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Journal Entries

Record manual accounting transactions with journal entries.

When to Use Journal Entries

  • Adjusting entries at period end
  • Depreciation and amortization
  • Accruals and deferrals
  • Correcting errors
  • Reclassifying transactions
  • Recording non-cash transactions

Creating a Journal Entry

  1. Go to Accounting → Journal Entries
  2. Click "New Entry"
  3. Enter entry date and reference number
  4. Add description/memo
  5. Add debit line items with accounts and amounts
  6. Add credit line items with accounts and amounts
  7. Verify debits equal credits
  8. Attach supporting documents (optional)
  9. Save or post entry

Double-Entry Accounting

Every transaction affects at least two accounts:

  • Debits: Increase assets and expenses, decrease liabilities and revenue
  • Credits: Increase liabilities and revenue, decrease assets and expenses
  • Balance: Total debits must always equal total credits

Common Journal Entry Examples

Example 1: Recording Depreciation

Scenario: Monthly depreciation of $500 on equipment

Account
Debit
Credit
5800 - Depreciation Expense
$500.00
-
1590 - Accumulated Depreciation
-
$500.00
Total
$500.00
$500.00

Effect: Increases expense (reduces profit) and reduces asset value

Example 2: Accruing Expenses

Scenario: Accruing $2,000 in unpaid utilities at month-end

Account
Debit
Credit
5120 - Utilities Expense
$2,000.00
-
2020 - Accrued Expenses
-
$2,000.00
Total
$2,000.00
$2,000.00

Effect: Records expense in correct period and creates liability

Example 3: Prepaid Expense Adjustment

Scenario: Converting $1,200 prepaid insurance to expense (1 month)

Account
Debit
Credit
5400 - Insurance Expense
$1,200.00
-
1400 - Prepaid Insurance
-
$1,200.00
Total
$1,200.00
$1,200.00

Effect: Converts asset to expense as insurance coverage is used

Example 4: Correcting an Error

Scenario: $500 expense was recorded to wrong account

Account
Debit
Credit
5510 - Advertising (Correct)
$500.00
-
5130 - Office Supplies (Wrong)
-
$500.00
Total
$500.00
$500.00

Effect: Reclassifies expense to correct account without changing total expenses

Example 5: Owner Investment

Scenario: Owner invests $10,000 cash into business

Account
Debit
Credit
1010 - Checking Account
$10,000.00
-
3000 - Owner's Equity
-
$10,000.00
Total
$10,000.00
$10,000.00

Effect: Increases cash asset and owner's equity

Debit and Credit Rules

DEBIT increases:

  • Assets
  • Expenses
  • Dividends/Draws

CREDIT increases:

  • Liabilities
  • Equity
  • Revenue

Tip: Use recurring journal entries for monthly depreciation or other regular adjustments.