Journal Entry Examples: Learning Accounting the Easy Way

journal entry examplesIf you are an accounting student, you do not need to be told just how difficult accounting can be. Accountants analyze business transactions and record them in journal entries using debit-credit rules as a guide. Usually, an accountant will use specialized journals for numerous journal entries of the same type – like cash journals, sales journals, and purchases journals. Large businesses usually use specialized journals. Smaller businesses tend to only use a general journal that includes all transactions. Recording journal entries is only the first step in the accounting cycle.

If you are interested in learning accounting, try an introduction to financial accounting. Here are journal entry examples to help you better understand journal entries.

First Example

The company started business on June 6, 2013. The business was started with $300,000. The transactions they engaged in during their first month of business are below:

DateTransaction
June 8An amount of $50,000 was paid for six months of rent.
June 9Equipment costing $100,000 was purchased using $40,000 cash. The remaining amount of $60,000 is a one year note with an interest rate of 3.4%
June 10Office supplies were purchased totaling $25,000 on account.
June 16Received $39,400 in cash for services rendered to customers.
June 16Paid the account for office supplies purchased June 10.
June 20$63,900 worth of services were given to customers. Received cash amount of $43,700. Customers promised to pay remaining amount of $20,200.
June 21Paid employees’ wages for June 8-June 21. Wages totaled $23,500.
June 21Received $20,200 in cash for services rendered to customers on June 20.
June 22Received $6,300 in cash as advanced payment from customers.
June 27Office supplies were purchased totaling $3,500 on account.
June 28Electricity bill received totaling $1,850.
June 28Phone bill received totaling $2,650.
June 28Miscellaneous expenses totaled $4,320.

These events would then be recorded into the accounting journal. The table below records the journal entries for the events above.

DateAccountDebitCredit
June 6Cash300,000
June 8Prepaid rent50,000
     Cash50,000
June 9Equipment100,000
     Cash40,000
     Notes Payable60,000
June 10Office Supplies25,000
     Accounts Payable25,000
June 16Cash39,400
     Service Revenue39,400
June 16Accounts Payable25,000
     Cash25,000
June 20Cash43,700
     Accounts Receivable20,200
     Service Revenue63,900
June 21Wages Expense23,500
     Cash23,500
June 21Cash20,200
     Accounts Receivable20,200
June 22Cash6,300
     Unearned Revenue6,300
June 27Office Supplies3,500
     Accounts Payable3,500
June 28Electricity Expense1,850
     Utilities Payable1,850
June 28Telephone Expense2,650
     Utilities Payable2,650
June 28Miscellaneous Expense4,320
     Cash4,320

The journal is then posted to the ledger accounts at the end of the period. Larger businesses separate their ledgers into different books, one being the general ledger and the other being a subsidiary ledger. The general ledger will include the main accounts and the following categories: assets, liabilities, owner’s equity, revenue, expense, gains, and losses. The subsidiary ledger includes detailed records of some accounts in the general ledger, the three main subsidiary ledgers being accounts receivable, inventory, and accounts payable. When recording the transactions, it is important to know how to record the debits and credits. When working with assets and expenses, an increase is recorded in debit, and a decrease is recorded in credit. When working with liabilities, equities, and revenues, a decrease is recorded in debit, and an increase is recorded in credit.

You can learn more about bookkeeping with an online course.

Second Example

This company was incorporated on March 1, 2013 with a starting of $1,500,000 and 10,000 common stock shares at $50 par value. These are the company’s transactions for the first month:

DateTransaction
March 3$300,000 were paid as advanced rent for six months.
March 4Office supplies were purchased on account totaling $35,000.
March 6Services were provided to customers, and the company received $54,000 in cash.
March 7The accounts payable for office supplies purchased on March 4 was paid.
March 7$200,000 in cash was used to purchase equipment costing $560,000. The remaining $360,000 became a one year note payable with interest rate of 4%.
March 9Office supplies were purchased on account totaling $13,500.
March 12Services were provided to customers, and the company received $43,500 in cash.
March 13The accounts payable for office supplies purchased on March 9 was paid.
March 14Employees were paid wages for March 3-March 14 totaling $356,000.
March 14Services were provided to customers totaling $256,720. Customers paid $143,650 with a promise to pay $113,070 remaining balance in the future.
March 20Office supplies were purchased on account totaling $5,400.
March 21Customers paid $100,000 toward the $113,070 remaining balance for services rendered March 14.
March 23The accounts payable for office supplies purchased on March 20 was paid.
March 25Customers paid $13,070 for services rendered March 14.
March 27Customers paid $23,000 in advance for services to be received.
March 28Employees were paid wages for the final weeks of March, totaling $453,600.
March 28Electricity bill was received totaling $6,750.
March 28Phone bill was received totaling $8,754.
March 31Miscellaneous expenses for the month were totaled at $15,450.

