2021
Transaction #2: On December 5, Gray Electronic Repair Services paid registration and licensing fees for the business, $370.
First, we will debit the expense (to increase an expense, you debit it); and then, credit Cash to record the decrease in cash as a result of the payment.
5 | Taxes and Licenses | 370.00 | ||
---|---|---|---|---|
Cash | 370.00 |
Transaction #3: On December 6, the company acquired tables, chairs, shelves, and other fixtures for a total of $3,000. The entire amount was paid in cash.
There is an increase in an asset account (Furniture and Fixtures) in exchange for a decrease in another asset (Cash).
6 | Furniture and Fixtures | 3,000.00 | ||
---|---|---|---|---|
Cash | 3,000.00 |
Transaction #4: On December 7, the company acquired service equipment for $16,000. The company paid a 50% down payment and the balance will be paid after 60 days.
This will result in a compound journal entry. There is an increase in an asset account ( debit Service Equipment, $16,000), a decrease in another asset ( credit Cash, $8,000, the amount paid), and an increase in a liability account ( credit Accounts Payable, $8,000, the balance to be paid after 60 days).
7 | Service Equipment | 16,000.00 | ||
---|---|---|---|---|
Cash | 8,000.00 | |||
Accounts Payable | 8,000.00 |
Transaction #5: Also on December 7, Gray Electronic Repair Services purchased service supplies on account amounting to $1,500.
The company received supplies thus we will record a debit to increase supplies. By the terms "on account", it means that the amount has not yet been paid; and so, it is recorded as a liability of the company.
7 | Service Supplies | 1,500.00 | ||
---|---|---|---|---|
Accounts Payable | 1,500.00 |
Transaction #6: On December 9, the company received $1,900 for services rendered. We will then record an increase in cash (debit the cash account) and increase in income (credit the income account).
9 | Cash | 1,900.00 | ||
---|---|---|---|---|
Service Revenue | 1,900.00 |
Transaction #7: On December 12, the company rendered services on account, $4,250.00. As per agreement with the customer, the amount is to be collected after 10 days. Under the accrual basis of accounting , income is recorded when earned.
In this transaction, the services have been fully rendered (meaning, we made an income; we just haven't collected it yet.) Hence, we record an increase in income and an increase in a receivable account.
12 | Accounts Receivable | 4,250.00 | ||
---|---|---|---|---|
Service Revenue | 4,250.00 |
Transaction #8: On December 14, Mr. Gray invested an additional $3,200.00 into the business. The entry would be similar to what we did in transaction #1, i.e. increase cash and increase the capital account of the owner.
14 | Cash | 3,200.00 | ||
---|---|---|---|---|
Mr. Gray, Capital | 3,200.00 |
Transaction #9: Rendered services to a big corporation on December 15. As per agreement, the $3,400 amount due will be collected after 30 days.
15 | Accounts Receivable | 3,400.00 | ||
---|---|---|---|---|
Service Revenue | 3,400.00 |
Transaction #10: On December 22, the company collected from the customer in transaction #7. We will record an increase in cash by debiting it. Then, we will credit accounts receivable to decrease it. We are reducing the receivable since it has already been collected.
17 | Cash | 4,250.00 | ||
---|---|---|---|---|
Accounts Receivable | 4,250.00 |
Actually, we simply transferred the amount from receivable to cash in the above entry.
Transaction #11: On December 23, the company paid some of its liability in transaction #5 by issuing a check. The company paid $500 of the $1,500 payable.
To record this transaction, we will debit Accounts Payable for $500 to decrease it by the said amount. Then, we will credit cash to decrease it as a result of the payment. The entry would be:
20 | Accounts Payable | 500.00 | ||
---|---|---|---|---|
Cash | 500.00 |
Accounts payable would now have a credit balance of $1,000 ($1,500 initial credit in transaction #5 less $500 debit in the above transaction).
Transaction #12: On December 25, the owner withdrew cash due to an emergency need. Mr. Gray withdrew $7,000 from the company.
We will decrease Cash since the company paid Mr. Gray $7,000. And, we will record withdrawals by debiting the withdrawal account – Mr. Gray, Drawings .
25 | Mr. Gray, Drawings | 7,000.00 | ||
---|---|---|---|---|
Cash | 7,000.00 |
Transaction # 13: On December 29, the company paid rent for December, $ 1,500. Again, we will record the expense by debiting it and decrease cash by crediting it.
29 | Rent Expense | 1,500.00 | ||
---|---|---|---|---|
Cash | 1,500.00 |
Transaction #14: On December 30, the company acquired a $12,000 short-term bank loan; the entire amount plus a 10% interest is payable after 1 year.
Again, the company received cash so we increase it by debiting Cash. The company now has a liability. We will record it by crediting the liability account – Loans Payable .
30 | Cash | 12,000.00 | ||
---|---|---|---|---|
Loans Payable | 12,000.00 |
Transaction #15: On December 31, the company paid salaries to its employees, $3,500.
For this transaction, we will record/increase the expense account by debiting it and decrease cash by crediting it. ( Note: This is a simplified entry to present the payment of salaries. In actual practice, different payroll accounting methods are applied. )
31 | Salaries Expense | 3,500.00 | ||
---|---|---|---|---|
Cash | 3,500.00 |
There you have it. You should be getting the hang of it by now. If not, then you can always go back to the examples above. Remember that accounting skills require mastery of concepts and practice.
We've gone through 15 journal entry examples and explained how each are prepared to help you learn the art of recording. By now you'd feel more confident in preparing journal entries. Feel free to refer back to the examples above should you encounter similar transactions.
