The foundation of bookkeeping is journal entries. The entries of the journal include crucial information such as credit and debit amounts, when and from which accounts they were made. Every journal entry represents a specific business transaction, which is later posted to the general ledger.
There are several types of journal entries in accounting, however, primarily; the seven different types.
Simple Journal Entries
An entry is simple if it only affects two accounts, one with debit and another with credit.
Compound Journal Entries
Such entries contain multiple debits and/or multiple credits. They’re recorded mostly for transactions that have similar characteristics and occur on the same day.
Opening Journal Entries
As the name suggests they are entries that represent the closing balance of previous period that becomes the opening balance of the current period. This is true for “assets” & “liabilities” including “equity” from an earlier accounting period. Opening entries are a by-product of the going concern concept in accounting.
Closing Journal Entries
An entry that closes the balances of revenue and expenses by transferring their balances to the Trading Account or Profit & Loss Account.
Transfer Journal Entries
Account transfers involve the transfer of balance from one account to another. In general, these entries are recorded when an incorrect booking is made in connection with any account.
Rectification Journal Entries
In accounting, rectifying entries refer to those entries as part of the process of correcting entries in books of original entries or in some accounts in the ledger.
Adjustment Journal Entries
In accounting, adjusting entries refer to the records that align assets and liabilities with their true values and revenues with expenses.