# What Is a Journal in Accounting, Investing, and Trading?

![Journal](https://www.investopedia.com/thmb/YR6h0EmhV23rPn1aCvsuRTVDaH0=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/journal-4194014-1-blue-462dddf9f33143f6b3d4df80c60639d8.jpg)

*— Investopedia / Joules Garcia*

> **Definition**
>
> A journal is a detailed accounting record that documents a company's financial transactions over a period—usually on a monthly or quarterly basis.

## What Is a Journal?

A journal is a detailed running record of all of a business's financial transactions. It is used to reconcile accounts and is transferred to other accounting records, such as the [general ledger](https://www.investopedia.com/terms/g/generalledger.asp). The journal includes information like the transaction date, the accounts affected, and the dollar amounts. Most journal entries are composed in a double-entry bookkeeping method.

### Key Takeaways

*   A journal is a detailed record of all transactions done by a business used to reconcile accounts.
*   Entries are usually recorded using a double-entry method.
*   Entries identify the account affected with a debit or credit—the totals of which must be equal.
*   Single-entry bookkeeping is rarely used.
*   In the investing world, a journal is a running list of trades made by an investor and why.

## Understanding a Journal

For [accounting](https://www.investopedia.com/terms/a/accounting.asp) purposes, a journal may be a physical record or a digital document stored as a book, a spreadsheet, or data entered into accounting software. When a transaction is made, a bookkeeper records it as a journal entry. If the expense or income affects one or more business accounts, the journal entry will detail that as well.

Journaling is an essential part of objective accounting and record-keeping. Journals are easy to review and can be easily transferred later in the accounting process. In addition to the general ledger, journals are often reviewed as part of a trade or audit process.

Information recorded in a journal may include sales, expenses, movements of cash, inventory, and [debt](https://www.investopedia.com/terms/d/debt.asp). The information is best recorded immediately for the sake of accuracy. An accurate journal is critical to business planning, [budgeting](https://www.investopedia.com/budgeting-4689726), and [tax preparation](https://www.investopedia.com/articles/pf/07/tax_prep.asp).

## Types of Journal Entries

The following are the key journal entries that are used in accounting—all of which highlight a company's health and well-being.

*   **Opening entry:** This entry carries over the closing balance from the previous accounting period and becomes the opening balance.
*   **Adjusting entry:** This entry adjusts any errors or makes changes to any entries that weren't previously accounted for, and are inputted into the general ledger at the end of the accounting period.
*   **Reversing entry:** This type of entry is done at the beginning of the accounting period and makes adjustments to adjusting entries made in the last period.
*   **Compound entry:** A compound entry documents multiple transactions with debits and credits. The rule of thumb is that the debit column must equal the credit column.
*   **Closing entry:** A closing entry is the final balance in the journal, appearing at the end of the accounting period. It becomes the opening entry in the next period.

## Using Double-Entry Bookkeeping in Journals

[Double-entry bookkeeping](https://www.investopedia.com/terms/d/double-entry.asp) is the most common system of accounting. Every business transaction is made up of an exchange between two accounts. Thus, every journal entry is recorded with two columns.

For example, if a business owner purchases $1,000 worth of [inventory](https://www.investopedia.com/terms/i/inventory.asp) using cash, the bookkeeper records two transactions in a journal entry. The [cash account](https://www.investopedia.com/terms/c/cashaccount.asp) will show a credit of $1,000, and the inventory account, which is a current asset, will show a debit of $1,000.

> **Important**
>
> One of the primary rules for double-entry journal entries is to debit what comes in and credit what goes out for real accounts.

## Using Single-Entry Bookkeeping in Journals

Single-entry bookkeeping is rarely used in accounting and business. It is the most basic form of accounting and is set up like a checkbook, in that only a single account is used for each journal entry. It is a simple running total of [cash inflows](https://www.investopedia.com/terms/c/cashflow.asp) and cash outflows.

For example, if a business owner purchases $1,000 worth of inventory with cash, the single-entry system records a $1,000 reduction in cash, with the total ending balance below it. Separately, another line indicates that $1,000 has been deducted from the cash account.

It is possible to separate income and expenses into two columns so a business can track total income and total expenses, and not just the aggregate ending balance.

## The Journal in Investing and Trading

A journal is also used by those in the investment finance sector. For an individual investor or professional money manager, a journal is a comprehensive and detailed record of trades in the investor's accounts and can be used for tax, evaluation, and [auditing](https://www.investopedia.com/terms/a/audit.asp) purposes.

[Traders use journals](https://www.investopedia.com/terms/b/blotter.asp) to keep a chronicle of their trading activities and to learn from past successes and failures. Over time, a trader can sometimes spot the errors, emotional decisions, or divergence from an investing strategy that caused a loss.

The investor's journal typically has a record of profitable trades, unprofitable trades, watch lists, pre- and post-market records, and notes on why an investment was purchased or sold.

## What Information Must Be Recorded in a Business Journal?

Every entry in a business journal must contain all critical information about a transaction. In double-entry accounting, this means the date of the transaction, the amount to be credited and debited, a brief description of the transaction, and the business accounts that are affected by it.

Depending on the business, the journal may make room for other entries, such as the tax implications or the impact on a subsidiary.

## What Are the Types of Journals?

The word journal has different meanings, but all of them refer to a running record of events:

*   A personal journal is to record and reflect on events in a person's life over time.
*   A published journal is devoted to reporting news and events. Some are specialized publications devoted to scientific, medical, professional, or trade interests.
*   A business journal is used to record business transactions as they occur.  
    

## What's the Difference Between a Journal and a Diary?

The terms are virtually interchangeable. However, the word diary implies a personal record of daily activities and events, while a journal is often used to explore thoughts and ideas in depth.

## The Bottom Line

Every business needs a journal. This running account of transactions is critical for recording the day-to-day activities of the business. It is used to reconcile other records and ensure that management has an accurate picture of business activities. The journal is also used for other reasons, such as evaluating business successes and missteps to preparing taxes or withstanding an audit.

**_Correction—Jan. 30, 2023:_** This article was edited to reflect that in the double-entry system, transactions are recorded in terms of debits and credits, not increases and decreases. Debits do not always equate to increases, and credits do not always equate to decreases.