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Here is an example of a basic journal assignment:
Short writing assignments for a personal journal will be required for all readings. Additional assignments will be given frequently in class and for homework throughout the semester. In addition, it must be kept up to date. You may be asked to read journal entries for the class. Consequently, your journal must be brought to every class. Journal writings will not be graded for quality as a paper would be. If you have completed all assigned journal entries in a sincere manner, you will receive full credit for the journal in your final grade. That credit will be lessened only if you are lacking certain journal entries, or your entries are unacceptably brief or intentionally do not address the topic. The journal will not be judged negatively for unintentional errors in writing or punctuation. In other words, the journal is one place where a better writer will not necessarily get a better grade. The journal rewards effort and participation. It provides an opportunity to succeed no matter where you are starting from if you sincerely dedicate yourself.
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Home › Examples › Journal Entries › Journal Entries
Journal entries are a key component as well as the first step in the accounting cycle. Each business transaction is analyzed for the economic impact on the asset, liability, and equity accounts before being recorded in the accounting system with a journal entry. Since every single business transaction is recorded or journalized throughout the year, there are tons of different journal entries. Most journal entries are recorded in general journal , but specific journal entries like credit sales of inventory are recorded in separate journals like the sales journal .
I know how difficult it can be to memorize how each business transaction is recorded. That’s why I’ve made this extensive list of journal entry examples. Each example deals with a common business transaction, so you can use this as a reference for how to journalize transactions in the future.
I also show you how to record the journal entry as well as explain the economic impact of each transaction on the accounting equation . Most of these journal entry examples are also in parts of the accounting course . Check out this list of journal entries. If you don’t see what you are looking for, use the search bar on the right to find an example.
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Journal entries are often, though not always, meant to be reflective. To write a strong journal entry, take the following steps:
1. Read the prompt carefully.
What is the required mode of reflection? Are you supposed to be comparing ideas? Asking a question? Presenting information? Highlighting thoughts? Be sure to follow the instructions given.
2. Consider requirements.
How many words should the journal entry be? What is the due date and time? What should the format look like? Follow your instructor's guidelines. If no specific formatting is indicated, follow general APA guidelines , or use a template .
3. Reflect.
After reading the required material, reflect on specific elements, examples, or experiences you would like to include in your journal entry. Use other prewriting techniques to get your ideas flowing. If you get stuck, see the Writing Center’s tips on avoiding writer’s block .
4. Outline.
Create a thesis (even if it is only a miniature) to give your readers an area of focus. Then outline the points that you will cover. Be sure to include a brief introduction and conclusion (one sentence for each is often sufficient). Even journal entries can benefit from outlining, so view some outlining strategies to get started.
5. Draft.
Go ahead and get started! Use your outline as a starting point, and review the Writing Center's resources on using scholarly tone as you write. Give credit to outside sources if you use them. See an explanation of how to cite if you are not sure how to best give credit to your sources.
Additional Resources:
Further Questions?
Would you like a current or future assignment to be reviewed by the Writing Center? If so please visit the Writing Center's Paper Review Website and make an appointment with us!
Do you have other general writing questions? Ask OASIS !
Other questions about your doctoral capstone or the Form & Style review? E-mail the Dissertation Editors at [email protected] .
Want to peruse other writing resources? Go to the Writing Center’s homepage .
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Journal entries act as the building blocks of financial accounting, providing a chronological record of all transactions made by a business. They enable companies to keep track of all financial transactions and ensure that the accounts are balanced.
Whether you’re a seasoned accountant or a small business owner acquiring accounting acumen, comprehending the mechanics of journal entries paves the way for coherent, accurate, and insightful financial recording and reporting, thereby contributing to the overall financial health and sustainability of the business.
This article will delve into the essentials of journal entries, discussing their purpose, their components, and how they are crafted, offering easy-to-understand examples along the way.
The heartbeat of financial accounting is encapsulated in journal entries, ensuring every financial transaction is recorded systematically. A journal entry in accounting refers to the logging of transactions into accounting journal items.
The entry has a left-hand side (debit) and a right-hand side (credit) to maintain the accounting equation balance, which is:
Assets = Liabilities + Equity
These entries provide a comprehensive chronological record, itemizing the date of a transaction, the accounts affected, the amounts, and a brief description.
If a business takes a loan of $5,000 from a bank:
Debits and Credits are the terminologies that guide the directionality of journal entries, with debits indicating an increase in assets or expenses and a decrease in liabilities or equity. Conversely, credits signify an increase in liabilities or equity and a decrease in assets or expenses. It’s pivotal to remember:
Every journal entry must have at least one debit and one credit entry, ensuring the accounting equation stays balanced.
Journal entries are indispensable to maintaining financial coherence and enabling accurate financial reporting.
The primary purposes include:
An accounting journal entry contains the following components:
Consider a business takes out a loan of $10,000. The journal entry would be:
The above entry ensures that the increase in the company’s cash (an asset, hence debited) is counterbalanced by recognizing a liability (loan payable, hence credited) of an equal amount, adhering to the accounting equation.
Creating a journal entry, while systematically structured, is a straightforward process.
Here’s a simplified step-by-step guide:
Each entry should consist of:
Opening entries:.
These are the initial entries that establish the opening balances in the various ledger accounts.
Facilitate the movement of amounts from one account to another, ensuring each transaction impacts the financial statements appropriately.
Made at the end of the accounting period to transfer the balances from the temporary accounts to the permanent accounts.
Made before preparing the financial statements, adjusting entries account for items that are not recorded in the accounting system at the period’s end.
Involve more than two accounts where there are multiple debits, multiple credits, or both.
Made at the beginning of the new accounting period, reversing entries negate specific adjusting entries made in the previous period.
General Journal: This is the primary journal where all kinds of business transactions are recorded. From purchases to sales, various activities find a place in the general journal, making it a comprehensive record of the financial activities of a business.
Special Journal: Tailored for recording specific types of transactions in a dedicated journal, special journals streamline the recording process by categorizing similar transactions.
