Journal entries

How you actually record a transaction, step by step — from debits and credits to writing it down, with T-accounts and real examples like paying rent.

You’ve met debits and credits and double-entry as ideas. Now comes the practical bit: how do you actually write a transaction down? The answer is the journal entry — the basic unit of recording, the place where every concept finally touches paper.

What a journal entry is

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A journal entry is the written record of a single transaction. It names the accounts involved, says how much value was recorded, and marks which side — debit or credit — each account is on.

Think of it as the sentence accounting uses to describe an event. Every entry has the same three parts:

• Which accounts are affected (at least two).
• How much the amount is.
• Which side each account sits on — debit (left) or credit (right).

And it follows one unbreakable rule you already know: total debits must equal total credits. If they don’t, the entry is wrong before you’ve even finished writing it.

The steps, every single time

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Recording any transaction is the same short routine. Walk through it slowly the first few times and it becomes automatic.

1. What happened? Describe the event in plain words — “we paid rent,” “a customer paid us.”
2. Which accounts does it touch? Every event hits at least two. One gives, one receives.
3. Does each account go up or down? Decide the direction for each.
4. Translate up/down into debit/credit. Use the account type to know which side that means.
5. Check the balance. Debits on the left, credits on the right — and the two totals must match.

Step 4 is the one that trips people up, so keep the cheat sheet from debits and credits handy:

Account type	To increase it	To decrease it
Assets (what you own)	Debit	Credit
Liabilities (what you owe)	Credit	Debit
Equity (what’s yours)	Credit	Debit
Revenue (money earned)	Credit	Debit
Expenses (money spent)	Debit	Credit

T-accounts in practice

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A T-account is just a way to picture one account as a big letter T — debits on the left, credits on the right. A journal entry is what you get when you write down the matching halves of two (or more) T-accounts at once.

       Cash (an asset)              Rent expense
   -----------------------     -----------------------
   Debit (+)  |  Credit (-)    Debit (+)  |  Credit (-)
   -----------------------     -----------------------
              |   $1,000         $1,000   |
   -----------------------     -----------------------

The left side of one account lines up with the right side of another. That mirror is the entry. Now let’s write a couple for real.

Example 1 — paying rent in cash

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What happened: the business paid $1,000 for rent.

• It touches two accounts: Cash and Rent expense.
• Cash goes down — money left the business. Cash is an asset, so a decrease is a credit.
• Rent expense goes up — that’s what the money was for. Expenses increase with a debit.

Written as a journal entry:

Account	Debit	Credit
Rent expense	$1,000
Cash		$1,000

Debits ($1,000) equal credits ($1,000). The entry balances. It reduces cash and recognizes rent expense for the period; both effects are on the record.

Example 2 — receiving payment for a cash sale

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What happened: a customer paid the business $2,000 for a cash sale.

• It touches Cash and Revenue.
• Cash goes up — money arrived. Cash is an asset, so an increase is a debit.
• Revenue goes up — that’s where the money came from. Revenue increases with a credit.

Account	Debit	Credit
Cash	$2,000
Revenue		$2,000

Again, debits equal credits, and the money has a clear source and destination. Notice that Cash was debited this time and credited last time — same account, opposite directions, depending on whether money came in or went out. If the payment settles an earlier invoice, the credit is to Accounts Receivable rather than Revenue.

See also in Core Banking

In a ledger system a journal entry becomes a transaction made of operations — see How money moves and The building blocks.

In short

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• A journal entry is how you actually record a transaction: which accounts, how much, and which side each is on.
• Follow the same steps every time — name the event, find the two accounts, decide up or down, translate to debit/credit, then check that the two sides balance.
• The iron rule never changes: debits must equal credits, which is what keeps every entry — and the whole ledger — trustworthy.

Next up

Every entry posts to an account — but where does that list of accounts come from? Meet the Chart of accounts.