How to Write a Journal Entry?

How to Write a Journal Entry

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How to Write a Journal Entry

A journal entry is a record of a business transaction in the general ledger. Journal entries typically include the date of the transaction, the accounts affected, the amounts to be debited and credited, and a brief description of the transaction.

The double-entry bookkeeping system is used in accounting where each transaction affects at least two accounts and the total debits must equal the total credits.

Here is the format of a journal entry:

DateAccount TitleDebit ($)Credit ($)
mm/dd/yyyyAccount Name #1Debit Amount
Account Name #2Credit Amount
Description of the transaction

Steps to write a journal entry:

  1. Date of Transaction: Record the date of the transaction in the Date column.
  2. Account Names: Determine which accounts are affected by the transaction. Write the name of the account to be debited on the first line and the name of the account to be credited on the second line.
  3. Debit and Credit Amounts: Enter the amounts of the debit and credit corresponding to each account.
  4. Description: Write a brief description of the transaction in the description column (or below the entry, as preferred).
  5. Post to Ledger: Once you’ve recorded the journal entry, you would then post the entry to the appropriate ledger accounts.
  6. Verify Balances: After posting to the ledger, always verify that total debits equal total credits to ensure your books are in balance.

Example of How to Write a Journal Entry

Here’s an example. Suppose a business, “HealthyEats Restaurant,” purchases $500 worth of food supplies on credit from their supplier “FoodMart.”

The two accounts involved in this transaction are “Inventory” (an asset account) and “Accounts Payable” (a liability account). The business receives food supplies, increasing their inventory, and incurs a liability as they have to pay FoodMart in the future.

The journal entry for this transaction would look like:

DateAccount TitleDebit ($)Credit ($)
Accounts Payable500
Purchased food supplies on credit from FoodMart

In this transaction:

  • Inventory (an asset) increases, so we debit it for $500.
  • Accounts Payable (a liability) also increases because we owe money to our supplier, so we credit it for $500.

The description clearly states the nature of the transaction, helping anyone reading the journal entry understand what occurred.

This example should give you a good idea of how to record a journal entry. Always remember the fundamental rule of double-entry bookkeeping: for every transaction, debits must equal credits.

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