Some of the prominent special journals include:
By segregating transactions according to their nature and grouping them into designated journals, the special journals facilitate focused and organized record-keeping.
Tracking journal entries is crucial to maintain the accuracy and reliability of financial data.
Here are some strategies:
Example 1: purchasing inventory on credit.
Adjusting journal entries are made at the end of an accounting period to align the account balances with the accrual accounting. In contrast, regular entries are made as and when transactions occur.
Journal entries provide a chronological record of all financial transactions, ensuring that the impact on the financial statements is accurately reflected, and facilitating compliance and audit trails.
Depreciation is recorded by debiting the Depreciation Expense account and crediting the Accumulated Depreciation account, reflecting the reduction in value of an asset over its useful life.
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Understanding and accurately crafting journal entries is pivotal in encapsulating the financial essence of all business activities. By ensuring consistency, reliability, and accuracy in journalizing, a firm safeguards its financial integrity and lays a robust foundation for transparent and insightful financial reporting.
Journal entries stand at the core of financial accounting, ensuring every transaction is accurately chronicled, and the financial position of an entity is transparently depicted. Through systematic recording, tracking, and analysis of journal entries, businesses not only ensure compliance with statutory requirements but also carve a path toward informed strategic decision-making.
Equipped with the knowledge and examples provided, businesses, especially small and burgeoning entities, can navigate through the intricacies of journalizing with augmented confidence and precision, fostering a robust financial management ecosystem.
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Assignment: critical thinking journal entry.
Journal entry assignments tend to be more flexible than other types of writing assignments in college, and as a result they can be tailored to your own experiences as long as they answer the primary questions asked in the assignment.
One model of a successful entry about this topic can be found below. Feel free to include your own experiences and examples from real life as they pertain to the issue at hand.
Critical Thinking Journal Entry by Sandy Brown The thing I like about critical thinking is that is applies to everything. If you get better at using critical thinking in school, that means other things in life get easier, as well (at least that’s what I hope is true). I didn’t do so great on the critical thinking quiz. I got a 50% the first time, but I think I would have done better if I had understood the questions more clearly. Question #9, the one about having autonomy, I got wrong because I thought it was saying it was important, rather than it wasn’t. Now that I think about it, I guess that’s an example of where I could be a better critical thinker—I could take the time to read these questions more closely, and be sure that my answer makes sense to what the question actually asks, rather than what I think it asks. I was happy with parts of this, though. There were a couple of questions about fair-mindedness, and I got both those right, even though I didn’t remember seeing the words “fair-mindedness” in the textbook. That phrase makes a lot more sense to me than “first order” and “second order” thinking. For me, I think that I’m a better thinker when I’m not in a rush. I tend to panic when I take tests, and then I answer questions too quickly. For things that don’t have a timer, like homework or out-of-class assignments, I tend to do a lot better because I can take as long as I need to figure out what exactly I’m supposed to do. So I guess one way to improve my critical thinking skills would be to practice going slower for timed tests, and giving myself time to check my answers before turning something in. I don’t want to make mistakes like the one I did on this quiz, when it counts against my actual grade.
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An example of a journal entry includes the purchase of machinery by the country where the machinery account will be debited, and the cash account will be credited.
The following journal entry examples in accounting provide an understanding of the most common journal entries used by business enterprises in their day-to-day financial transactions. It is the summary of debits and credits of financial transactions with a note of which accounts these financial transactions will affect, maintained in chronological order. Passing the journal entries is very much required as they allow the business organization to sort their transactions into manageable data.
Example #1 - revenue, journal entry examples video explanation, example #2 - expense, example #3 - asset, example #4 - liability accounting, example #5 - equity accounting, example #6 - transaction with journal entries, example #7 - practical, example #8 - practical, example #9 - practical, example #10 - practical, recommended articles, sales journal entry:.
When sales are made on credit, the journal entry for accounts receivable is debited, and the sales account is credited.
If cash sales happen, then the cash account is debited.
At times customers are unable to pay. For such scenarios, setting up or adjustment for bad debt expenses is made. Bad debt expense is debited for such entry, and allowance for doubtful accounts is credited.
If such provisions are found, the doubtful accounts are debited, and the account receivable is credited.
In this case, the related asset or expense account is debited, and the journal entry for the payable account is credited.
When payment is to account payable, accounts payable is debited, and the cash account is credited.
In the case of payroll expenses, the wages expense, these accounts are debited, and the cash account is credited.
In this case, the applicable expense is debited, and accrued expense is credited.
For depreciation expense, depreciation expense is debited, and the accumulated depreciation account is credited.
To establish a petty cash fund, petty cash is debited, and the cash account is credited.
There is usually a debt to the bank fees account, Office Supplies Account, Interest Account, etc., to recognize charges made by the bank, with a credit to the cash account.
In this case, the expense account debits and the prepaid expense account credits.
If the inventory purchased is worth $90000, $10000 in cash, and $80000 on the account;
When a fixed asset is added, the applicable fixed asset account is debited, and accounts payable is credited.
Purchased Equipment for $600,000 in Cash;
When a fixed asset is removed, the accumulated depreciation account is debited, and the applicable fixed asset account is credited. There could be a chance of a gain or loss in this regard.
Accrued liabilities account is credited. If a debt is owed but not yet billed, accrued liability entry is to be made. In this case, the accrued expense is a debit to the expense account .
When dividends are declared , the retained earnings account is debited, and the dividends payable account is credited.
Once dividends are paid, this is a debit to the dividends payable account and a credit to the cash account.
When shares in a business are repurchased , debit treasury stock , and credit cash.
If the company borrowed $300,000 from the bank, the journal entry would look like this:
Let us see another example of accounting transactions and their respective journal entries.
