How to Make Journal Entries in Accounting

Posted by: Patricia Barlow Post Date: 16th March 2017

Journal entries aren’t just the preserve of teenage girls; accountants also rely on them as part of the double entry accounting system.

What are journal entries in accounting?

In accounting, a journal is essentially a document that records financial transactions. Journal entries are made to keep track of transactions within the double entry bookkeeping system.

How to make journal entries in accounting

Journal entries should include the following information:

  • The date of the entry
  • The name of the account it applies to
  • The amount to be debited or credited
  • A reference number
  • A brief description of the entry

How to make journal entries

When completing the bookkeeping for a company, information is usually entered into a journal through the daybooks. For example, sales invoices for the month will be updated into the accounting system from the sales daybook.

The totals from the daybooks will then be journalled into the double entry bookkeeping system. For example, the net sales would be credited to sales, the VAT would be credited to VAT, and the gross figure would be debited to the sales ledger control.

When each of these are made as journal entries, it will look like this:

DateAccount nameDebitCredit
31.12Sales£10,000
31.12VAT£2,000
31.12Sales ledger control£12,000

 

Remember that every transaction affects at least two accounts. Because they relate to the same transaction, debits and credits must be equal.

The journal works in a similar way for purchase invoices, except that these will come from the purchase daybook.

Entries unrelated to the daybooks are also made into the accounting system. These could include accounting adjustments that are required at the end of the month. For example, depreciation will normally be entered into the accounts via a journal, and will look like this:

DateAccount nameDebitCredit
31.12Depreciation charge  £3,000
31.12Accumulated depreciation £3,000

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