Every single day, businesses are swimming in a sea of transactions. To keep from drowning, they use a lifeline called accounting journal entries.

Think of it as the company’s diary. Except, instead of writing about its crush, it’s meticulously logging every dollar that comes in or goes out. These entries are the bedrock of a company’s financial story, providing the juicy details to management, auditors, and the accounting team.

It’s basically the paper trail that proves you’re either making a fortune or just creatively avoiding financial chaos. No pressure.

This isn’t just about tedious record-keeping. The information from these journal entries directly shapes a company’s key financial statements, including its income statement, statement of cash flows, and statement of financial position. Get the entries wrong, and the whole financial picture gets distorted.

So, before we dive into a bunch of accounting journal entry examples, let’s get a clear handle on what these crucial little records are all about.

What are journal entries in accounting?

So, what are journal entries in accounting? Think of them as the official logbook for every single financial transaction a company makes. They are the absolute foundation of the double-entry accounting system, a method that’s been keeping financial records straight for centuries.

This system runs on a simple, non-negotiable principle that governs debits and credits rules. For every transaction, there must be a debit entry and an equal, opposite credit entry. This ensures the fundamental accounting equation (Assets = Liabilities + Equity) stays perfectly balanced.

For every dollar that comes in, a dollar must be recorded elsewhere. It’s a law of financial physics. No matter how many accounts are involved, the total debits must always equal the total credits.

Get it wrong, and the whole thing becomes a sloppy, inaccurate mess. As the saying goes: for every crushing debit, there’s an equal but opposite credit. Otherwise, the whole charade just looks sloppy.

This isn’t just about being neat. Overlooking the importance of precise journal entries can lead to significant financial misstatements, misleading everyone from investors to the IRS. These entries are the linchpin of financial accuracy and transparency.

There are different types of journal entries. Most common transactions are sorted into specialty journals, like:

• Cash Disbursement Journal
• Sales Journal
• Purchases Journal
• Cash Receipts Journal

Any transaction that doesn’t fit into one of these specialized books gets recorded in the general ledger. While some companies might have more specialty journals, these four are the most common workhorses of the accounting world.

How to Prepare Journal Entries

Alright, let’s get into the nitty-gritty of how to make journal entries. The secret lies in understanding debits and credits.

It can be interesting to see how one action might lead to different outcomes, depending on where it’s applied. A debit might boost one account while shrinking another. There’s a quiet strength in understanding these intricate systems.

To master the debits and credits rules, you first need to know the five main account types in accounting. This table is your new best friend – it shows how debits (Dr) and credits (Cr) affect each one.

Effect of debit and credit on different accounts

Account	Debit (Dr)	Credit (Cr)
Assets	Increase	Decrease
Liabilities	Decrease	Increase
Equity	Decrease	Increase
Expenses	Increase	Decrease
Revenue	Decrease	Increase

Let’s break down these account types accounting for beginners.

Assets These are the valuable resources a company owns, both physical and non-physical, that provide future economic benefit. Think of them as all the nice things you own until they become worthless. Asset accounts include cash, goodwill, accounts receivable, inventory, land, and equipment.

Liabilities This is the money your company owes to others. These are the chains that bind you, piling up until the whole charade is at risk. Common liability accounts include accounts payable and loans.

Equity This is the company’s net worth – what’s left after you subtract liabilities from assets. It’s that imaginary number that keeps investors happy and is often just enough to cover the CEO’s bonus. Equity accounts include capital stock and retained earnings.

Expenses This is the money a company spends to operate. Think of it as the cash that immediately vanishes to cover things like the cost of goods sold (COGS), rent, depreciation, and salaries for people who might just be counting down the minutes until Friday.

Revenue This is the money a company earns from its operations, like selling goods or providing services. It’s that glorious, fleeting income that appears just before it’s swallowed whole by expenses.

Making Journal Entries: A Beginner’s Guide

Before we jump into a sea of accounting journal entry examples, let’s first understand the craft behind them. Think of it like a weaver preparing to create a tapestry. Before she casts a single thread, she must know its fiber and its destined place in the grand design.

The same principle applies here. You must first identify the nature of a transaction, trace its journey, and understand how it contributes to the larger financial picture.

This process can feel complex at first, but remember that even the most intricate systems are built on simple, foundational steps. Be patient with yourself as you build your understanding of debits and credits.

Here’s a simple guide for accounting journal entries for beginners.

Step 1: Identify the Transaction First, figure out which accounts are affected. Is it an asset, liability, equity, revenue, or expense? A simple way to think about it is to ask: which account is gaining value, and which one is giving something up?