The journal entries for the above transactions are:
Pen World Ltd. has the following transactions during the month of Feb-2019. Pass the necessary Journal Entry.
On Feb 4, 2019, I Purchased material worth $50,000;
On Feb 10, 2019, Sold Pens worth $80,000
On Feb 28, 2019, Incurred Expenses worth $5,000
On Feb 28, 2019, Purchased furniture worth $7,000
The following are the transactions of Fun Ltd. Record the transaction in the Journal.
Small Finance International Ltd was incorporated in April 2019 with the capital initially of 10,000 common stocks of $ 10 each. During the first month of its operation the company had the following transactions. Record the journal entries of all the transactions.
Other purchases related to transactions in Company Material Ltd. are given below. Record the journal entry for each transaction.
On 05- Mar- 19 goods were purchased worth $5,000
On 07-Mar-19, Goods worth $500 were lost by fire;
On 10-Mar-19, Goods worth $900 were lost by theft;
On 15-Mar-19, Goods worth $700 were distributed as a charity;
On 20-Mar-19, Goods worth $600 owner withdrew.
The business enterprise benefits, in many ways, by bypassing journal entries. Firstly it can get at one place the full effect of any transactions. Secondly, it provides records of transactions in chronological order helping and easing out to locate any transaction based on their date. Thirdly it helps mitigate the errors because the debit and credit of individuals and total transactions can be easily compared. Moreover, any entry which does not go into any books maintained by the company is recorded in the journal.
This article has been a guide to Journal Entry Examples. Here we discuss the top 4 examples of journal entries in accounting used by business enterprises. You can learn more about accounting from the following articles –
In the previous lesson, we learned about the general journal and how to capture economic events . Let’s try an easy example using this simple system. Some transactions are routine and happen very frequently. It helps to know these, because they represent 99% of the total journal entries a company will make. All companies earn some sort of revenue, so let’s look at a sale transaction:
March 20, the company made a cash sale for $100.
Enter the Cash portion of the journal entry.
Mar-20 | Cash | $100 | |
The date always starts a journal entry. Enter the month once on a page, and put the day in front of each journal entry on the page, even if they are all on the same date. The day indicates the beginning of a new journal entry. You should also leave one or two blank lines between journal entries on a page.
3. Enter the balancing dollar amount in the opposite column from Cash.
Mar-20 | Cash | $100 | |
Almost done….
4) Refer to the information given, check the Chart of Accounts, tighten your thinking bolts and select the correct account for the second part. This is a sale, so we will use Sales Revenue for the Credit side of the journal entry.
Mar-20 | Cash | $100 | |
Sales Revenue | $100 | ||
The journal entry is in balance, and is complete. The textbook will show that a memorandum can be entered on the line below the journal entry. This should be additional information that is not contained in the journal entry itself; information that will be useful when trying to reconstruct events at a later date.
Another example. April 1, the company paid rent $500.
Apr-1 | $500 | ||
Cash | $500 | ||
Note that it is customary to enter the debit part first , and the credit entry second. The credit entry account title is indented, to help set it off from the debit account titles. These practices are used to make the journal entry easier to read, and reduce errors in posting.
4) Refer to the information given, check the Chart of Accounts, tighten your thinking bolts and select the correct account for the second part. This is an example of paying an expense, in this case Rent Expense.
Apr-1 | Rent Expense | $500 | |
Cash | $500 | ||
Another example…without cash. April 20, the company opens a charge account at Office Emporium. They buy a $1000 computer, and say “charge it!”
Apr-20 | $1000 | ||
cash | $1000 | ||
Notice that I have roughed in the structure of the journal entry, but the actual accounts have not been entered yet.
4) Refer to the information given, check the Chart of Accounts, tighten your thinking bolts and select the correct account for the second part. This is an example of buying equipment, in this case we will use the account Office Equipment.
5) Refer to the Chart of Accounts and replace “cash” with the appropriate account, which will usually end with “Payable” or “Receivable” such as Accounts Payable, Interest Receivable, etc.
In this case we will use Accounts Payable, one of the most frequently used accounts. Accounts Payable is used to refer to most of the common, day-to-day debts and current liabilities that a company incurs. It is short-term debt, meant to be paid soon, like the phone bill, utility bill, etc.
Apr-20 | Office Equipment | $1000 | |
Accounts Payable | $1000 | ||
These are all examples of simple journal entries. There is one debit and one credit. Some transactions might involve more then two accounts, and we would use three or more lines to write those entries. These are called compound journal entries (or complex journal entries). There is no limit to the number of debit or credit accounts that can be included in a journal entry. All necessary accounts will be used. The journal entry will balance , regardless of the number of accounts used.
Let’s try an example of a compound journal entry. June 5, the company buys building and land for $100,000. They make a down payment of $20,000 and sign a mortgage note with their bank for the balance. An appraisal shows the land alone has a value of $10,000.
June-5 | |||
Notes Payable | $80,000 | ||
Cash | $20,000 |
3) Enter the balancing dollar amount in the opposite column.
4) Refer to the information given, check the Chart of Accounts, tighten your thinking bolts and select the correct account for the second part. I left 2 blank lines above, because I knew we had both land and a building, which must be entered separately.
Land | $10,000 | ||
Building | $90,000 | ||
Notes Payable | $80,000 | ||
Cash | $20,000 | ||
——– | ——– | ||
Total | $100,000 | $100,000 |
In this example I have totaled the columns to show that the journal entry is in balance. In real accounting systems a total is only drawn at the bottom of the page, not after each journal entry.
Here’s another example of a compound journal entry. This one also shows how to record the issue of common stock, a very important journal entry to know. On May 1, Bill, Bob and Quinn create a new corporation, BBQ, Inc. They raise capital in the company by selling 10,000 shares of Common Stock for $5 per share. The common stock has a Par value of $1 per share.
