Journal entry examples: how to record common transactions

Every number in a set of financial statements starts as a journal entry. A sale, a supplier bill, a payment, a month of depreciation: each one is written into the books as debits and credits that must balance. Get the entries right and the statements follow. Get them wrong and every report built on top inherits the mistake.

This guide explains what a journal entry is, how debits and credits work and how to write one, then walks through six journal entry examples finance teams record all the time, taken from one illustrative business so every figure ties out.

What is a journal entry?

A journal entry is the record of a single business transaction in the accounting system. It lists the date, the accounts affected, an amount debited to one or more accounts and an equal amount credited to others, and a short description of what happened. Because total debits always equal total credits, every entry keeps the books in balance. This is double-entry bookkeeping, the method behind every general ledger.

The parts of a journal entry

• A date and a reference number, so the entry can be found and placed in the right period.
• The accounts affected, taken from your chart of accounts.
• The debit and credit amounts, which must be equal in total.
• A memo that says what happened in plain words.
• The evidence behind it: the invoice, bill, receipt or approval that proves the transaction happened.

Debits and credits, simply

• Assets, such as cash, receivables and equipment, increase with a debit and decrease with a credit.
• Expenses, such as depreciation, payment fees and exchange losses, increase with a debit.
• Liabilities, such as accounts payable, increase with a credit and decrease with a debit.
• Revenue and equity, such as retained earnings, increase with a credit.

A quick check: debits sit on the left of an entry and credits on the right, and the two columns always add up to the same number.

How to write a journal entry in four steps

1. 1Identify the transaction. Start from the document: the invoice you sent, the bill you received, the payment that cleared.
2. 2Choose the accounts. Decide which accounts the transaction changes, and whether each one goes up or down.
3. 3Apply debits and credits. Use the rules above to put each amount on the right side, and check that the totals agree.
4. 4Record it with its evidence. Post the entry with a clear memo, and keep the document and any approval with it so anyone can trace it later.

Six journal entry examples

The examples below follow one illustrative company through ordinary transactions. It invoices a customer, buys 6 laptops from a German supplier on purchase order PO-2087, pays for them in euros and starts depreciating them.

1. Sending a customer invoice

The company sends invoice INV-1042 to Northwind Studio for $12,400 of work delivered. The revenue is earned now, so the entry records it, together with the amount the customer owes:

2. Receiving the customer's payment

When Northwind Studio pays the full $12,400, cash goes up and the receivable is cleared. Revenue doesn't change; it was recorded when the invoice went out:

3. Recording a supplier bill

Bill #A-311 arrives from Alder Tech GmbH for 6 laptops, €9,000 in total. At 1 EUR = 1.0800 USD, that's $9,720. Laptops last several years, so they're recorded as an asset rather than an expense:

4. Paying a foreign-currency bill, with an exchange loss and a fee

By the payment date the rate has moved to 1.0850, so the €9,000 now costs $9,765, and the payment carries a $15 fee. The entry clears the full $9,720 from accounts payable and records both differences as they happen:

This is the entry most often recorded wrong. If the payment is booked at the bill's value, the $45 exchange loss and the $15 fee are missing, and the $9,780 on the bank statement won't match anything in the books.

5. Recording monthly depreciation

The laptops cost $9,720 and are expected to last three years, so the cost is spread over 36 months at $270 a month. Depreciation is an adjusting entry: no money moves, but the expense lands in the months the laptops are used:

6. Closing the year

At year-end, a closing entry moves the year's revenue and expenses into retained earnings and resets those accounts to zero for the new year. Our guide to closing entries covers it step by step, with its own example.

Common journal entry mistakes

• Debits and credits that don't balance, usually from a typo or a missing line.
• The right amount in the wrong account, such as equipment recorded as an expense.
• The right entry in the wrong period, which moves profit from one month to the next.
• Foreign-currency payments recorded at the bill's rate, leaving exchange differences and fees unexplained.
• No evidence kept with the entry, so nobody can say later why it was made.

Manual and automatic journal entries

Most journal entries don't need to be typed by hand. Invoices, bills and payments already describe the transaction, so accounting software can post the entry from the document itself. Manual journal entries are still needed for adjustments, accruals and corrections, and they deserve the closest review: who prepared them, who approved them and what evidence supports them.

What changes on one system

When invoicing, purchasing, payments and the ledger run as one system, most of the entries in this guide post themselves from the documents behind them: the invoice, the bill, and the payment with its exchange rate and fee. Every entry links back to its evidence and approval. That's what unified financial operations look like in the ledger: unified, governed, auditable. See how it works on the Accounting page.