Bookkeeping involves recording all financial transactions systematically and accurately. Journal entries are the foundation of bookkeeping, as they capture all financial activities in a business. Below are several common types of bookkeeping journal entries with explanations.
Example 1: Recording a Sale on Credit
Your business sells goods worth $5,000 on credit to a customer on January 5, 2024.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 01-05-2024 | Accounts Receivable | 5,000 | |
| 01-05-2024 | To Sales Revenue | 5,000 |
Explanation:
- Accounts Receivable will debited to record the amount owed by the customer.
- Sales Revenue will credited to recognize the revenue earned from the sale.
Example 2: Paying a Vendor for Supplies
On January 10, 2024, your business pays $2,000 in cash to a vendor for supplies purchased earlier.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 01-10-2024 | Accounts Payable | 2,000 | |
| 01-10-2024 | To Cash | 2,000 |
Explanation:
- Accounts Payable will debited to decrease the liability owed to the vendor.
- Cash will credited to reflect the cash outflow.
Example 3: Recording a Cash Sale
Your business makes a cash sale of $3,500 on January 15, 2024.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 01-15-2024 | Cash | 3,500 | |
| 01-15-2024 | To Sales Revenue | 3,500 |
Explanation:
- Cash will debited to increase the cash account.
- Sales Revenue will credited to recognize the revenue earned from the sale.
Example 4: Recording Depreciation Expense
On January 31, 2024, your business records monthly depreciation of $1,200 for office equipment.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 01-31-2024 | Depreciation Expense | 1,200 | |
| 01-31-2024 | To Accumulated Depreciation | 1,200 |
Explanation:
- Depreciation Expense will debited to recognize the expense for the period.
- Accumulated Depreciation will credited to account for the reduction in the equipment’s book value.
Example 5: Recording a Loan Payment
Your business makes a monthly loan payment of $1,500 on February 1, 2024, including $1,200 principal and $300 interest.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 02-01-2024 | Loan Payable | 1,200 | |
| 02-01-2024 | Interest Expense | 300 | |
| 02-01-2024 | To Cash | 1,500 |
Explanation:
- Loan Payable will debited to reduce the principal amount of the loan.
- Interest Expense will debited to recognize the interest cost.
- Cash will credited to reflect the cash outflow.
Example 6: Recording Employee Payroll
On February 15, 2024, your business pays $4,000 in wages to employees.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 02-15-2024 | Wages Expense | 4,000 | |
| 02-15-2024 | To Cash | 4,000 |
Explanation:
- Wages Expense will debited to recognize the payroll expense.
- Cash will credited to reflect the payment of wages.
Example 7: Purchasing Equipment on Credit
Your business purchases office equipment worth $10,000 on credit on March 1, 2024.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 03-01-2024 | Office Equipment | 10,000 | |
| 03-01-2024 | To Accounts Payable | 10,000 |
Explanation:
- Office Equipment will debited to increase the asset account.
- Accounts Payable will credited to recognize the liability owed to the vendor.
Example 8: Receiving Payment from a Customer
On March 10, 2024, your business receives $5,000 from a customer for a previous credit sale.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 03-10-2024 | Cash | 5,000 | |
| 03-10-2024 | To Accounts Receivable | 5,000 |
Explanation:
- Cash will debited to increase the cash account.
- Accounts Receivable will credited to reduce the amount owed by the customer.
Example 9: Adjusting Entry for Prepaid Insurance
On March 31, 2024, your business adjusts for $1,000 of insurance used during the month.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 03-31-2024 | Insurance Expense | 1,000 | |
| 03-31-2024 | To Prepaid Insurance | 1,000 |
Explanation:
- Insurance Expense will debited to recognize the cost for the month.
- Prepaid Insurance will credited to reduce the prepaid asset.
Example 10: Recording a Dividend Payment
On April 1, 2024, your business pays $3,000 in dividends to shareholders.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 04-01-2024 | Retained Earnings | 3,000 | |
| 04-01-2024 | To Cash | 3,000 |
Explanation:
- Retained Earnings will debited to reduce the equity account for the dividend distribution.
- Cash will credited to reflect the payment to shareholders.
