Simple journal entries involve Basic accounting involves transactions where a single debit occurs in one account and a single credit occurs in another account. Here are important journal entries with examples to illustrate common transactions.
1. Cash Sale
When a company sells products or services and receives cash, the entry records the increase in cash and recognizes the sale.
Example: A company makes a sale for $500 in cash.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-15-2024 | Cash A/c Debit | 500 | |
| 08-15-2024 | To Sales Revenue A/c | 500 |
Explanation:
Cash will be debited (increased) as the money is received, and sales revenue will be credited to recognize the revenue from the sale.
2. Purchase of Supplies
When a company purchases office supplies for cash, the entry records the expense and debits the cash account.
Example: The company buys office supplies worth $200 for cash.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-15-2024 | Office Supplies Expense A/c Debit | 200 | |
| 08-15-2024 | To Cash A/c | 200 |
Explanation:
Office supplies expenses will be debited as the company incurs the expense, and cash will be credited to the account for cash outflows.
3. Paying Rent
When a business pays rent, the entry records the rent expense and reduces the Bank account.
Example: The business pays $1,000 for rent.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-15-2024 | Rent Expense A/c Debit | 1,000 | |
| 08-15-2024 | To Bank A/c | 1,000 |
Explanation:
Rent expense will be debited because it is an expense for the business, and the Bank will credited, as the company paid money for the rent.
4. Receiving Cash from Accounts Receivable
When a customer pays off an amount they owe, it reduces the accounts receivable and increases the cash balance.
Example: A customer pays $600 for a previous sale on credit.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-15-2024 | Cash A/c Debit | 600 | |
| 08-15-2024 | To Accounts Receivable A/c | 600 |
Explanation:
Cash will debited to increase the company’s cash balance, and Accounts Receivable is credited to reduce the amount owed by the customer.
5. Borrowing Money from the Bank
When a company takes out a loan, it increases cash and recognizes a liability (loan payable).
Example: The company borrows $5,000 from the bank.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-15-2024 | Bank A/c Debit | 5,000 | |
| 08-15-2024 | To Loan Payable A/c | 5,000 |
Explanation:
Bank will debited to increase the company’s cash balance, and Loan Payable will credited to recognize the liability to the bank.
These are simple examples show how common financial transactions are recorded in accounting systems using basic journal entries.