Step 2: Trace the Money Flow Next, determine where the money is coming from and where it’s going. This is where the accounting debit and credit rules become your best friend. They are the unbreakable laws that keep the financial universe in balance.

Step 3: Make the Journal Entry Finally, record the entry. Every basic accounting journal entry must include:

• The date of the transaction
• The accounts involved
• The amount debited
• The amount credited

Here’s what a typical journal entry looks like in its simplest form:

A simple journal entry example in accounting

Date	Account	Debit	Credit
Jan 1	Account Name 1	$XXX
	Account Name 2		$XXX
	To record…

Now that you know what a typical journal entry looks like, let’s dive into specific examples of journal entries in accounting for assets, expenses, equity, liabilities, and revenue.

Accounting Journal Entry Examples

Now we get to the good stuff. The best way to understand the rhythm of double entry accounting is to see it in action. Each entry is a single step in a dance, a piece of a larger story being told in the language of numbers.

Let’s walk through some common accounting journal entry examples, broken down by the five major account types in accounting.

Assets Journal Entries

Assets are all the shiny objects and valuable resources a company owns that are supposed to bring in money. They’re the things you proudly list on your balance sheet before they inevitably break, become obsolete, or get replaced by a newer, shinier version.

Accounts Receivable

When a company sells goods or services on credit, it creates an IOU from the customer. This is tracked in accounts receivable (AR). Essentially, the AR balance is the total of all your outstanding invoices – money you’re owed but don’t have yet.

When you make a sale on credit, you debit Accounts Receivable (because what you’re owed increases) and credit Revenue (because you’ve earned it).

Journal entries in accounting examples: Accounts receivable

Date	Account	Debit	Credit
Jan 1	Accounts Receivable	$5,000
	Revenue		$5,000

When the customer finally pays up, you debit Cash (because your cash increases) and credit Accounts Receivable (because the amount owed to you decreases).

Journal entries in accounting examples: When the accounts receivable is paid up

Date	Account	Debit	Credit
Jan 1	Cash	$5,000
	Accounts Receivable		$5,000

Cash

Cash is the lifeblood of a company, used for everything from buying assets and paying off debts to funding the monthly pizza party. It’s the most liquid asset, and often the one that disappears the fastest.

When you use cash for a purchase, you credit the Cash account (because it’s going down) and debit whatever you bought.

Journal entry in accounting examples: Cash used for purchase

Date	Account	Debit	Credit
Jan 1	Equipment	$10,000
	Cash		$10,000

When you receive cash from a sale, you debit the Cash account (it’s going up) and credit the corresponding account.

Journal entry in accounting examples: Cash realized from the sale of goods or services

Date	Account	Debit	Credit
Jan 1	Cash	$5,000
	Revenue		$5,000

Equipment

Equipment covers the tools a company uses to do its job, from laptops and company cars to heavy machinery. The journal entries for equipment change depending on whether you’re buying it, depreciating it, or selling it.

To record the purchase, you debit the Equipment account (it’s a new asset) and credit Cash (or Accounts Payable if you bought it on credit).

Journal entries in accounting examples: Purchase of equipment

Date	Account	Debit	Credit
Jan 1	Equipment	$10,000
	Cash		$10,000

As the equipment ages and loses value, you have to record its depreciation. This is done by debiting Depreciation Expense and crediting Accumulated Depreciation (a contra-asset account that reduces the equipment’s value).

Journal entries in accounting examples: Depreciation of equipment

Date	Account	Debit	Credit
Jan 1	Depreciation Expense	$1,000
	Accumulated Depreciation		$1,000

Equity Journal Entries

Equity is the company’s net worth. It’s that magical, often abstract number that represents what would be left for the owners if the company sold all its assets and paid off all its debts. It’s the financial equivalent of hoping for leftovers after a feast.

Capital Stock

This account shows the total amount of money the company has raised by selling shares. When the company issues shares, it’s recorded as a credit to the Capital Stock account.

Capital stock sold

Date	Account	Debit	Credit
Jan 1	Cash	$100,000
	Capital Stock		$100,000

Retained Earnings

Retained Earnings are the profits a company has kept over time instead of distributing them to shareholders as dividends. It’s the company’s piggy bank, used to reinvest in the business.

If the company makes a profit, it’s a credit to Retained Earnings.

Journal entries in accounting examples: Retained earnings

Date	Account	Debit	Credit
Jan 1	Income Summary	$50,000
	Retained Earnings		$50,000

If the company has a loss, it’s a debit to Retained Earnings.