As in the example above, these transactions are then recorded into the accounting journal. Below is the table that records the accounting journal for March 2013.

DateAccountDebitCredit
March 1Cash1,500,000
     Common Stock500,000
March 3Prepaid Rent300,000
     Cash300,000
March 4Office Supplies35,000
     Accounts Payable35,000
March 6Cash54,000
     Service Revenue54,000
March 7Accounts Payable35,000
     Cash35,000
March 7Equipment560,000
     Cash200,000
     Notes Payable360,000
March 9Office Supplies13,500
     Accounts Payable13,500
March 12Cash43,500
     Services Revenue43,500
March 13Accounts Payable13,500
     Cash13,500
March 14Wages Expense356,000
     Cash356,000
March 14Cash143,650
     Accounts Receivable113,070
     Services Revenue256,720
March 20Office Supplies5,400
     Accounts Payable5,400
March 21Cash100,000
     Accounts Receivable100,000
March 23Accounts Payable5,400
     Cash5,400
March 25Cash13,070
     Accounts Receivable13,070
March 27Cash23,000
     Unearned Revenue23,000
March 28Wages Expense453,600
     Cash453,600
March 28Electricity Expense6,750
     Utilities Payable6,750
March 28Phone Expense8,754
     Utilities Payable8,754
March 31Miscellaneous Expense15,450
     Cash15,450

You can see why a larger company might have multiple journals instead of one general journal. This was only a short list of transactions that could occur in a large business, but there are usually many more. Looking at a table like this with sales and purchases mixed together could get confusing when there is so much of it going on. It is easier for accountants to record sales and purchases separately so they do not end up mixed.

Third Example

For this last example, transactions will be recorded in three separate tables to represent four separate journals – purchases journal, sales journal, cash receipts journal, and cash disbursements journal. This example should give you a greater understanding of the debit-credit rules.

This company was incorporated January 1, 2014. They started out with a cash value of $2,350,000, and they have 25,000 stock at $200 par value. These are their transactions for the first month:

DateTransaction
January 2Rent was paid in advance for a full year totaling $750,000.
January 3Equipment costing $830,000 was purchased. $310,000 was paid in cash, and the remaining amount of $520,000 was a one year note payable with an interest rate of 4.6%.
January 3Office supplies were purchased on account totaling $340,000.
January 4Services were provided to customers, and the company received $570,000 in cash.
January 5Sales were made, and the company received $350,000 in cash.
January 6The accounts payable for office supplies purchased on January 3 was paid.
January 7Sales were made totaling $475,000. Customers paid $235,000 in cash and promised to pay the remaining $240,000 in the future.
January 8Services were provided to customers totaling $654,000. Customers paid $300,000 in cash and promised to pay the remaining $354,000 in the future.
January 9Office supplies were purchased on account totaling $115,000.
January 10Customers paid $25,000 for sales made on January 7 leaving a balance of $215,000.
January 11Employees were paid wages totaling $457,000 for the first two weeks of January 2014.
January 12The accounts payable for office supplies purchased on January 9 was paid.
January 13Customers paid $65,000 for services rendered on January 8 leaving a balance of $289,000.
January 14The company paid $35,000 to the note payable for equipment purchased January 3 leaving a balance of $485,000.
Janaury 15Customers paid $53,000 for sales made on January 7 leaving a balance of $162,000.
January 16Customers paid $43,000 for services rendered on January 8 leaving a balance of $246,000.
January 17Office supplies were purchased on account for $75,000.
January 18Customers paid $35,000 for services rendered on January 8 leaving a balance of $211,000.
January 19The company paid $75,000 for equipment purchased January 3 leaving a balance of $410,000.
January 20The accounts payable for office supplies purchased on January 17 was paid.
January 21Customers paid $100,000 for sales made on January 7 leaving a balance of $62,000.
January 22Sales were made, and the company received $235,000 in cash.
January 23Customers paid $211,000 for services rendered on January 8.
January 24Customers paid $65,000 in advance for services to be rendered.
January 25Employees were paid wages totaling $545,000 for the third and fourth weeks of January 2014.
January 26Customers paid $62,000 for sales made on January 7.
January 27Sales were made, and the company received $345,000 in cash.
January 28Office supplies were purchased on account totaling $215,000.
January 29The accounts payable for office supplies purchased on January 28 was paid.
January 30Services were provided to customers, and the company received $765,000 in cash.
January 31Dividends were paid totaling $1,000,000.
January 31Electricity bill totaling $15,450 was received.
January 31Phone bill totaling $17,850 was received.
January 31Miscellaneous expenses for the month totaled to $650,000.

