Journal Entry Glossary

Find detailed explanations of how to correctly post common journal entries.

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How to Book Dividend Declaration Journal Entry

A dividend declaration is a formal action by a company's board of directors that a dividend will be paid to shareholders. The journal entry is the accounting record of the dividend declaration and is used to record the company's liability to pay the dividend.

Intercompany Journal Entry

Intercompany journal entries are used to accurately record the transfer of funds between two companies within the same corporate group, ensuring that the financial statements of both companies are accurate and in compliance with Generally Accepted Accounting Principles (GAAP).

How to Book Prepaid Expense Amortization Journal Entry

Prepaid expenses are costs that have been paid in advance for goods or services that will be received in the future. Prepaid expenses are recorded as assets on the balance sheet until they are used or consumed. When the prepaid expense is used or consumed, it is then recorded as an expense on the income statement.

Depreciation Journal Entry

Accounting professionals working at enterprise companies should be aware of the importance of recording depreciation journal entries to accurately reflect the value of assets in financial statements and to calculate taxable income.

How to Book Journal Entry for Bonus Accrual

Bonuses are accrued as earned. Generally bonuses should be expenses over time as employees perform work over the service period, even when the final bonus amount is conditional on performance. When conditions like performance or other uncertainties exist, a probability weight should be applied.

How to Book Journal Entry for Accrued Commissions

Commissions should be recorded when earned (when the sale is closed at the employee has right to receive the commission).

How to Book Credit Card Rewards Journal Entry

Credit Card Rewards are recognized when earned.

How to Book Early Exercised Stock Options Journal Entry

The early exercise of stock options allows the option holder to purchase shares prior to the vesting period. Typically, stock that is purchased via early exercise is subject to repurchase if the holder does not meet the vesting criteria when an event like employee separation occurs.

How to Book Capitalization and Amortization for Costs to Obtain a Contract Journal Entry

Revenue recognition under ASC 606 requires the capitalization of costs to complete a contract. This is most often but is not limited to sales commissions. The capitalized costs are amortized over the expected customer life (the contract length plus reasonably anticipated renewals).

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