Record a Journal Entry
A journal entry records a single transaction in the books using double-entry bookkeeping. Every entry has a date, a description, and at least one debit and one credit that are equal in total.
Steps:
- Identify the transaction. What happened? Cash was received, an expense was incurred, a liability was created, etc.
- Determine which accounts are affected. Every transaction touches at least two.
- Decide which accounts are debited and which are credited. Remember: assets and expenses increase with debits; liabilities, equity, and revenue increase with credits.
- Verify the entry balances — total debits must equal total credits.
- Record the entry with the date, accounts, amounts, and a brief description.
Example — purchased office supplies for $300 cash:
| Account | Debit | Credit |
|---|---|---|
| Office Supplies Expense | $300 | |
| Cash | $300 |
Example — received $5,000 from a client on account:
| Account | Debit | Credit |
|---|---|---|
| Cash | $5,000 | |
| Accounts Receivable | $5,000 |
Common mistakes:
- Reversing debits and credits (debiting what should be credited)
- Forgetting to include all affected accounts in compound entries
- Recording the wrong amount (especially with tax-inclusive vs. tax-exclusive amounts)
- Missing the date, making the entry hard to place in the correct period