Accounting Journal Entries

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Accounting Journal Entries
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U.S. GAAP Codification, Accounting Standards ASC

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What is a journal entry in Accounting?

Journal entry is an entry to the journal.

Journal is a record that keeps accounting transactions in chronological order, i.e. as they occur.

Ledger is a record that keeps accounting transactions by accounts.

Account is a unit to record and summarize accounting transactions.

All accounting transactions are recorded through journal entries that show account names, amounts, and whether those accounts are recorded in debit or credit side of accounts.

Double-Entry Recording of Accounting Transactions

To record transactions, accounting system uses double-entry accounting.

Double-entry implies that transactions are always recorded using two sides, debit and credit.

Debit refers to the left-hand side and credit refers to the right-hand side of the journal entry or account.

The sum of debit side amounts should equal to the sum of credit side amounts.

A journal entry is called "balanced" when the sum of debit side amounts equals to the sum of credit side amounts.

T-Account

This form looks like a letter "T", so it is called a T-account.

T-account is a convenient form to analyze accounts, because it shows both debit and credit sides of the account.

Account
Debit	Credit

Examples of Journal Entries

Transaction 1: Company A sold its products at $120 and received the full amount in cash.

Steps	Self-Questions	Answers
1	What did Company A receive?	Cash.
2	If Company A received cash, how would this affect the cash balance?	Receiving cash increases the cash balance of the company.
3	Which side of cash account represents the increase in cash?	Debit side (Left side).
4	What is the account name to record the sales of products.	Sales.
5	Which side of sales account represents the increase in sales?	Credit side (Right side).
6	Does the sum of debit side amounts equal to the sum of credit side amounts? In other words, does this journal entry balance?	Yes. $120 = $120

[Journal entry to record transaction 1]

		Debit	Credit
Cash		120
	Sales		120

Examples of Journal Entries

Transaction 2: Company A purchased supplies and paid $50 in cash.

Steps	Self-Questions	Answers
1	What did Company A receive?	Supplies.
2	If Company A received supplies, how would this affect the supplies balance?	It increases supplies balance.
3	Which side of supplies account represents the increase in cash?	Debit side (Left side).
4	What did Company A pay?	Cash.
5	Which side of cash account represents the decrease in cash?	Credit side (Right side).
6	Does the sum of debit side amounts equal to the sum of credit side amounts? In other words, does this journal entry balance?	Yes. $50 = $50

[Journal entry to record transaction 2]

		Debit	Credit
Supplies		50
	Cash		50

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Debits and Credits of Accounts

Debit	Credit
Increase in asset accounts	Decrease in asset accounts
Increase in expense accounts	Decrease in expense accounts

Decrease in liability accounts	Increase in liability accounts
Decrease in equity accounts	Increase in equity accounts
Decrease in revenue accounts	Increase in revenue accounts