Key takeaways
- Every journal entry must balance: total debits equal total credits.
- Expenses increase with a debit. Paying from the bank or charging a card is the credit side.
- Adjusting entries at month or year end record expenses that don’t match a payment date, like prepaid insurance or depreciation.
- Attach or reference the receipt so every entry is easy to verify later.
What is a journal entry?
A journal entry is how a transaction gets into your books. You buy something, you get a receipt, and the journal entry translates it into accounting language: which accounts went up, which went down, and by how much.
In double-entry bookkeeping, every entry touches at least two accounts. That’s not extra work for the sake of it. It’s a built-in check: if debits and credits don’t match, something is wrong.
Keep the receipt behind every journal entry with the Manage Receipt app.
Journal entry format
A standard entry has five parts:
| Date | Account | Debit | Credit |
|---|---|---|---|
| Sep 5 | 6300 Software and subscriptions | $86.40 | |
| 1000 Checking | $86.40 | ||
| Memo: Monthly design software, paid by debit card. Receipt #4471. | |||
By convention the debit line comes first and the credit line is indented or listed below. The memo explains the business purpose and points to the source document.
Debits increase expense and asset accounts. Credits increase liability, equity and income accounts. So an expense is almost always a debit, and the money leaving (bank) or the debt growing (credit card) is the credit.
Expense journal entry examples
1. Client lunch on a business credit card
| Account | Debit | Credit |
|---|---|---|
| 6500 Meals | $72.50 | |
| 2000 Business credit card | $72.50 |
When you later pay the card bill, debit the credit card account and credit checking. That payment isn’t a new expense; the expense was recorded at the meal.
2. Business expense paid with personal money
| Account | Debit | Credit |
|---|---|---|
| 6450 Travel (parking) | $45.00 | |
| 3000 Owner contributions | $45.00 |
The receipt is still a business cost. The credit shows that you, the owner, put money into the business. If the business reimburses you later, debit owner contributions and credit checking.
3. One receipt, business and personal items
| Account | Debit | Credit |
|---|---|---|
| 6250 Office expense | $90.00 | |
| 3100 Owner draws | $30.00 | |
| 2000 Business credit card | $120.00 |
A $120 receipt with $90 of supplies and $30 of personal items. Only the business part is an expense. Total debits ($120) equal total credits ($120).
Adjusting entries
Adjusting entries are made at the end of a month or year so expenses land in the period they belong to, mostly under accrual accounting. Common ones:
- Prepaid expenses. You pay $1,200 in January for a year of insurance: debit Prepaid insurance $1,200, credit Checking $1,200. Each month, debit Insurance expense $100 and credit Prepaid insurance $100.
- Accrued expenses. December’s $140 internet bill arrives in January: debit Utilities $140, credit Accrued expenses $140 in December.
- Depreciation. Spread the cost of equipment over its useful life with a monthly or yearly entry.
Each entry is posted to the general ledger, where the account balances build up into your reports.
Turn receipts into ready-to-post entries
Manage Receipt extracts the vendor, date, total and line items from every receipt and assigns a category, so you know the debit account and amount before you open your books. Expense reports bundle the receipts as backup for each entry.
Explore AI Expense ReportsFrequently asked questions
How do you record an expense in a journal entry?
Debit the expense account, such as Office expense or Meals, for the receipt total. Credit the account the money came from: Checking for a debit card or bank payment, the credit card account for a card charge, or Owner contributions if you paid personally. Add a memo and receipt reference.
What is the difference between a journal and a ledger?
A journal records transactions in date order, each one in full with all the accounts it touches. A ledger organizes the same information by account, showing each account’s history and running balance. Entries are recorded in the journal first and then posted to the ledger.
What is an adjusting journal entry?
An adjusting entry is made at the end of a period to record income or expenses in the right month or year when the payment date doesn’t match. Examples include using up prepaid insurance, recording bills owed but not yet paid, and recording depreciation.
Do I need to make journal entries myself?
Usually not. Most accounting software creates the journal entries automatically in the background when you record a bill, expense or payment. You may need manual entries for adjustments, corrections, owner contributions or year-end items, and an accountant often reviews or makes those for you.