How to Record Journal Entries

A Beginner's Guide to Accurate and Practical Bookkeeping

Recording journal entries is the foundation of reliable bookkeeping. Whether you are keeping personal books for a small business or learning fundamental accounting, understanding how to record journal entries will help you track transactions, prepare financial statements, and make informed decisions. This guide explains the essentials, walks through step-by-step examples, and highlights common pitfalls and best practices for beginners.

What is a journal entry?

A journal entry is a formal record of a financial transaction in chronological order. At its core, each entry shows which accounts are affected and whether they are debited or credited. In double-entry bookkeeping, every journal entry keeps the accounting equation balanced: Assets = Liabilities + Equity. That means the total amount debited must equal the total amount credited for each transaction.

Basic components of a journal entry

- Date: When the transaction occurred.

- Accounts involved: The names of the accounts affected, such as Cash, Accounts Receivable, Revenue, or Supplies.

- Debit and credit amounts: Numeric values indicating which account is increased or decreased.

- Description or memo: A short note explaining the nature of the transaction.

Step-by-step process to record journal entries

1. Analyze the transaction: Identify what happened and which accounts are affected. Ask: Did the company receive cash? Did it incur an expense? Did a liability increase?

2. Determine account types: Classify the accounts as assets, liabilities, equity, revenue, or expenses.

3. Decide debit or credit: Use rules of double-entry bookkeeping. For example, assets increase with debits and decrease with credits; liabilities increase with credits and decrease with debits.

4. Record the entry: Write the date, list the account debited first with the amount, then the account credited indented below with its amount. Add a brief description.

5. Post to ledger accounts: Transfer the journal entry amounts to individual account ledgers to maintain running balances.

6. Trial balance and adjustments: Periodically prepare a trial balance to ensure debits equal credits. Make adjusting entries as needed for accruals, deferrals, depreciation, and estimates.

Journal entry examples

Example 1 — Simple cash sale:

Date: 2026-01-15

Debit: Cash $1,200

Credit: Sales Revenue $1,200

Memo: Cash sale of goods

This entry increases Cash (asset) and increases Sales Revenue, keeping the books balanced.

Example 2 — Purchase on credit:

Date: 2026-01-20

Debit: Equipment $3,000

Credit: Accounts Payable $3,000

Memo: Purchased equipment on account

Equipment (asset) increases with a debit, while Accounts Payable (liability) increases with a credit.

Example 3 — Paying an expense with cash:

Date: 2026-01-25

Debit: Rent Expense $800

Credit: Cash $800

Memo: Rent payment for the month

Recording expenses reduces equity through the expense account and decreases cash.

Common types of accounting journal entries

- Regular transactions: Sales, purchases, payments, and receipts.

- Adjusting entries: Accruals and deferrals to match revenues and expenses to the correct period.

- Closing entries: Transfer revenues and expenses to equity accounts at period end.

- Reversing entries: Optional entries at the start of a new period to simplify later recording of related transactions.

Tips for clear and accurate journal entries

- Be consistent with account names to avoid confusion when posting to ledgers.

- Always include a date and clear description to explain why the entry was made.

- Use supporting documentation (invoices, receipts, contracts) to verify transactions.

- Keep entries concise: the memo should be informative but not overly long.

- Reconcile regularly: Match cash and bank activity to recorded entries to catch errors quickly.

Avoid these common mistakes

- Reversing debits and credits: If entries leave the trial balance unequal, re-examine whether debits and credits were applied correctly.

- Omitting supporting documentation: Without proof, correcting errors takes longer and financial statements can be unreliable.

- Posting to the wrong account type: Misclassifying an expense as an asset or vice versa distorts results and tax reporting.

- Delaying entries: Backlogs of unrecorded transactions lead to inaccuracies and lost details.

Practice examples to build confidence

Try creating journal entries for everyday scenarios: paying a utility bill, receiving a customer deposit, recording payroll, or buying office supplies. Make a habit of writing the transaction in plain language first, then translating that into debits and credits. Compare your entries to sample journal entry examples until the process feels intuitive.

When to use adjusting and closing entries

Adjusting entries align accounting records with accrual accounting principles at the end of a period—record revenue earned but not yet billed, or expenses incurred but not yet paid. Closing entries zero out temporary accounts (revenues and expenses) and transfer their balances into retained earnings or equity to start the next period with fresh totals.

Practical workflow for a beginner

1. Collect documents daily or weekly.

2. Enter transactions in a chronological journal.

3. Post to ledgers on a regular schedule.

4. Run a trial balance monthly.

5. Make necessary adjusting entries at period end.

6. Prepare financial statements and perform reconciliations.

Final thoughts

Learning how to record journal entries is a skill that builds with practice. Start with simple transactions, study journal entry examples, and gradually take on more complex entries like accruals or depreciation. Be meticulous with documentation and consistent with account naming. With routine practice and reviews, you will develop confidence in recording transactions and producing reliable financial records that support better business decisions.