Glossary
Accounting Basics

Journal Entry

By: Alec Hollingsworth
Updated:  
June 2, 2025

DEFINITION:

A journal entry records the details of a financial transaction in an organization’s accounting system, indicating which accounts are debited and credited.
A journal entry is a formal record of a financial transaction in an organization’s accounting system. Each journal entry provides details about the transaction, including the date, accounts affected, amounts debited and credited, and a brief description. In nonprofit accounting, journal entries are essential for tracking donations, grants, expenses, and other financial activities. Accurate journal entries ensure that all financial information is properly documented according to accounting principles. They form the foundation for compiling financial statements and provide a clear audit trail. Typically, every transaction is entered as a journal entry before being posted to the general ledger, ensuring transparency and accountability in financial reporting.

Key Takeaways

  • Records financial transactions in detail
  • Includes date, accounts, amounts, and descriptions
  • Forms the basis for financial statements
  • Essential for accurate nonprofit accounting

Why It Matters

Journal entries are essential for maintaining accurate and transparent financial records.

Real World Example

A nonprofit receives a $5,000 grant restricted for educational programs. The bookkeeper creates a journal entry debiting the bank account and crediting a temporarily restricted grant revenue account. Later, when part of the funds are used for educational supplies, another journal entry is made to debit educational expenses and credit the bank account. These entries ensure that both the receipt and use of grant funds are accurately documented, enabling clear reporting to funders and auditors.

How Aplos Helps

In Aplos, users can easily create and manage journal entries to record complex or manual transactions that may not be captured through standard modules. This functionality ensures nonprofit organizations can maintain accurate records for all types of activities, such as corrections, transfers, or unique donations. Aplos streamlines the process with user-friendly forms and built-in validations.
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Frequently Asked Questions

What is a journal entry?

A journal entry is a formal record of a financial transaction, specifying which accounts are affected and by how much.

Why are journal entries important for nonprofits?

They ensure accurate records, support transparency, and provide a clear audit trail for financial activities.

How does Aplos help with journal entries?

Aplos provides easy-to-use tools for creating, managing, and reviewing journal entries, ensuring accounting accuracy.