Here are some important examples of accounting journal entries, covering various transactions that a business might encounter. Each example is followed by a brief explanation to help understand the logic behind the entries.
Example 1: Recording a Cash Sale
Your business sells products worth $2,500 on August 1, 2024, and receives cash immediately.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-01-2024 | Cash | 2,500 | |
| 08-01-2024 | To Sales Revenue | 2,500 |
Explanation:
- Cash will debited to reflect the cash inflow.
- Sales Revenue will credited to recognize the income earned from the sale.
Example 2: Purchasing Inventory on Credit
Your business purchases $4,000 worth of inventory on August 5, 2024, with payment due in 30 days.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-05-2024 | Inventory | 4,000 | |
| 08-05-2024 | To Accounts Payable | 4,000 |
Explanation:
- Inventory will debited to increase the inventory balance.
- Accounts Payable will credited to record the liability to pay the supplier.
Example 3: Paying for Utilities
Your business pays $600 for utility expenses on August 10, 2024.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-10-2024 | Utilities Expense | 600 | |
| 08-10-2024 | To Cash | 600 |
Explanation:
- Utilities Expense will debited to record the expense.
- Cash will credited to reflect the cash outflow.
Example 4: Receiving Cash for Services Rendered
Your business receives $3,000 on August 15, 2024, for services provided to a client.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-15-2024 | Cash | 3,000 | |
| 08-15-2024 | To Service Revenue | 3,000 |
Explanation:
- Cash will debited to record the receipt of cash.
- Service Revenue will credited to recognize the income from the services provided.
Example 5: Borrowing Money from a Bank
Your business takes out a $10,000 loan from a bank on August 20, 2024.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-20-2024 | Cash | 10,000 | |
| 08-20-2024 | To Loan Payable | 10,000 |
Explanation:
- Cash will debited to reflect the funds received from the loan.
- Loan Payable will credited to record the obligation to repay the bank.
Example 6: Recording Depreciation Expense
Your business records $1,500 of depreciation on office equipment for the month of August 2024.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-31-2024 | Depreciation Expense | 1,500 | |
| 08-31-2024 | To Accumulated Depreciation | 1,500 |
Explanation:
- Depreciation Expense will debited to account for the reduction in the asset’s value.
- Accumulated Depreciation will credited to increase the contra asset account.
Example 7: Paying Salaries to Employees
Your business pays $7,000 in salaries to employees on August 31, 2024.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-31-2024 | Salaries Expense | 7,000 | |
| 08-31-2024 | To Cash | 7,000 |
Explanation:
- Salaries Expense will debited to reflect the expense incurred.
- Cash will credited to record the cash outflow.
Example 8: Dividends Paid to Shareholders
Your business declares and pays $5,000 in dividends to shareholders on August 31, 2024.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-31-2024 | Dividends | 5,000 | |
| 08-31-2024 | To Cash | 5,000 |
Explanation:
- Dividends will debited to reflect the distribution to shareholders.
- Cash will credited to show the reduction in cash balance.
Example 9: Purchase of Office Supplies on Credit
Your business purchases $1,200 worth of office supplies on August 5, 2024, with payment due in 30 days.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-05-2024 | Office Supplies | 1,200 | |
| 08-05-2024 | To Accounts Payable | 1,200 |
Explanation:
- Office Supplies will debited to increase the asset account.
- Accounts Payable will credited to record the liability to pay the supplier later.
Example 10: Sale of Goods on Credit
Your business sells $5,000 worth of goods to a customer on August 10, 2024, with payment due in 45 days.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-10-2024 | Accounts Receivable | 5,000 | |
| 08-10-2024 | To Sales Revenue | 5,000 |
Explanation:
- Accounts Receivable will debited to record the amount the customer owes.
- Sales Revenue will credited to recognize the income earned from the sale.
Example 11: Purchase of Equipment on Credit
Your business purchases equipment worth $15,000 on August 15, 2024, with payment due in 60 days.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-15-2024 | Equipment | 15,000 | |
| 08-15-2024 | To Accounts Payable | 15,000 |
Explanation:
- Equipment will debited to increase the asset account for the equipment purchased.
- Accounts Payable will credited to recognize the liability to pay for the equipment.
Example 12: Services Rendered on Credit
Your business provides $7,500 worth of consulting services to a client on August 20, 2024. The client will pay within 30 days.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-20-2024 | Accounts Receivable | 7,500 | |
| 08-20-2024 | To Service Revenue | 7,500 |
Explanation:
- Accounts Receivable will debited to reflect the amount owed by the client.
- Service Revenue will credited to record the income earned.
Example 13: Purchase of Inventory on Credit
Your business purchases $8,000 worth of inventory on August 25, 2024, with payment due in 45 days.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-25-2024 | Inventory | 8,000 | |
| 08-25-2024 | To Accounts Payable | 8,000 |
Explanation:
- Inventory will debited to increase the inventory balance.
- Accounts Payable will credited to recognize the liability to pay the supplier.
Example 14: Repair Services Received on Credit
Your business receives $2,000 worth of repair services on August 28, 2024, with payment due in 15 days.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-28-2024 | Repair Expense | 2,000 | |
| 08-28-2024 | To Accounts Payable | 2,000 |
Explanation:
- Repair Expense will debited to account for the cost of the repair services.
- Accounts Payable will credited to record the liability to pay the repair company.
Example 15: Purchase of Software License on Credit
Your business purchases a $3,500 software license on August 30, 2024, with payment due in 30 days.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-30-2024 | Software License | 3,500 | |
| 08-30-2024 | To Accounts Payable | 3,500 |
Explanation:
- Software License will debited to recognize the intangible asset.
- Accounts Payable will credited to record the amount owed to the software vendor.
Example 16: Receiving an Invoice for Advertising on Credit
Your business receives an invoice for $1,800 for advertising services on August 31, 2024, with payment due in 30 days.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-31-2024 | Advertising Expense | 1,800 | |
| 08-31-2024 | To Accounts Payable | 1,800 |
Explanation:
- Advertising Expense will debited to reflect the cost of the advertising services.
- Accounts Payable will credited to record the liability to pay the advertising company.
Conclusion
These examples cover a variety of common transactions that businesses encounter, from sales and purchases to paying expenses and distributing dividends. Properly recording these transactions in your accounting system ensures that your financial statements accurately reflect your business’s financial performance and position.