Analyze the transaction
Record the date, amount and supporting facts. Identify each affected asset, liability, equity, revenue or expense account. Decide whether it increases or decreases; a cash payment is not automatically an expense.
Record and check the entry
List account names with debit and credit amounts, followed by a short explanation. Total debits must equal total credits. Then post to the relevant ledger accounts and check the resulting balances.
Example
Invented classroom transaction, not an archive submission or business record.
- Transaction
- On October 1, a fictional shop buys equipment for $900 cash. Assume the equipment is recorded as an asset; ignore tax and depreciation for this entry.
- Accounts
- Equipment increases by $900. Cash decreases by $900. Both accounts are assets.
- Entry
- Debit Equipment $900; credit Cash $900. Explanation: purchased equipment for cash.
- Check
- Debits and credits both total $900. Total assets are unchanged: one asset increased while another decreased. This purchase entry does not record an expense.
Review your draft
Check account names, dates and amounts against the transaction. A balanced entry can still use the wrong accounts or omit a transaction.
Further reading: OpenStax: journal entries and T-accounts.
Past journal-entry requests
Real historical request types, described without student text or files.
- Journal-entry accounting request — April 2021
- Journal-entry accounting request — April 2021
- Journal-entry accounting request — December 2020
- Journal-entry accounting request — December 2020
Common questions
Does debit always mean increase?
No. The effect depends on the account type. Debits increase assets and expenses but decrease liabilities, equity and revenue.
What changes when equipment is bought on account?
The equipment debit remains. Credit Accounts Payable instead of Cash when the purchase creates an unpaid obligation to the supplier.