Journal entry (journaalpost)
A journal entry records a financial event with a debit and a credit entry of equal size.
What does journal entry mean?
A journal entry records a financial event with a debit and a credit entry of equal size.
The entry must be supported by a source document and concern the correct period. A balanced journal entry can still be wrongly classified in substance.
How does it work?
A journal entry consists of a date, a description, a reference to the voucher and at least two lines: one debit and one credit, together in balance. Assets and costs increase on the debit side; debts, equity and income on the credit side.
The law does not prescribe the technique, but it does prescribe the outcome: records from which the rights and obligations of the legal entity can be known at any time (art. 2:10(1) DCC). Every entry must therefore be traceable to a source document, and vice versa; both are kept for seven years (paragraph 3). The booking date determines in which financial year the expense or income falls (art. 2:362(5) DCC).
Example
A painting company (BV) receives an invoice on 14 November for an aerial work platform: € 5.000 plus 21% VAT, together € 6.050. Journal entry in the purchase journal: debit Machinery € 5.000, debit VAT receivable € 1.050, credit Accounts payable € 6.050. On payment on 12 December a second entry follows in the bank journal: debit Accounts payable € 6.050, credit Bank € 6.050. Neither affects the profit and loss account. That only happens with depreciation, through a third entry in the general journal.
In the annual accounts
Ledger source for the balance sheet and P&L.
Difference from the voucher
The voucher is the evidence of the event: the invoice, the bank statement, the contract, the resolution. The journal entry is the translation of that into accounts and amounts. An entry without a voucher cannot be audited, and a voucher without an entry is a missing transaction.
Common mistakes
- Reading debit and credit as profit and loss
- Forgetting VAT where relevant
What to watch for
- Book on the date of the delivery or the invoice, not on the date of payment; otherwise costs shift to the wrong year.
- Give every correction its own entry with an explanation instead of overwriting the original booking. That keeps the trail visible.
- The requirements for the entries are the same for micro, small, medium-sized and large; only what the annual accounts show of them differs.
Legal basis and source
art. 2:10 DCC
Frequently asked questions
What do debit and credit mean?
They are the left and right side of an account, not words for good or bad. Debit is an increase in assets or costs, credit an increase in debt, equity or income. On your bank statement it is the other way around, because the bank books your balance as its debt.
How do I correct a wrong journal entry?
With a reversing entry of the wrong entry and a new, correct entry, both with a reference to the original. If the period has already been closed, you book the correction in the next open period.
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Preparing Dutch annual accounts?
Your first set of annual accounts is free, for every size class. Create an account and prepare the annual accounts of your Dutch company under Title 9 of Book 2 of the Dutch Civil Code.
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