What is a Journal Entry?
A journal entry is a record of a commercial transaction in an organization’s accounting system. Journal entries are the foundation of the double-entry accounting technique, which has been used to retain financial records for centuries. They make it feasible to track what a company’s resources have been used for and where they came from.
Every transaction must be documented in at least two accounts under the double-entry accounting technique. When a company buys supplies using cash, for example, the transaction will appear in both the supply and cash accounts.
The following elements make up a journal entry:
- The transaction’s start date
- Where applicable, the names of the accounts impacted as well as the account number
- The credit and debit amounts to be credited and debited
- A reference number that acts as a transaction’s unique identification.
- A summary of the transactionEvery transaction must be documented in at least two accounts under the double-entry accounting technique. When a company buys supplies using cash, for example, the transaction will appear in both the supply and cash accounts.
2
Loss of a significant customer
Failure of clients to pay outstanding debts or complete business projects: Being dragged down by another failed business is one of the most typical causes of business failure. Is your company unduly reliant on a single client or customer? If a single client accounts for a big portion of your profits, your business is at risk of failing if that customer decides to switch to a competitor. Similarly, the failure of a key customer or client – such as a B2B services client filing for bankruptcy – could result in your company not being paid for its products or services.
3
Risky, unreliable business plan and investment , as well as competition
Many businesses undervalue their competition and lack a business strategy and long-term investment, leading to failure. New competition has resulted in a loss of business. However, neglecting your competition, particularly when they’re expanding quickly, could result in your company losing market share. As a result, you may experience falling profitability and a lack of cash to run your firm successfully. Preparing ahead of time is the greatest method to avoid losing market share to a competition. Examine your competitors’ value propositions and benefits, then ensure that your company provides greater quality (or better value) than theirs.
