---
title: "Journal entry examples | Ledgerbrook"
source: https://ledgerbrook.com/blog/journal-entry-examples/
description: "Twenty-three worked entries with the debits, the credits, and the question that decides which account each belongs in."
---

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# Journal entry examples

September 5, 2026 · [Omkar Moraye](/about/)

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## How do you write a journal entry?

A journal entry records a transaction in 5 parts: the date, the account debited, the account credited, equal amounts on each side, and a description of why. Total debits must equal total credits. For example, paying $1,800 for a year of insurance debits Prepaid Insurance $1,800 and credits Checking $1,800.

## The anatomy, once, using money that actually moved

A business pays $1,800 on April 1 for a year of liability insurance.

| Date | Account | Debit | Credit |
| --- | --- | --- | --- |
| Apr 1 | Prepaid insurance | 1,800.00 | |
| Apr 1 | Checking | | 1,800.00 |

Five things are present and none of them is optional. The date, because an entry posted to the wrong month moves profit between periods. The account debited and the account credited, one on each side. The amounts, equal in total. And, though it does not appear in the table, a description saying what this was, because in eleven months somebody will ask.

Notice what the entry does not say. It does not say “insurance expense,” even though the money left for insurance. On April 1 the business has not used any of the coverage yet. It has bought twelve months of protection, which is a thing it owns, and things you own are assets. The expense arrives later, $150 at a time.

That gap between where the money went and where the entry goes is the whole subject. Everything below is a variation on it.

## The two questions that decide every entry

Forget debits and credits for a second. They are bookkeeping’s worst piece of vocabulary and they mean nothing in English.

Ask instead: what did the business get, and what did it give up?

The business got a prepaid asset. It gave up cash. What you got is the debit. What you gave up is the credit. That holds for the overwhelming majority of entries a small business will ever need, and when it does not hold, it is because the thing given up was a promise rather than an asset, which is a liability going up rather than an asset going down.

The second question only comes up on the awkward entries: did anything actually happen in the real world this month? Depreciation, accruals and amortization all answer no. No money moved and no invoice arrived. Those are the entries the software will never write for you, because there is nothing for it to detect, and they are most of the reason this page exists.

## Twenty-three entries, worked

Amounts are illustrative. The account names match a default QuickBooks Online chart of accounts closely enough to find, and the pairings do not change with the amounts.

| Transaction | Debit | Credit |
| --- | --- | --- |
| Owner puts $10,000 into a new business | Checking 10,000 | Owner’s equity 10,000 |
| Cash sale of $600 | Checking 600 | Sales income 600 |
| Invoice a customer $2,400 | Accounts receivable 2,400 | Sales income 2,400 |
| Customer pays that invoice | Checking 2,400 | Accounts receivable 2,400 |
| Subcontractor bills $1,500 on net 30 | Subcontractor expense 1,500 | [Accounts payable](/blog/journal-entry-for-accounts-payable/) 1,500 |
| Pay that bill | Accounts payable 1,500 | Checking 1,500 |
| Buy $5,000 of inventory on account | [Inventory asset](/blog/journal-entry-for-inventory/) 5,000 | Accounts payable 5,000 |
| Buy a $12,000 machine with cash | Machinery & equipment 12,000 | Checking 12,000 |
| Monthly depreciation on it | [Depreciation expense](/blog/journal-entry-for-depreciation/) 200 | Accumulated depreciation 200 |
| Sell that machine after 40 months for $5,000 | Checking 5,000 and accumulated dep 8,000 | Machinery & equipment 12,000 and [gain on disposal](/blog/journal-entry-for-disposal-of-asset/) 1,000 |
| Pay $1,800 for a year of insurance | [Prepaid insurance](/blog/journal-entry-for-prepaid-expenses/) 1,800 | Checking 1,800 |
| One month of that coverage used | Insurance expense 150 | Prepaid insurance 150 |
| December contractor work, invoiced in January | Subcontractor expense 2,000 | [Accrued liabilities](/blog/journal-entry-for-accrued-expenses/) 2,000 |
| Reverse that accrual on January 1 | Accrued liabilities 2,000 | Subcontractor expense 2,000 |
| Payroll gross $8,000, net pay $6,100 | Wages expense 8,000 | Checking 6,100 and payroll liabilities 1,900 |
| Remit the withholding | Payroll liabilities 1,900 | Checking 1,900 |
| Client pays a $12,000 annual retainer up front | Checking 12,000 | [Deferred revenue](/blog/journal-entry-for-deferred-revenue/) 12,000 |
| One month of that work delivered | Deferred revenue 1,000 | Service revenue 1,000 |
| Take a $20,000 loan | Checking 20,000 | Notes payable 20,000 |
| Loan payment of $430, of which $80 is interest | Notes payable 350 and interest expense 80 | Checking 430 |
| Write off a $1,200 invoice that will never pay | [Bad debt expense](/blog/journal-entry-for-bad-debt/) 1,200 | Accounts receivable 1,200 |
| Owner takes $3,000 out | Owner’s draw 3,000 | Checking 3,000 |
| Corporation declares and pays a $10,000 dividend the same day | [Dividends declared](/blog/journal-entry-for-dividends/) 10,000 | Checking 10,000 |

