Journal Entries
Journal entries are the foundation of the accounting cycle. Learn how to record business transactions with proper debits and credits, including compound entries and adjusting entries.
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Study Tips
- ✓Remember: Debits increase assets and expenses, credits increase liabilities, equity, and revenue (DEALER)
- ✓Always ensure debits equal credits before moving on
- ✓Practice with real-world transaction scenarios
- ✓Understand the 'why' behind each entry, not just the mechanics
Common Mistakes to Avoid
The most common mistakes in journal entries include reversing debits and credits, forgetting to record all parts of a compound entry, and mixing up expense vs. asset classification. Always verify the accounting equation balances after each entry.
Journal Entries FAQs
Common questions about journal entries
A journal entry is the formal recording of a business transaction in the accounting records. It includes the date, accounts affected, amounts (debits and credits), and a brief description of the transaction.
Use the DEALER acronym: Debits increase Dividends, Expenses, and Assets. Credits increase Liabilities, Equity, and Revenue. When one account increases, another must decrease to keep the equation balanced.
A compound journal entry involves more than two accounts in a single transaction. For example, purchasing inventory with cash and credit would debit Inventory and credit both Cash and Accounts Payable.
Related Topics
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