May-1 | Cash | $50,000 | |
4) Refer to the information given, check the Chart of Accounts, tighten your thinking bolts and select the correct account for the second part. Common stock is recorded as a credit to the Common Stock account. It is recorded at Par value, in this case $1 per share. So 10,000 x $1 = $10,000.
May- | Cash | $50,000 | |
Common Stock | $10,000 | ||
The journal entry is out of balance and we need to finish it up. Any excess raised by the sale of stock is credited to the Additional Paid-In Capital account.
May-1 | Cash | $50,000 | |
Common Stock | $10,000 | ||
Additional Paid-In Capital | $40,000 |
This is a good example of an important journal entry every accountant and bookkeeper should know. We don’t use it very often, but it’s important to know how to make this type of journal entry.
Each state has slightly different laws regarding corporations. Most states permit Par value stock, and some have a Legal Capital rule, forcing corporations to maintain tangible capital equal to the Legal Capital. This is in place to protect stockholders. Some states permit No-Par stock.
States also allow Preferred stock, which pays a fixed dividend, similar to an interest-bearing investment. Preferred stock usually has a Par value, and is recorded as in the example above, except the Preferred Stock account is used. Some company’s maintain a separate account Additional Paid-In Capital on Preferred Stock, but Additional Paid-In Capital usually reverts to the Common stockholders, regardless of it’s source.
Journal entries must be posted to the Ledger accounts on a regular basis. In many computer based systems this is done automatically, when journal entries are made. In a manual system, and some computer systems, the journal entries are posted on a daily, weekly or monthly basis, called “batch posting.”
When you Post, you simply take each line from the journal entries, and transfer the amounts to the corresponding Ledger accounts. You have to be very careful to post all journal entries, get the dollar amounts right, and enter them in the correct column of the correct account. Needless to say, in a manual system errors do get made.
Posting is actually a routine and mechanical procedure.
You may see examples of T-Accounts in accounting textbooks. A T-Account is just a simple way to represent a Ledger account. It’s handy for accounting students, because you can make quite a few T-Accounts on one page, and post journal entries quickly. This makes it easier to do homework assignments or analyze transactions.
Some homework assignments will only use a few accounts, and there will only be one or two entries to each account. You can make three T-Accounts across a page, and several rows down the page. The Cash account should be larger than the rest, since it will have quite a few entries in most assignments.
When you post to T-Accounts, make a large T and write the name of the account above it. Write the Debit entries on the left half of the T, and Credit entries on the right side of the T. You can draw a line underneath the entries, net all the entries together, and put the balance on the correct side of the T below the line.
The Income Statement: Relates to a period of time . Revenue – the price of your goods and services Expenses – costs incurred in earning revenue Net Income – the excess of Revenue over Expenses, on the Income Statement Net Loss – the excess of Expenses over Revenue, on the Income Statement Net Income is synonymous with Net Profit. Debit and Credit Rules Revenues = Credit Entry Expenses = Debit Entry
All revenue and expense entries follow these simple rules. The opposite side entry is usually made only to correct an error in an earlier journal entry. This is true of all income statement accounts.
Many balance sheet accounts tend to increase and decrease on a regular basis. Cash, Inventory, Accounts Receivable, Supplies, Accounts Payable all change on a frequent basis. Income statement accounts only increase, and do so according the the rules above. It is really easy to remember this simple rule.
Example February 3, the company makes a credit sale of $250.
Feb-3 | Accounts Receivable | $250 | |
$250 | |||
Example February 5, the company makes a cash sale of $250.
Feb-5 | Cash | $250 | |
$250 | |||
These two entries are almost identical. Notice that Sales Revenue is on the Credit side in both entries. Remember this and it will make all your journal entries easier. When you record a revenue you will put it on the Credit side.
Example February 1, the company pays rent, $500.
Feb-1 | $500 | ||
Cash | $500 | ||
Example February 5, the company has an service company clean their office every week. The fee is $100 each week, and the bill is paid at the end of the month. This is the first time the office has been cleaned this month.
Feb-5 | $100 | ||
Accounts Payable | $100 | ||
These are both examples of an Expense entry. The expense part is always in the Debit column. You will list it first, and then either Cash or Accounts Payable. An entry to record Payroll Expense would credit Wages Payable. An entry to record Interest Expense would credit Interest Payable. These are special payable accounts. Most common business expenses will credit Accounts Payable or occasionally Cash.
Realization Principle – at the time goods are sold or services are rendered.
Matching Principle – offsetting expenses against revenues in the appropriate time period. For instance, the bill for June’s long distance phone calls is paid in July. The long distance expense should show up on the June income statement.
Creating a journal entry is the process of recording and tracking any transaction that your business conducts. Journal entries help transform business transactions into useful data.
Want to learn how to correctly write journal entries for your business? You’ve come to the right place!
Journal entries are records of financial transactions flowing in and out of your business. These transactions all get recorded in the company book, called the general journal .
Journal entries are the very first step in the accounting cycle . The main thing you need to know about journal entries in accounting is that they all follow the double-accounting method.
What this means is that for every recorded transaction, two accounts are affected - and as a result, there is always a debit entry and a credit entry.
Before diving into the nits and grits of double-entry bookkeeping and writing journal entries, you should understand why journal entries are so important for a business.
Well, for starters, maintaining organized records of your transactions helps keep your company information organized . Accountants record data chronologically based on a specific format. This way they can easily find information and keep an eye out for any possible accounting errors .
Secondly, journal entries are the first step in the recording process. So you’ll eventually need them to prepare other financial statements . The income statement, cash flow, balance sheet, all of them are based on the initial recordings of journal entries.
Lastly, performance measurement . Auditors use financial reports to analyze how transactions are impacting the business.
