# How to Record Journal Entries

> Learn how to record journal entries with clear examples. Covers debits, credits, the accounting equation, and common business transactions. Free practice problems included.

- Canonical page: https://accountery.app/learn/how-to-record-journal-entries
- Language: English (en)
- Category: journal-entries
- Estimated reading time: 12 minutes
- Published: 2026-04-09
- Updated: 2026-04-09

## What Is a Journal Entry?

A journal entry is the record of a single business transaction in an accounting system. Every time money moves, an asset changes hands, or an obligation is created, it gets recorded as a journal entry.

Each entry includes:
- **Date** of the transaction
- **Accounts** affected (at least two)
- **Debit and credit amounts** (must be equal)
- **Description** explaining what happened

## The Golden Rule: Debits Must Equal Credits

This is the foundation of double-entry bookkeeping. Every journal entry must balance — the total debits must equal the total credits. If they don't, something is wrong.

This isn't arbitrary. It comes directly from the accounting equation:

**Assets = Liabilities + Equity**

Every transaction affects at least two sides of this equation, and the entry must keep it balanced.

## Which Accounts Get Debited? Which Get Credited?

This is where most students get stuck. Here's the pattern:

| Account Type | Increases With | Decreases With |
|---|---|---|
| Assets | Debit | Credit |
| Expenses | Debit | Credit |
| Liabilities | Credit | Debit |
| Equity | Credit | Debit |
| Revenue | Credit | Debit |

**Memory trick:** Assets and Expenses are on the left side — they increase with debits (left side of the entry). Everything else increases with credits (right side).

## Worked Example 1: Cash Sale

**Scenario:** Al-Saqr Trading received SAR 15,000 cash from a customer for consulting services performed today.

**Analysis:**
1. Cash (an asset) is increasing → **Debit Cash**
2. Service Revenue is being earned → **Credit Service Revenue**

**The Entry:**

| Account | Debit | Credit |
|---|---|---|
| Cash | 15,000 | |
| Service Revenue | | 15,000 |

**Why it works:** Assets went up (debit), revenue went up (credit). Debits equal credits. The accounting equation stays balanced.

## Worked Example 2: Purchasing Equipment on Credit

**Scenario:** A company bought office equipment for SAR 50,000, paying SAR 20,000 cash and signing a promissory note for the remaining SAR 30,000.

**Analysis:**
1. Equipment (an asset) is increasing by 50,000 → **Debit Equipment**
2. Cash (an asset) is decreasing by 20,000 → **Credit Cash**
3. Notes Payable (a liability) is increasing by 30,000 → **Credit Notes Payable**

**The Entry:**

| Account | Debit | Credit |
|---|---|---|
| Equipment | 50,000 | |
| Cash | | 20,000 |
| Notes Payable | | 30,000 |

**Why it works:** One debit (50,000) = two credits (20,000 + 30,000). Assets increased net 30,000, and liabilities increased 30,000. Equation balanced.

## Worked Example 3: Receiving Payment on Account

**Scenario:** Oceanview Resort received SAR 8,000 from a corporate client paying off an outstanding invoice.

**Analysis:**
1. Cash (an asset) is increasing → **Debit Cash**
2. Accounts Receivable (an asset) is decreasing → **Credit Accounts Receivable**

**The Entry:**

| Account | Debit | Credit |
|---|---|---|
| Cash | 8,000 | |
| Accounts Receivable | | 8,000 |

**Key insight:** No revenue is recorded here. The revenue was already recognized when the service was performed. This entry just records the cash collection.

## Common Mistakes Students Make

**1. Confusing revenue recognition with cash collection**
Revenue is earned when the work is done, not when the cash arrives. If you perform a service in March and get paid in April, the revenue journal entry belongs in March.

**2. Reversing debits and credits**
The most common error. Remember: assets and expenses increase with debits. Liabilities, equity, and revenue increase with credits.

**3. Entries that don't balance**
If your debits don't equal your credits, the entry is wrong. Always check the totals before posting.

**4. Using the wrong accounts**
Cash received isn't always revenue. Payment made isn't always an expense. Think about what's actually happening in the transaction before picking accounts.

## Practice Problems

Test your understanding with these scenarios. Try recording the journal entry before checking the answer.

**Problem 1:** A company paid SAR 6,000 for three months of office rent in advance.
*Hint: What kind of asset did the company create by prepaying?*

**Problem 2:** A client paid SAR 25,000 upfront for a project that hasn't started yet.
*Hint: Has the company earned this revenue yet? What liability does this create?*

**Problem 3:** The company received a SAR 4,200 electricity bill, due in 30 days.
*Hint: An expense has been incurred. A liability has been created. No cash moved.*

Want instant feedback on your answers? Practice these exact scenarios on Accountery — the platform checks your entries in real time and tells you exactly where you went right or wrong.

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