Journal entries in accounting examples: Recording retained earnings when there are losses

Date	Account	Debit	Credit
Jan 1	Retained Earnings	$10,000
	Income Summary		$10,000

When the company declares dividends, the amount is deducted from Retained Earnings.

Journal entries in accounting examples: Dividend payment to shareholders

Date	Account	Debit	Credit
Jan 1	Retained Earnings	$20,000
	Dividends Payable		$20,000

Expense Journal Entries

Expenses are the financial black hole where all your hard-earned revenue goes to die. It’s the cost of keeping the lights on, paying people who are probably updating their resumes on company time, and buying things you need to generate income.

Cost of Goods Sold (COGS)

COGS includes all the direct costs of creating the products you sell, like raw materials and direct labor. To make a journal entry, you first have to calculate it with the formula: COGS = Beginning Inventory + Purchases – Ending Inventory.

The COGS account increases with a debit.

Journal entries in accounting examples: Cost of goods sold (COGS)

Date	Account	Debit	Credit
Jan 1	Cost of Goods Sold	$2,000
	Inventory		$2,000

Depreciation Expense

This account records the loss in value of an asset over a single accounting period. When you recognize depreciation, you debit the expense account and credit Accumulated Depreciation.

Journal entries in accounting examples: Depreciation expense

Date	Account	Debit	Credit
Jan 1	Depreciation Expense	$1,000
	Accumulated Depreciation		$1,000

Purchase

A purchase is simply buying goods, services, or assets. The journal entry depends on whether you paid with cash or on credit.

For a cash purchase, you debit the asset and credit Cash.

Journal entries in accounting examples: Purchase of assets in cash

Date	Account	Debit	Credit
Jan 1	Asset	$5,000
	Cash		$5,000

For a credit purchase, you debit the asset and credit Accounts Payable.

Journal entries in accounting examples: Purchase of assets on credit

Date	Account	Debit	Credit
Jan 1	Asset	$5,000
	Accounts Payable		$5,000

Rent Expense

This is a classic expense for any company that doesn’t own its building. The journal entry involves debiting Rent Expense and crediting Cash (or a similar account for bank transfers, checks, etc.).

Journal entries in accounting examples: Rent expense

Date	Account	Debit	Credit
Jan 1	Rent Expense	$2,000
	Cash		$2,000

Liabilities Journal Entries

Liabilities are the debts you owe to others. They are the ghosts of purchases past, the promises you made when your ambition outweighed your bank account. Managing them is key to not becoming a cautionary tale.

Accounts Payable

When you buy goods or services on credit, you record the amount you owe in Accounts Payable. This account tracks your short-term debts to suppliers and vendors.

When you buy on credit, you increase Accounts Payable with a credit.

Journal entries in accounting examples: Accounts payable

Date	Account	Debit	Credit
Jan 1	Inventory	$3,000
	Accounts Payable		$3,000

When you pay off the debt, you decrease Accounts Payable with a debit.

Journal entries in accounting examples: Payment of accounts payable

Date	Account	Debit	Credit
Jan 1	Accounts Payable	$3,000
	Cash		$3,000

Revenue Journal Entries

Revenue is the glorious inflow of cash from your primary business operations, whether it’s selling goods or providing services. It’s the number everyone celebrates before it gets brutally chipped away by expenses, taxes, and other harsh realities.

Also known as the Sales account, it records the income generated. If a sale is made on credit, you debit Accounts Receivable. If it’s for cash, you debit Cash. In both cases, you credit Revenue.

Journal entries in accounting examples: Revenue

Date	Account	Debit	Credit
Jan 1	Accounts Receivable	$5,000
	Revenue		$5,000

If there’s a tax liability on the sale, you also have to account for that.

Journal entries in accounting examples: Sales revenue with tax

Date	Account	Debit	Credit
Jan 1	Accounts Receivable	$5,500
	Revenue		$5,000
	Sales Tax Payable		$500

The Bottom Line

It’s easy to overlook the quiet power in consistent, foundational steps. But it’s these steady, careful efforts in creating accounting journal entries that build a clear financial picture and bring a deep sense of understanding.

At the end of the day, basic accounting journal entries are the bedrock of a company’s financial story. They provide the raw data needed to answer the most critical questions:

• How much revenue are we actually making?
• What is the true extent of our liabilities?
• Where is all the money going?

Without accurate entries, a company’s financial statements are just expensive fiction. And while most companies now use accounting software to do the heavy lifting, understanding the logic of double entry accounting is non-negotiable.

After all, these records are the meticulous corporate story where numbers are carefully arranged – the bedrock of financial transparency, or at the very least, plausible deniability.