As we said above, in every transaction, at least two accounts will change, where one is debited and the other one credited. This is known in accounting as double-entry bookkeeping .
Double-entry bookkeeping isn’t as complicated as it might sound. To understand the concept, think about any purchase you’ve ever made.
Money in exchange for a product, right? In accounting language, this is a transaction that simultaneously affects two accounts . The cash account, which decreases since you’re paying, and the equipment account, which increases from buying the product.
So in simple terms, in the business world, money doesn’t simply appear or disappear. If it goes into one account, it has to get out of another. That’s why it’s called “double-entry”.
This is where the concepts of debit and credit come to play.
First, let’s get some common misconceptions out of the way.
Debit and credit are neither good nor bad . And no, they’re not the same as adding or subtracting .
They are just words that show the double-sided nature of financial transactions .
In brief: debit is money that flows into an account , whereas credit is money that flows out of an account .
Here’s all you need to remember:
Does it all still sound a bit confusing? Don’t worry! We’ve made a cheat sheet so you can easily remember.
Types of accounts | Debit | Credit |
---|---|---|
Assets are the resources of a business. They include cash, accounts receivable, equipment, etc. | Increase | Decrease |
Expenses are the cost of the consumed assets. They include rent, interest expense, etc. | Increase | Decrease |
The owner’s equity represents the owner’s investments in a company. | Decrease | Increase |
Liabilities are claims against assets. These include accounts payable, wages payable, notes payable, etc. | Decrease | Increase |
Revenue is cash received from business activities such as sales, dividends, services, etc. | Decrease | Increase |
Ready to solve an example? Let’s take a simple one and explain the process step-by-step.
Let’s say the owner of an advertising company decides to invest $10,000 cash in his business.
There are three main steps you have to follow to make the perfect journal entry:
First, figure out which accounts are affected . In this transaction, they are the assets account and the owner’s equity account.
Now, determine which items have been increased or decreased , and by how much .
Since the owner is making an investment , both of the accounts will increase by $10.000. The asset account will have $10.000 more in cash, whereas the Owner’s Equity account $10.000 more in Capital.
Lastly, we have to translate the changes into debits and credits . We learned that debits increase assets, so cash will be debited for $10,000. On the other hand, the opposite will happen to the owner’s equity. Capital will be credited for $10,000.
After this point, the hardest work is done. All there’s left to do now is neatly document the transaction.
Here’s how you do it ...
To make a complete journal entry you need the following elements:
This is what the previous transaction would look like in a Journal:
Ref. | DATE | Account Titles and Explanation | Debit | Credit |
---|---|---|---|---|
101 | September 3rd | Cash | $10,000 | |
Capital (Owners investment in the business) | $10,000 |
Businesses are diverse - in size, service, ownership. That’s why there are different types of journals, based on the company you run. Mainly, however, we divide them into two categories: general and special .
We briefly mentioned the general journal in the beginning. To recap, the general journal is the company book in which accountants post (or summarize) all journal entries.
While small businesses and startups might not have difficulty fitting all of their entries in the general journal, that’s not always the case.
For big industries like trading or manufacturing, other journals, called special journals are necessary. Their purpose is to group and record transactions of a specific type. These types depend on the nature of the business. Usually, though, special journals record the most recurring transactions within a company.
Here’s a list of the most frequent types of special journals utilized by companies:
Some of the most common types of journal entries that a small business will make are the following:
All examples assume tax is applied on sales and purchase. If no tax, then it can be removed as the value will be zero.
Journal Entry for Sales of Services
Journal Entry for Sales Invoice - Goods/Inventory
Ref. | DATE | Account Titles and Explanation | Debit | Credit |
---|---|---|---|---|
100 | September 3rd | Accounts Receivable | $1,100 | |
Sales | $1,000 | |||
Tax | $100 | |||
Inventory | $500 | |||
Cost of Goods Sold | $500 |
Journal Entry for Cash Sales
Ref. | DATE | Account Titles and Explanation | Debit | Credit |
---|---|---|---|---|
100 | September 3rd | Cash | $1,100 | |
Sales | $1,000 | |||
Tax | $100 |
Journal Entry for Receiving Payment for Invoice
Ref. | DATE | Account Titles and Explanation | Debit | Credit |
---|---|---|---|---|
100 | September 3rd | Bank (or Cash) | $1,100 | |
Accounts Receivable | $1,100 |
Journal Entry for Purchase of Goods
Ref. | DATE | Account Titles and Explanation | Debit | Credit |
---|---|---|---|---|
100 | September 3rd | Inventory | $500 | |
Tax | $50 | |||
Accounts Payable | $550 |
Journal Entry for Purchase of Services
Ref. | DATE | Account Titles and Explanation | Debit | Credit |
---|---|---|---|---|
100 | September 3rd | Purchases | $500 | |
Tax | $50 | |||
Accounts Payable | $550 |
Journal Entry for Making Payments for Purchases
Ref. | DATE | Account Titles and Explanation | Debit | Credit |
---|---|---|---|---|
100 | September 3rd | Accounts Payable | $550 | |
Bank (or Cash) | $550 |
Journal Entry for Only Fulfilling Orders (transfer of goods/inventory out of the system)
Ref. | DATE | Account Titles and Explanation | Debit | Credit |
---|---|---|---|---|
100 | September 3rd | Cost of Goods Sold | $500 | |
Inventory | $500 |
Journal Entry for Only Receiving Goods (transfer of goods/inventory into the system)
Ref. | DATE | Account Titles and Explanation | Debit | Credit |
---|---|---|---|---|
100 | September 3rd | Inventory | $500 | |
Accrued Purchases | $500 |
As you might’ve guessed, a journal entry for sales of goods, is created whenever your business sells some manufactured goods. Since these are self-descriptive enough, let’s move on to some more complex accounting journal entries.
