Journal Entries in Accounting: Complete Guide with Examples

Journal entries are the building blocks of accounting. Every financial transaction a business makes — every sale, every purchase, every payroll run — gets recorded as a journal entry before it flows into the ledger, trial balance, and financial statements.

If you're a bookkeeper, you make journal entries every day. If you're moving into advisory work, understanding the why behind entries — not just the how — is what lets you spot errors, optimize tax positions, and advise clients on financial strategy.

What Is a Journal Entry?

A journal entry is a record of a financial transaction in the accounting system. Every entry has:

1. Date — when the transaction occurred
2. Accounts affected — at least two (debit and credit)
3. Amounts — debits must equal credits
4. Description/memo — brief explanation of the transaction

This follows the double-entry bookkeeping system: every transaction affects at least two accounts, keeping the accounting equation balanced:

Debits and Credits: The Rules

The most common source of confusion in accounting. Here's the definitive reference:

Memory trick: Assets and Expenses are "debit-normal" accounts (they increase with debits). Everything else — Liabilities, Equity, Revenue — increases with credits. Think "AE" for debit, "LER" for credit.

Types of Journal Entries

1. Opening Entries

Record the beginning balances when starting a new accounting period or setting up a new company's books.

2. Standard Entries (Day-to-Day Transactions)

Recording a sale on credit:

Paying a vendor invoice:

Recording payroll:

3. Adjusting Entries

Made at the end of an accounting period to ensure revenue and expenses are recorded in the correct period (accrual basis).

Accrued revenue (earned but not yet billed):

Prepaid expense (paid in advance, recognize over time):

Depreciation:

4. Closing Entries

Transfer temporary account balances (revenue, expenses) to retained earnings at year-end.

Common Journal Entry Mistakes

1. Unbalanced entries — Debits don't equal credits. Most software prevents this, but manual journals can slip through.
2. Wrong account — Posting repairs to an asset account instead of expense (capitalizing operating costs).
3. Wrong period — Recording January revenue in February. Accrual accounting requires matching to the period earned.
4. Missing entries — Forgetting to accrue expenses or revenue at month-end. Common with recurring items.
5. Duplicate entries — Recording the same transaction twice. Often happens with bank feed auto-matching.
6. Reversing debits and credits — Recording a sale as a debit to revenue instead of credit. Creates off-balance-sheet errors.

Journal Entries in Modern Accounting Software

Most day-to-day journal entries are automated in modern software:

• QuickBooks Online — Invoices, bills, and bank transactions create entries automatically. Manual journal entries via + New → Journal Entry.
• Xero — Bank feeds auto-categorize. Manual journals via Accounting → Manual Journals.
• Sage — Full general journal with recurring entry templates.

When you still need manual journal entries:

• Adjusting entries at month/year-end
• Reclassification entries (correcting misposted transactions)
• Depreciation and amortization
• Accruals and deferrals
• Intercompany transactions
• Non-cash transactions (barter, write-offs)

From Journal Entries to Advisory: The Career Transition

Understanding journal entries at a deep level is what enables the transition from bookkeeper to advisor:

The bookkeeper who understands why a depreciation entry matters — not just how to record it — can advise clients on whether to buy or lease equipment, which depreciation method saves the most tax, and when to write off obsolete assets. That's a $200/hour conversation, not a $35/hour data entry task.

Practice Exercises

Test your understanding with these scenarios:

1. A client receives $5,000 in advance for work to be performed next month. What entry do you record today? What adjusting entry do you record next month?
2. A client discovers they've been recording equipment purchases as office supplies expense for 6 months ($12,000 total). What correcting entry do you make?
3. A client's AR aging shows $8,000 in invoices over 120 days past due that are likely uncollectible. What entries do you record?

Related Articles

• Double-Entry Bookkeeping: The Complete Guide
• Chart of Accounts: Setup and Best Practices
• General Ledger Explained
• Trial Balance: What It Is and How to Prepare One
• Accrual vs Cash Accounting: Which Should Your Clients Use?
• Monthly Close Process: Step-by-Step Guide