money is lent or we are buying and selling between the entities we manager.

Who made the entry. You might want to record who made the entry for audit and control purposes. This is import in large systems because there might be 10s, 100s or even 1000s or people record entries. So we want to be able to see who made the entry. This is also a control point we might only allow specific people to record an entry or we might have a process where someone records and someone else approves before it’s posted.

This is probably a good start of information we need. There will be additional information we might need to include with the journal based on the different type of transactions we are recording. This might also include information related to tax accounting for the country that we are operating in.

There are different types of journals but they call share the same basic information and purpose which is to collect information to post to the ledger. They different types of journals might record some additional information for the type of transactions they resent. For example a receipt journal might be used to register customer payment. In Dynamics there are different types of journals through the different modules even inventory that serve both a purpose of creating an accounting entry and updating on-hand quantity. But for a pure account perspective the general journal is, as its name implies, is the all-purpose tool for recoding account entries.

To use the journal we need to know what accounts we are posting to an hence the typical patterns of DR and CR that will be used through the journals.

In the next post let’s explore some of the types of accounts.



One response to “What is a journal in accounting

  1. Thanks to the author.
    Helped me to clear basics !
    Kindly share some nice learning materials to understand from basic to pro for AX Finance to

    Cheers !


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