There are three other main types of journal entries in accounting:
When transactions affect more than two accounts , we make compound entries . These are common when the recordings are related in nature or happen during the same day.
Remember: debits and credits must always be equal. The principle stays the same, there are just more accounts that change.
Let’s check out an example.
XYZ company decides to buy new computer software for $1,000. They pay $500 in cash right away and agree to pay the remaining $500 later.
The steps are the same as in the double-entry bookkeeping.
First, we figure out which accounts have changed and by how much. In this scenario, those are three:
The next step is to translate them into debit and credit.
Assets increase when debited, so Equipment will be debited for $1,000. Expenses decrease when credited, so Cash will be credited for $500. Liabilities increase when credited, so Accounts Payable will also be credited for $500.
This is what the transaction would like in a Journal:
Ref. | DATE | Account Titles and Explanation | Debit | Credit |
---|---|---|---|---|
101 | September 3rd | Equipment | $1,000 | |
Cash | $500 | |||
Accounts payable | $500 | |||
(purchased computer software with a balance on the account) |
Adjusting entries are used to update previously recorded journal entries . They ensure that those recordings line up to the correct accounting periods. This does not mean that those transactions are deleted or erased, though. Adjusting entries are new transactions that keep the business’ finances up to date .
They are usually made at the end of an accounting period . The accounting period usually coincides with the business fiscal year.
There are four main types of adjusting entries:
Let’s put all of this information into a concrete exercise.
On October 2nd, you sell to a client, a service worth $3,000. You receive the payment for the provided service, however, you forget to make a journal entry.
Then at the end of October, you compare the actual cash reserve with the cash reserve shown on the balance sheet.
Since the two sums will not match, it means that there is a missing transaction somewhere. At this point, you need to make a journal entry adjustment .
The journal entry on October 31st would look like this:
DATE | Account Titles and Explanation | Ref. | Debit | Credit |
---|---|---|---|---|
October 31st | Cash | 101 | $3,000 | |
Unearned Revenue | $3,000 | |||
(adjusting entry due to excess cash) |
Reverse entries are the opposite of adjusting entries. When we say the opposite, we don’t mean that the adjusting entries get deleted. No amount previously recorded changes. Reverse entries only simplify financial reports , by canceling out the effect of the adjusting entries.
Since their goal is just to simplify, reverse entries are optional. Some accountants choose to make them, others don’t.
They’re usually done at the start of a new accounting period .
Because adjusting entries are made at the end of the period. So, for instance, if the period ends on December 31st, you would do the reverse the next day, on January 1st.
Now, you can’t reverse all types of adjusting entries: only accrued revenues and accrued expenses .
Let’s see how the previous accrued revenues example would look like reversed.
The adjusting entry in the last section was:
What reversing entries do is switch the places of the two. So now:
This is what the complete journal entry would look like:
DATE | Account Titles and Explanation | Ref. | Debit | Credit |
---|---|---|---|---|
December 2nd | Service Revenue | 101 | $3,000 | |
Accounts receivable | $3,000 | |||
(to reverse November 2nd adjusting entry) |
Running your own company comes with many challenges . No business owner has time to write down all of their journal entries by hand.
That’s why most companies record their entries using accounting software.
You might be thinking - isn’t accounting software only for accountants?
Well, most are, but we at Deskera prioritize small business owners. We’ve spent over 10 years working with small business owners from 100+ different countries to create a cloud accounting software that fits any type of business.
Need to create invoices , manage inventory, create financial reports, track payments, manage dropshipping? You can do all of that with Deskera. Our program is specifically built for you, to easily manage and oversee the finances of your business.
Here’s how you can use Deskera Books to record journal entries. 1. Go to Accounting > Journal Entry.
Here, you’ll be able to view, create, and manage all your journal entries. The main attributes displayed for every entry here are the journal entry number, the journal entry date, the journal entry type, and the related document number .
To view the details of each journal entry, you can press on the expand all records button. As you can see, the account name, debit amount, credit amount, and description will all appear .
2. Next, to manually create a journal entry, press on the create button on the top right . You’ll notice two journal entry options: normal or fund transfer. Each option depends on the type of entry you’re making.
3. Click JE - Normal . This will take you to the general journal page. The top half of the page contains the auto numbering format, currency, and journal date . There’s also an option that allows you to include the entry on the tax report . Then there’s the bottom half , where you can add the account, description, type, and amount .
4. Fill in all of these boxes with the appropriate information and press Save . Ta-da, you’ve created a journal entry!
What if you accidentally enter the wrong amounts? The software will notice and won’t save the journal entry . That’s what the “unbalanced account” on the bottom right of the page serves for. The exact off-balance amount will show.
Businesses have moved on from the age of pen and paper for a reason. Using accounting software like Deskera will help you automate the entire journal entry creation process.
When your business creates an invoice , the corresponding journal entry is added automatically by the system in the respective ledger for Accounts Receivable, Sales, Sales Tax, etc...
Similarly, when a payment is processed, the bank and the accounts receivable are adjusted automatically by the accounting software.
Deskera , allows you to integrate your bank directly and track any expenses automatically. When you make an expense, the journal entry is automatically created, and it is mapped to the correct ledger account.
You can also create custom invoices using the provided templates, and send reminders to make sure you don’t miss out on any invoice payments .
To top it off, creating financial reports with Deskera is as easy as 1-2-3.
Still not sure? Well, luckily Deskera offers a completely free trial. You can sign up here and try out all 3 Deskera platforms - Books, Sales (CRM), & People (HRIS).
Hope our guide to journal entries was helpful!
