Journal Entries Explained: 10 Common Examples
How double-entry journals work, the anatomy of a good entry, and worked examples for VAT sales, purchases, depreciation, accruals and corrections.
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A journal entry is the basic unit of bookkeeping: a dated record of a transaction showing which accounts change and by how much. Each entry has equal total debits and total credits. Get that one rule right and the rest is knowing which accounts to use.
Debit and credit, simply
- Debit increases assets and expenses; credit increases liabilities, equity and income.
- The reverse reduces them.
| Account type | Increase | Decrease |
|---|---|---|
| Asset | Debit | Credit |
| Expense | Debit | Credit |
| Liability | Credit | Debit |
| Equity | Credit | Debit |
| Income | Credit | Debit |
Anatomy of a good entry
- Date the transaction belongs to.
- Unique reference (JV-0001) for the audit trail.
- Accounts and amounts, debits and credits equal.
- Narration — the business reason, in a full sentence. "Adjustment" is a question; "Being October depreciation on delivery vans" is evidence.
- Authorisation — who prepared and who approved.
- Support — the invoice, schedule or calculation attached.
Ten common examples
1. Credit sale of AED 10,000 + 5% VAT Dr Accounts receivable 10,500 / Cr Sales 10,000 / Cr VAT payable (output) 500
2. Cash sale Dr Bank/cash 10,500 / Cr Sales 10,000 / Cr VAT payable 500
3. Supplier invoice AED 4,000 + 5% VAT Dr Purchases or expense 4,000 / Dr VAT recoverable (input) 200 / Cr Accounts payable 4,200
4. Customer pays an invoice Dr Bank 10,500 / Cr Accounts receivable 10,500
5. Monthly depreciation Dr Depreciation expense 1,250 / Cr Accumulated depreciation 1,250 — see fixed assets and depreciation.
6. Accrued expense (utility used, bill not yet received) Dr Utilities expense 780 / Cr Accrued expenses 780
7. Prepayment (annual insurance paid in advance) Dr Prepaid expenses 12,000 / Cr Bank 12,000, then each month Dr Insurance expense 1,000 / Cr Prepaid expenses 1,000
8. Owner's capital injection Dr Bank 50,000 / Cr Share capital 50,000
9. Bad debt write-off Dr Bad debt expense 3,000 / Cr Accounts receivable 3,000
10. Correcting an error (expense posted to the wrong account) Dr Correct expense account 1,200 / Cr Wrong expense account 1,200
Adjusting vs correcting
Adjusting entries at period end (accruals, prepayments, depreciation, provisions) apply accrual accounting. Correcting entries fix mistakes. Both should be separate entries with clear narrations — never overwrite the original.
Build one and check it balances
The free Journal Entry Builder shows debit and credit totals live, offers starter examples (VAT sale, supplier invoice, depreciation, accrual), prints a voucher for sign-off and exports a batch as CSV. If your trial balance doesn't balance afterwards, use the error-finding guide.
Where journals live
Manual journals should be rare — most entries come automatically from invoices, bills and payments. Pyalm Books posts documents to a double-entry ledger and also supports manual and recurring journals with a chart of accounts and period locking, free during beta. See the chart of accounts guide to set accounts up sensibly.
Standards, rates and deadlines change. Confirm the current position with the relevant authority or a qualified adviser before you rely on it.