Eleven of those are worth pulling apart because they are where files go wrong in practice. Nine have their own guide:

| Entry | What usually goes wrong | Guide |
| --- | --- | --- |
| Vendor bills | Bill entered, then the bank payment added again instead of matched, so the expense counts twice | [Accounts payable](/blog/journal-entry-for-accounts-payable/) |
| Depreciation | The asset account credited directly, so original cost disappears | [Depreciation](/blog/journal-entry-for-depreciation/) |
| Selling or scrapping an asset | Proceeds booked as income while the asset stays on the balance sheet | [Asset disposal](/blog/journal-entry-for-disposal-of-asset/) |
| Accrued expenses | Accruals that never reverse, so the bill is expensed twice | [Accrued expenses](/blog/journal-entry-for-accrued-expenses/) |
| Prepaid expenses | Released for a few months, then forgotten on the balance sheet | [Prepaid expenses](/blog/journal-entry-for-prepaid-expenses/) |
| Deferred revenue | Retainers booked as income the day they arrive | [Deferred revenue](/blog/journal-entry-for-deferred-revenue/) |
| Inventory | Stock purchases expensed, or journal entries that split the item list from the ledger | [Inventory](/blog/journal-entry-for-inventory/) |
| Bad debt | Invoices left open for years, and sales tax never reclaimed | [Bad debt](/blog/journal-entry-for-bad-debt/) |
| Dividends | Payouts to owners coded as expenses on the profit and loss | [Dividends](/blog/journal-entry-for-dividends/) |

The other two, the loan payment and the owner’s draw, are short enough to cover here.

## The loan payment, because almost everyone gets it wrong

A $430 payment leaves the checking account every month. The bank feed shows one line, $430, and whoever is categorizing it picks one account. Usually interest expense, sometimes loan payment, occasionally a made-up account called “loan.”

Only $80 of it was interest. The other $350 repaid principal, which is not an expense at all, it is a liability going down. Coding the whole payment to interest overstates expenses by $350 a month and leaves the loan balance on the balance sheet frozen at $20,000 forever, which is how you end up owing a bank $12,000 and showing $20,000 on the books.

The split changes every month, which is why this cannot be a rule in the bank feed. The amortization schedule from the lender has the two numbers on it. That schedule, not the bank feed, is the source document for this entry.

## The owner’s draw, because it is not payroll and it is not an expense

Money the owner takes out of a sole proprietorship or a partnership is a draw. It reduces equity. It never touches the profit and loss, and it is not deductible, and coding it to contract labor or to wages produces a tax return that is wrong in a way that is expensive to be wrong about.

