Legal Definitions - book entry

A book entry refers to a record of a transaction or ownership that exists as an electronic or written notation in a ledger or accounting system, rather than being represented by a physical document or certificate.

This term is commonly used in two main contexts:

• General Accounting: It refers to any record made in a company's financial books to track income, expenses, assets, or liabilities.
• SecuritiesOwnership: It describes the modern method of holding ownership of financial assets, such as stocks or bonds, where no physical certificate is issued. Instead, ownership is recorded digitally by a brokerage firm or a central clearing system.

Here are a few examples to illustrate the concept of a book entry:

• Imagine a small graphic design studio that purchases new software licenses. Instead of receiving a physical invoice that they then manually file, the payment is processed electronically, and their accounting software automatically creates a digital record. This record notes the date, vendor, amount, and purpose of the expense. This digital notation in their accounting system is a book entry, reflecting the outflow of cash and the acquisition of a business asset.

  This example demonstrates the general accounting sense, where financial transactions are recorded directly into a company's ledgers, often digitally, to maintain accurate financial records without relying on physical paperwork for every single transaction.

• Consider an individual who decides to invest in a bond fund through their online investment platform. When they complete the purchase, they do not receive a physical bond certificate or any paper document confirming their ownership of the fund units. Instead, their ownership is recorded electronically by the investment firm and the relevant clearing house. They receive monthly statements detailing their holdings and transactions. This electronic record of their ownership is a book entry.

  This illustrates the securities ownership context, where financial assets are held in a dematerialized form. Ownership is tracked digitally, making transactions more efficient and reducing the risks associated with physical certificates, such as loss or theft.