What is Journalizing?

//What is Journalizing?
What is Journalizing? 2017-10-05T04:21:41+00:00

Definition: Journalizing is the process of recording transaction in an accounting journal.

What Does Journalizing Mean?

The journalizing process starts when a business transaction occurs. Accountants or bookkeepers must analyze each business transaction in order to understand what accounts are affected by the business transaction. Once the accounts are identified, the accountant must figure out how the accounts are affected.

The business transaction can then be journalized starting with the account to be debited and the ending with the credited accounts. Each journal entry is typically accompanied with a date and a description of the business transaction.

Example

Let’s take a look at an example business transaction that we can show the journalizing process. Assume Pizza Pizza, Inc. just bought a new delivery car for $1,000 cash on January 1st.

First, the transaction must be analyzed to identify what accounts were affected. Pizza Pizza, Inc. bought a new car, so the vehicle account would have been affected and it paid cash for the car, so the cash account would also have been affected.

Second, we must analyze how these accounts changed. The vehicle account increased because we just added another vehicle to it and the cash account decreased because we just paid cash for the vehicle.

Third, we must record the transaction. Since both of these accounts are asset accounts, they both have debit balances. We will debit the vehicle account to increase it and credit the cash account to decrease it. Here is what our example journal entry will look like in the purchases journal.

Vehicle Purchase Journal Entry Example

Here is a list of other common journal entry examples.