An S corporation is different, because the owner is genuinely an employee and genuinely gets a wage, and then also takes [distributions](/blog/journal-entry-for-dividends/). Both exist, and they are two different entries. If one of your clients is an S corp and there is no wages expense anywhere in the file, that is not a bookkeeping question, it is a conversation to have before the return is filed.

Money a corporation lends its owner, or borrows from them, is neither a draw nor a distribution. It sits on the balance sheet as a [shareholder loan](/blog/shareholder-loan/) until it is repaid.

## Most entries in QuickBooks Online should never be typed as journal entries

This is the part the textbooks leave out, and it is the practical difference between knowing the accounting and keeping a file someone else can work in.

Every form in QuickBooks Online writes a journal entry behind the scenes. An invoice debits accounts receivable and credits income. A bill credits accounts payable. A received payment moves money out of receivables and into the bank or into Payments to deposit (the account QuickBooks used to call Undeposited Funds). The entries in the table above are what the software is already doing.

So when you write a manual journal entry against accounts receivable or accounts payable, you create a balance that no invoice and no bill explains. The aging report and the general ledger now disagree, and nothing in QuickBooks will warn you. The customer shows a balance with no open invoice behind it. Whoever cleans this up later, which is often me, has to work out what the entry was for from a memo field written by someone who has left.

The rule I work to, on other people’s files:

- Never journal against [accounts receivable](/blog/journal-entry-for-bad-debt/) or [accounts payable](/blog/journal-entry-for-accounts-payable/). Use a credit memo, an invoice, a bill, or a vendor credit, so the sub-ledger stays intact.
- Never journal against [inventory](/blog/journal-entry-for-inventory/) in a file that uses inventory items. The item quantities and the asset account will separate and they do not come back together on their own.
- Never journal against a bank account to force a reconciliation. That is the plug entry described in [the reconciliation piece](/blog/bank-reconciliation-explained/), and it makes the difference permanent rather than fixing it.
- Do journal accruals, deferrals, [depreciation](/blog/journal-entry-for-depreciation/), [asset disposals](/blog/journal-entry-for-disposal-of-asset/), amortization, and payroll from an outside provider. Those are the entries no form represents.

## What a good entry leaves behind

Someone will read this entry who was not there when it was made. Possibly a reviewer, possibly a tax preparer in March, possibly you in two years.

Write the description as a sentence, not a code. “Dec contractor accrual, invoice #4471 received Jan 8” survives being read cold. “AJE 12” does not. Attach the document if there is one, because QuickBooks Online lets you attach a file to a journal entry and almost nobody does. And date it to the period it belongs in rather than the day you typed it, which is the single most common reason a December entry lands in January and moves profit into the wrong year.

One more: if you are posting the same adjusting entry every month, and the amount is stable, make it recurring. The entry that gets forgotten is the one that is manual, and the month it gets forgotten is the month someone is reading the statements.

## When the entries are already wrong

Most of what shows up in a file that needs work is not a missing entry. It is entries that exist, balance perfectly, and point at the wrong accounts. A loan amortized entirely to interest. A prepaid that was expensed on day one. Draws in contract labor. All of them reconcile, because the cash moved exactly as recorded, and all of them produce financial statements that do not describe the business.

Fixing that means walking the general ledger account by account rather than the bank feed line by line, which is [cleanup](/quickbooks-cleanup/) work and is priced by how many months back the problem runs:

$99per month of backlog20% off 6+ months

Once the file is right, the adjusting entries on this page are part of what a [monthly close](/monthly-bookkeeping/) does before the statements go out. Both are on the [pricing page](/pricing/) with real numbers, and if you are not sure which one your file needs, [send it for a free review](/contact/?from=blog%2Fjournal-entry-examples).

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Published September 5, 2026 · Updated October 3, 2026

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