Example 11: Recording Office Supplies Purchased with Cash
On April 5, 2024, your business purchases office supplies worth $800 and pays cash.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 04-05-2024 | Office Supplies | 800 | |
| 04-05-2024 | To Cash | 800 |
Explanation:
- Office Supplies will debited to recognize the purchase of supplies as an asset.
- Cash will credited to account for the cash outflow.
Example 12: Recording Interest Earned on a Bank Deposit
On April 10, 2024, your business earns $150 in interest from a savings account.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 04-10-2024 | Cash | 150 | |
| 04-10-2024 | To Interest Income | 150 |
Explanation:
- Cash will debited to reflect the increase in cash due to earned interest.
- Interest Income will credited to recognize the income generated from the bank deposit.
Example 13: Recording a Bad Debt Write-Off
On April 15, 2024, your business writes off an uncollectible accounts receivable of $2,000.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 04-15-2024 | Bad Debt Expense | 2,000 | |
| 04-15-2024 | To Accounts Receivable | 2,000 |
Explanation:
- Bad Debt Expense will debited to recognize the loss from the uncollectible account.
- Accounts Receivable will credited to remove the amount from the receivables balance.
Example 14: Receiving an Invoice for Services Rendered
On April 20, 2024, your business receives an invoice for $1,500 for consulting services received.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 04-20-2024 | Consulting Expense | 1,500 | |
| 04-20-2024 | To Accounts Payable | 1,500 |
Explanation:
- Consulting Expense will debited to recognize the cost of the services.
- Accounts Payable will credited to record the liability owed to the consultant.
Example 15: Recording a Refund from a Supplier
On April 25, 2024, your business receives a $500 refund from a supplier for returned goods.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 04-25-2024 | Cash | 500 | |
| 04-25-2024 | To Inventory | 500 |
Explanation:
- Cash will debited to increase the cash balance due to the refund.
- Inventory will credited to reduce the asset account for the returned goods.
Example 16: Recording a Loan from a Bank
On May 1, 2024, your business receives a $20,000 loan from the bank.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 05-01-2024 | Cash | 20,000 | |
| 05-01-2024 | To Loan Payable | 20,000 |
Explanation:
- Cash will debited to reflect the increase in cash from the loan.
- Loan Payable will credited to recognize the liability owed to the bank.
Example 17: Recording Depreciation on a Vehicle
On May 31, 2024, your business records monthly depreciation of $500 on a company vehicle.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 05-31-2024 | Depreciation Expense | 500 | |
| 05-31-2024 | To Accumulated Depreciation | 500 |
Explanation:
- Depreciation Expense will debited to recognize the monthly depreciation cost.
- Accumulated Depreciation will credited to reduce the book value of the vehicle.
Example 18: Purchasing Office Equipment with a Credit Card
On June 5, 2024, your business purchases office equipment worth $3,000 using a credit card.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 06-05-2024 | Office Equipment | 3,000 | |
| 06-05-2024 | To Credit Card Payable | 3,000 |
Explanation:
- Office Equipment will debited to record the asset purchased.
- Credit Card Payable will credited to recognize the liability incurred.
Example 19: Adjusting Entry for Accrued Salaries
On June 30, 2024, your business records $4,500 in accrued salaries that will be paid in the next period.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 06-30-2024 | Salaries Expense | 4,500 | |
| 06-30-2024 | To Salaries Payable | 4,500 |
Explanation:
- Salaries Expense will debited to recognize the expense for the period.
- Salaries Payable will credited to record the liability to be paid in the future.
Example 20: Recording a Dividend Declaration
On July 1, 2024, your business declares a dividend of $2,000 to be paid to shareholders.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 07-01-2024 | Retained Earnings | 2,000 | |
| 07-01-2024 | To Dividends Payable | 2,000 |
Explanation:
- Retained Earnings will debited to reduce the equity account for the dividend distribution.
- Dividends Payable will credited to recognize the liability until the payment is made.
Conclusion
These bookkeeping journal entries cover a variety of common financial transactions that businesses encounter regularly. Recording these transactions accurately is essential for maintaining correct financial records, which helps in making informed business decisions and ensuring compliance with financial regulations.