A journal entry is a record of financial transactions made by a business. It is the first step in the accounting cycle, as transactions are recorded and categorized in order to create financial statements such as the balance sheet and income statement. A journal entry consists of debits and credits. A debit increases an asset or expense account, while a credit decreases an asset or expense account. Businesses use journal entries to keep track of their finances and ensure that all transactions are properly accounted for. Journal entries are easier to process than separate transactions, making them a valuable tool to help keep track of a business’s finances.