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:

Date Transaction
June 8 An amount of $50,000 was paid for six months of rent.
June 9 Equipment 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 10 Office supplies were purchased totaling $25,000 on account.
June 16 Received $39,400 in cash for services rendered to customers.
June 16 Paid 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 21 Paid employees’ wages for June 8-June 21. Wages totaled $23,500.
June 21 Received $20,200 in cash for services rendered to customers on June 20.
June 22 Received $6,300 in cash as advanced payment from customers.
June 27 Office supplies were purchased totaling $3,500 on account.
June 28 Electricity bill received totaling $1,850.
June 28 Phone bill received totaling $2,650.
June 28 Miscellaneous 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.

Date Account Debit Credit
June 6 Cash 300,000
June 8 Prepaid rent 50,000
     Cash 50,000
June 9 Equipment 100,000
     Cash 40,000
     Notes Payable 60,000
June 10 Office Supplies 25,000
     Accounts Payable 25,000
June 16 Cash 39,400
     Service Revenue 39,400
June 16 Accounts Payable 25,000
     Cash 25,000
June 20 Cash 43,700
     Accounts Receivable 20,200
     Service Revenue 63,900
June 21 Wages Expense 23,500
     Cash 23,500
June 21 Cash 20,200
     Accounts Receivable 20,200
June 22 Cash 6,300
     Unearned Revenue 6,300
June 27 Office Supplies 3,500
     Accounts Payable 3,500
June 28 Electricity Expense 1,850
     Utilities Payable 1,850
June 28 Telephone Expense 2,650
     Utilities Payable 2,650
June 28 Miscellaneous Expense 4,320
     Cash 4,320

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.

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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:

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

Date Account Debit Credit
March 1 Cash 1,500,000
     Common Stock 500,000
March 3 Prepaid Rent 300,000
     Cash 300,000
March 4 Office Supplies 35,000
     Accounts Payable 35,000
March 6 Cash 54,000
     Service Revenue 54,000
March 7 Accounts Payable 35,000
     Cash 35,000
March 7 Equipment 560,000
     Cash 200,000
     Notes Payable 360,000
March 9 Office Supplies 13,500
     Accounts Payable 13,500
March 12 Cash 43,500
     Services Revenue 43,500
March 13 Accounts Payable 13,500
     Cash 13,500
March 14 Wages Expense 356,000
     Cash 356,000
March 14 Cash 143,650
     Accounts Receivable 113,070
     Services Revenue 256,720
March 20 Office Supplies 5,400
     Accounts Payable 5,400
March 21 Cash 100,000
     Accounts Receivable 100,000
March 23 Accounts Payable 5,400
     Cash 5,400
March 25 Cash 13,070
     Accounts Receivable 13,070
March 27 Cash 23,000
     Unearned Revenue 23,000
March 28 Wages Expense 453,600
     Cash 453,600
March 28 Electricity Expense 6,750
     Utilities Payable 6,750
March 28 Phone Expense 8,754
     Utilities Payable 8,754
March 31 Miscellaneous Expense 15,450
     Cash 15,450

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:

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

Date Account Debit Credit
Janaury 3 Equipment 830,000
     Notes Payable 520,000
January 3 Office Supplies 340,000
     Accounts Payable 340,000
January 9 Office Supplies 115,000
     Accounts Payable 115,000
January 17 Office Supplies 75,000
     Accounts Payable 75,000
January 27 Office Supplies 215,000
      Accounts Payable 215,000

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

Date Account Debit Credit
January 7 Accounts Receivable 240,000
     Sales 240,000
January 8 Accounts Receivable 354,000
     Service Revenue 354,000

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

Date Account Debit Credit
Janaury 2 Prepaid Rent 750,000
     Cash 750,000
January 3 Equipment 310,000
     Cash 310,000
January 6 Accounts Payable 340,000
     Cash 340,000
January 11 Wages Expense 457,000
     Cash 457,000
January 12 Accounts Payable 115,000
     Cash 115,000
January 14 Notes Payable 35,000
     Cash 35,000
January 19 Notes Payable 75,000
     Cash 75,000
January 20 Accounts Payable 75,000
     Cash 75,000
January 25 Wages Expense 545,000
     Cash 545,000
January 29 Accounts Payable 215,000
     Cash 215,000
January 31 Dividends 1,000,000
     Cash 1,000,000
January 31 Utilities Payable – Electricity 15,450
     Cash 15,450
January 31 Utilities Payable – Phone 17,850
     Cash 17,850
January 31 Miscellaneous Expenses 650,000
     Cash 650,000

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

Date Account Debit Credit
January 4 Cash 570,000
     Service Revenue 570,000
January 5 Cash 350,000
     Sales Revenue 350,000
January 7 Cash 235,000
     Sales Revenue 235,000
January 8 Cash 300,000
     Service Revenue 300,000
January 10 Cash 25,000
     Accounts Receivable – Sales 25,000
January 13 Cash 65,000
     Accounts Receivable – Service Revenue 65,000
January 15 Cash 53,000
     Accounts Receivable – Sales 53,000
January 16 Cash 43,000
     Accounts Receivable – Service Revenue 43,000
January 18 Cash 35,000
     Accounts Receivable – Service Revenue 35,000
January 21 Cash 100,000
     Accounts Receivable – Sales 100,000
January 22 Cash 235,000
     Sales Revenue 235,000
January 23 Cash 211,000
     Accounts Receivable – Service Revenue 211,000
January 24 Cash 65,000
     Unearned Revenue 65,000
January 26 Cash 62,000
     Accounts Receivable – Sales 62,000
January 27 Cash 345,000
     Sales Revenue 345,000
January 30 Cash 765,000
     Service Revenue 765,000

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

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