You can see that such a long list of transactions would be quite confusing if kept in one single journal. Some companies use QuickBooks to keep track of transactions and journals. If you are interested in using QuickBooks, you might want to consider learning how to use it with an online course. Below is the table representing the purchases journal.

Purchases Journal

DateAccountDebitCredit
Janaury 3Equipment830,000
     Notes Payable520,000
January 3Office Supplies340,000
     Accounts Payable340,000
January 9Office Supplies115,000
     Accounts Payable115,000
January 17Office Supplies75,000
     Accounts Payable75,000
January 27Office Supplies215,000
      Accounts Payable215,000

It is obvious that a journal written as such is a lot easier to read than a longer, larger general journal keeping track of everything. Notice that this table only recorded purchases on account, not payments for the purchases or cash payments for purchases.

Sales Journal

DateAccountDebitCredit
January 7Accounts Receivable240,000
     Sales240,000
January 8Accounts Receivable354,000
     Service Revenue354,000

Again, this journal does not record payments of sales or services purchased by customers on credit, and it does not record sales or services paid with cash. This only records the credit.

Cash Disbursements

Cash 457,000

DateAccountDebitCredit
Janaury 2Prepaid Rent750,000
     Cash750,000
January 3Equipment310,000
     Cash310,000
January 6Accounts Payable340,000
     Cash340,000
January 11Wages Expense457,000
     Cash457,000
January 12Accounts Payable115,000
     Cash115,000
January 14Notes Payable35,000
     Cash35,000
January 19Notes Payable75,000
     Cash75,000
January 20Accounts Payable75,000
     Cash75,000
January 25Wages Expense545,000
     Cash545,000
January 29Accounts Payable215,000
     Cash215,000
January 31Dividends1,000,000
     Cash1,000,000
January 31Utilities Payable – Electricity15,450
     Cash15,450
January 31Utilities Payable – Phone17,850
     Cash17,850
January 31Miscellaneous Expenses650,000
     Cash650,000

This journal records all payments that the company makes to any responsibilities they may have including accounts payable recorded in the purchases journal.

Cash Receipts

DateAccountDebitCredit
January 4Cash570,000
     Service Revenue570,000
January 5Cash350,000
     Sales Revenue350,000
January 7Cash235,000
     Sales Revenue235,000
January 8Cash300,000
     Service Revenue300,000
January 10Cash25,000
     Accounts Receivable – Sales25,000
January 13Cash65,000
     Accounts Receivable – Service Revenue65,000
January 15Cash53,000
     Accounts Receivable – Sales53,000
January 16Cash43,000
     Accounts Receivable – Service Revenue43,000
January 18Cash35,000
     Accounts Receivable – Service Revenue35,000
January 21Cash100,000
     Accounts Receivable – Sales100,000
January 22Cash235,000
     Sales Revenue235,000
January 23Cash211,000
     Accounts Receivable – Service Revenue211,000
January 24Cash65,000
     Unearned Revenue65,000
January 26Cash62,000
     Accounts Receivable – Sales62,000
January 27Cash345,000
     Sales Revenue345,000
January 30Cash765,000
     Service Revenue765,000

These are all payments made by customers with cash. This includes any advanced payments, listed as unearned revenue.

Take an online accounting class for extra help with creating journal entries.