What is a journal entry in accounting?

A journal entry in accounting serves as a fundamental component of the double-entry bookkeeping system, which records every financial transaction made by an entity. This comprehensive record captures essential details, including the accounts affected by the transaction and the respective amounts involved. Each journal entry ensures that the accounting equation (Assets = Liabilities + Equity) remains balanced, which is critical for accurate financial reporting.

The primary purpose of a journal entry is to provide a detailed log of each transaction, allowing for better tracking, analysis, and reporting of financial activities. It includes the date of the transaction, the accounts impacted, debits and credits, and a description of the transaction. By adhering to this structure, businesses can maintain clarity and precision in their financial records, facilitating future reference and audits.

While other options mention different aspects of accounting such as summaries, estimates, or overviews, they do not define the specific process of recording individual transactions in the same detailed and structured manner as a journal entry does. Thus, the correct definition emphasizes its role in tracking and documenting transactions accurately within the financial system.