For a quick recap let’s go through the main points we’ve covered:
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COMMENTS
Journal Entries - Common Assignments - Academic Guides at Walden University. Transcript: Helpful Resources from OASIS for Fall 2024. Brittany Rogers: Hello and welcome to the Fall 2024 term. My name is Brittany Rogers and I am a Writing Specialist in the Office of Academic Support and Instructional Services. Better known as OASIS.
Develop a 200-400 word journal entry that identifies three beliefs, mentioned in the video or discovered through your own observations, that relate to a student's ability to write academic essays. ... Worked Example. Journal entry assignments tend to be more flexible than other types of writing assignments in college, and as a result they ...
Write in stream of consciousness. 3. Use "I" to write your journal in the first person. You're writing about your thoughts, experiences, and reflections, so don't worry about putting them in third person. It's okay to write your journal entries using the pronoun "I" unless you just prefer not to do so.
Transaction #4: On December 7, the company acquired service equipment for $16,000. The company paid a 50% down payment and the balance will be paid after 60 days. This will result in a compound journal entry. There is an increase in an asset account (debit Service Equipment, $16,000), a decrease in another asset (credit Cash, $8,000, the amount paid), and an increase in a liability account ...
Journal-entry assignments are a valuable tool for incorporating semi-structured writing into a course. Less formal than traditional writing assignments which often include a thesis statement, citations, or full-length papers (5 or more pages), journal entries allow the building of connections between course content and real life experiences within one or two pages of writing.
Here is an example of a basic journal assignment: Short writing assignments for a personal journal will be required for all readings. Additional assignments will be given frequently in class and for homework throughout the semester. In addition, it must be kept up to date. You may be asked to read journal entries for the class.
The video above discusses beliefs students hold about college and demonstrates how those beliefs relate to test performance. Consider how beliefs might also impact a student's performance on writing assignments. Develop a 200-400 word journal entry that identifies three beliefs, mentioned in the video or discovered through your own ...
Capital is an internal liability for the business hence credit the increase in liabilities. Example - Max started a business with 10,000 in cash. Cash A/c. 10,000. To Capital A/C. 10,000. (Capital introduced by Max in cash for 10,000) Related Topic - All Journal Entries on one Page. 2.
Worked Example. Journal entry assignments tend to be more flexible than other types of writing assignments in college, and as a result they can be tailored to your own experiences as long as they answer the primary questions asked in the assignment. One model of a successful entry about this topic can be found below.
Worked Example. Journal entry assignments tend to be more flexible than other types of writing assignments in college, and as a result they can be tailored to your own experiences as long as they answer the primary questions asked in the assignment. One model of a successful entry about this topic can be found below.
Worked Example. Journal entry assignments tend to be more flexible than other types of writing assignments in college, and as a result they can be tailored to your own experiences as long as they answer the primary questions asked in the assignment. One model of a successful entry about this topic can be found below.
Colfax Market. Colfax Market is a small corner grocery store that carries a variety of staple items such as meat, milk, eggs, bread, and so on. As a smaller grocery store, Colfax does not offer the variety of products found in a larger supermarket or chain. However, it records journal entries in a similar way. Grocery stores of all sizes must purchase product and track inventory.
Journal Writing Examples to Help Students Begin. Here are some journal writing examples your students may enjoy: Gratitude Journal: Have students maintain a record of the good things in their lives and everything they feel grateful to have. Gratitude journals encourage positivity and are a powerful tool of self-reflection.
Journal Entries. Journal entries are a key component as well as the first step in the accounting cycle. Each business transaction is analyzed for the economic impact on the asset, liability, and equity accounts before being recorded in the accounting system with a journal entry. Since every single business transaction is recorded or journalized ...
3. Reflect. After reading the required material, reflect on specific elements, examples, or experiences you would like to include in your journal entry. Use other prewriting techniques to get your ideas flowing. If you get stuck, see the Writing Center's tips on avoiding writer's block. 4.
Journal Writing. Journal entries should record your reaction to an assignment. Rather than summarizing the material or expressing an emotional opinion, they should evaluate the text, pose questions, connect to personal experiences, and transform the original work into a new way of thinking and writing about the topic.
Description or Narrative: Offering a brief explanation of the transaction for clarity and context. Example: Consider a business takes out a loan of $10,000. The journal entry would be: Date: [Date of Transaction] Debit: Cash $10,000. Credit: Loans Payable $10,000. Description: To record the borrowing of a $10,000 loan.
Worked Example. Journal entry assignments tend to be more flexible than other types of writing assignments in college, and as a result they can be tailored to your own experiences as long as they answer the primary questions asked in the assignment. One model of a successful entry about this topic can be found below.
Develop a 200-400 word journal entry that identifies three beliefs, mentioned in the video or discovered through your own observations, that relate to a student's ability to write academic ... Worked Example. Journal entry assignments tend to be more flexible than other types of writing assignments in college, and as a result they can be ...
Worked Example. Journal entry assignments tend to be more flexible than other types of writing assignments in college, and as a result they can be tailored to your own experiences as long as they answer the primary questions asked in the assignment. One model of a successful entry about this topic can be found below.
Example #1 - Revenue. Sales Journal Entry: When sales are made on credit, the journal entry for accounts receivableis debited, and the sales account is credited. If cash sales happen, then the cash account is debited. Allowance for Doubtful Accounts Entry: At times customers are unable to pay.
Here's another example of a compound journal entry. This one also shows how to record the issue of common stock, a very important journal entry to know. On May 1, Bill, Bob and Quinn create a new corporation, BBQ, Inc. They raise capital in the company by selling 10,000 shares of Common Stock for $5 per share.
1. Go to Accounting > Journal Entry. Add Journal Entries in Deskera Books. Here, you'll be able to view, create, and manage all your journal entries. The main attributes displayed for every entry here are the journal entry number, the journal entry date, the journal entry type, and the related document number.