How To Record Journal Entries? The Right Way


Last Updated on March 12, 2024 by Qusai Ahmad

How To Record Journal Entries The Right Way


Imagine you’ve just started a small business. You’re juggling multiple accounts, tracking every penny, and trying to keep your finances in order. Or perhaps you’re managing personal finances across various accounts. In both scenarios, understanding journal entries can be a game-changer.

Journal entries, the foundation of accounting, provide a clear and accurate record of all financial transactions. Mastering them not only ensures accurate record-keeping but also paints a clear financial picture, aiding in informed decision-making.

What are Journal Entries?

Journal entries are records of financial transactions expressed in terms of debits and credits. They are the building blocks of the double-entry bookkeeping system, where every transaction affects at least two accounts.

Accounts can be categorized into five types: assets, liabilities, equity, revenue, and expenses. Understanding these account types is crucial for making accurate journal entries.

Understanding Debits & Credits (DEAL)

Debits and credits can be easily understood using the Memory trick DEAL, which stands for Dividends, Expenses, Assets, and Liabilities.

In this system:

  • Debits (which increase the value) are on the left side and affect Assets & Expenses.
  • Credits (which also increase the value) are on the right side and affect Liabilities & Equity (including Dividends).

Here’s a table summarizing the behavior of debits and credits for each account type:


Account TypeDebitCredit

Also Check: What’s the Difference Between Debit and Credit in Accounting?

4 Steps to Record a Journal Entry

Recording a journal entry involves the following steps:

  1. Identify the accounts affected: Analyze the transaction and pinpoint the accounts impacted. For example, if you’re buying supplies, you would debit the office supplies account and credit the cash account.
  2. Determine debit and credit amounts: Assign the correct amount to be debited and credited based on the transaction and the DEAL system.
  3. Record the entry: Write the date, account names, and amounts (debit and credit) in a journal or accounting software.
  4. Provide a brief description: Include a clear explanation of the transaction for future reference.

Examples of Journal Entries

Let’s look at a few real-life examples with matching journal entries:

  1. Purchasing office supplies with cash: Debit the Office Supplies account and credit the Cash account.
  2. Paying rent with a bank transfer: Debit the Rent Expense account and credit the Bank account.
  3. Earning revenue from sales: Debit the Cash account and credit the Sales Revenue account.

Remember, consistent application of debits and credits is crucial for accurate record keeping.

Tips for Accurate Journal Entries

Here are some practical tips for recording accurate journal entries:

  • Maintain a consistent format for all entries.
  • Double-check your work to ensure balanced debits and credits.
  • Use clear and concise descriptions for each entry.
  • Consider using accounting software for automation and error reduction.


Mastering journal entries is key to maintaining accurate financial records and gaining a clear understanding of both personal and business finances.

By following the steps outlined above and practicing regularly, you can become skilled in recording journal entries. For further learning, consider exploring accounting tutorials or software guides.

Now, it’s your turn to practice recording entries. Remember, practice makes perfect. Happy accounting!

External Links

  1. Accounting Journal Entries: Definition, How-to, and Examples: This resource provides a comprehensive guide on journal entries, including their definition, importance, and how to make them.
  2. Journal Entry Example | Top 10 Accounting Journal Entries Examples: This resource provides practical examples of journal entries used by business enterprises in their day-to-day financial transactions.
  3. Accounting Transactions – Overview, Types, Double-Entry Recording: This resource provides an overview of accounting transactions, including the concept of double-entry recording.

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