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Accounting Diary Entries: Definition, Examples, and Instructions

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Every transaction that your company conducts necessitates the creation of journal entries. They collect transactions and convert them into data. You and your bookkeeper or accountant can use that data to generate financial reports and file taxes.

Here’s all you need to know about this crucial bookkeeping-building component. What it is, why it’s necessary, and how to make it

What exactly is a journal entry?

Journal entries are used to keep track of financial transactions. You enter transaction details into your company’s books to make a journal entry. Your journal entries are entered into the general ledger in the second step of the accounting cycle.

Every general ledger journal entry will include the transaction date, amount, and description. The journal entry may also list the affected accounts with their account numbers, a reference number like a check number, and a short transaction description.

If you use accounting software or hire someone else to do your accounting, your journal entries might need to be seen. They are generated on the back end, ensuring your accounts are accurate and up-to-date.

What is the purpose of journal entries?

When business transactions are recorded in accounting journals, they are posted to the general ledger. Consider “posting” synonymous with “summarizing”—the general ledger summarizes your journal entries.

The general ledger serves as the foundation for your financial reporting. It’s used to create financial statements such as your income statement, balance sheet, and cash flow statement.

Financial statements are essential for tracking your company’s performance and correctly completing your taxes. They allow you to see how your firm is performing at a glance.

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Maximizing Your Financial Business Success with an Accounting Firm

How Countick Can Assist

It is time-consuming to go through each transaction and make diary entries. But with Countick, a qualified bookkeeper enters and evaluates the data from your transactions. You no longer have to enter journal entries by hand, guess how to classify transactions or look for missing data. Everything is done for you. 

Double-entry Bookkeeping

There are two types of bookkeeping (and thus two methods of making journal entries): single-entry and double-entry.

Consider double-entry accounting as a GPS that shows you both the origin and the destination. It will demonstrate where the money is coming from and where it is going.

Single-entry Bookkeeping is far more straightforward. Make a note of any money you spend on office supplies. Make a note of any sales you make. The account that funded the purchase or the account into which the sale was deposited is not required to include.

Double-entry bookkeeping is the most frequent type of bookkeeping nowadays. We’ll use double-entry examples to demonstrate how journal entries function.

Find out more.

The Power of Double Entry Bookkeeping for Business Owners

Common journal examples

Your business type will determine the specific journals you use for bookkeeping. They are divided into two categories: general journals and special journals.

The general journal contains entries that do not fit into your special diaries, such as interest income or expenses. 

It can also be used to keep track of altering entries.

Special journals, often known as accounts, are used in your accounting system to record everyday, day-to-day transactions. Your chart of accounts contains a list of all of your special journals. Account names that are commonly used include:

  • Sales: Income from sales 
  • Accounts receivable: money owing to you
  • Cash receipts: money received 
  • Sales returns: money reimbursed 
  • Purchases: money paid 
  • Accounts payable: money owed
  • Equity consists of retained earnings and the owners’ investment.

Exemplifications of journal entries

You’ve got a lot on your plate today. You will meet with a client, get some office supplies, and make a loan payment at the bank.

A customer pays you for an invoice.

When you see your client, they pay the $600 invoice you gave them.

Cash Journal 

Date Description Debit  Credit
Nov. 3/23 Invoice #123 $600


Date indicates when the entry was made.


includes important notes so you know where the money is coming from and where it is going. It’s the invoice number in this scenario.


$600 has been deposited into your cash account.


Notes money going out of cash. There is no money being paid out in this case.

This entry would be made concurrently with another in accounts receivable (aka money clients owe you) ledger entry.

Accounts Receivable Journal

Date Description Debit  Credit
Nov. 3/23 Invoice #123 $600


Because the money is being deducted from accounts receivable—your client no longer owes you $600—it is now recorded as a credit (written in parentheses). The credit and debit amounts are the same in this case.

You purchased some office supplies.

You stopped returning from your client meeting to pick up $100 in office supplies.

Cash journal

Because money entered the cash account when the invoice was paid, we recorded it as a debit. But now that money is leaving the account, we credit it for the departing amount.

Date Description Debit  Credit
Nov. 3/23 Office Supplies ($100)

Journal of Expenses

Every action has an equal and inverse reaction, and every credit has an equal and inverse debit. We must debit the expense account because we credit the cash account.

Date Description Debit  Credit
Nov. 3/23 Office Supplies $100

You make a loan payment to your bank.

Ultimately, you make a stop at the bank to pay your loan. When you make a loan payment, a portion goes toward the loan balance. The rest goes toward the interest charge. This is referred to as loan principal and interest.

A compound entry is demonstrated here. This occurs when the debit or credit amount consists of many lines.

Consider a $1,000 payment, with $800 going toward the loan total and $200 going toward interest.

cash journal

We report the $1,000 exiting the account on the cash side (a credit).

Date Description Debit  Credit
Nov. 3/23 Loan payment ($1,000)

Expense Journal

In the expense journal, we separate the amount spent on interest from the amount spent to lower the balance.

Date Description Debit  Credit
Nov. 3/23 Loan payment-Interest $200

Loan Journal

Lastly, we record a debit for the amount applied to the principle.

Date Description Debit  Credit
Nov. 3/23 Loan payment-Principal  $800

Lastly, the amount put towards the principal is recorded as a debit.

The debit was divided into two lines here: the interest amount and the principal amount.

Accounting closing entries

Wipe away your Income and spending diaries at the end of the fiscal year, generally known as “closing the books.” You may start a new year with no carryover income or expenses.

But you can’t just throw away all that money; it must go somewhere. Thus, when it’s time to shut, you open a new account named income summary and transfer the funds there.

Here’s an illustration of how that might look.

Then, credit all funds from your asset accounts. In this case, the only asset is cash:

Sales Revenue Journal 

Date Description Debit  Credit
December. 3/23 Year total  $12,000

Close Income Accounts and Return to Income Summary

Finally, from your expense accounts, credit all of your spending. For the sake of this example, only accounts payable are included.

Expense Journal


Date Description Debit  Credit
December. 3/23 Year total $3,000

Close Expenditure Accounts and Return to Income Summary

Following that, the income summary journal will look like this:

Income Summary Journal

Date Description Debit  Credit
Nov. 31/23 Income Expense  $12,000
Expense total $3,000
Total income $9,000

Making changes to journal entries

If you employ accrual accounting, you must adjust journal entries monthly.

Adjusting entries guarantees that each accounting period’s expenses and revenue are consistent, resulting in an accurate balance sheet and income statement. 

The preceding material overviews how journal entries work when you complete your bookkeeping by hand. 

Nonetheless, the majority of people nowadays utilize accounting software to record transactions. The following processes still apply when using accounting software. However, the accounting program handles the specifics behind the scenes. 

Some small company entrepreneurs enjoy keeping a journal. The vast majority do not. 

If you belong to the second category, let Countick take over your bookkeeping.

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