Accounting Journal Entries — The Complete Guide
A journal entry is the foundation of every accounting record. Whether you are a student, business owner, or accounting professional, understanding how to record journal entries correctly is essential for maintaining accurate financial books.
In this guide, we cover everything from the basics of journal entries to advanced formats, Tally entries, interview questions, and UK-specific accounting treatments.
What Is a Journal Entry in Accounting?
A journal entry is a formal record of a financial transaction in the books of accounts. Every transaction affects at least two accounts — one is debited and the other is credited — following the Double Entry System of Accounting.
| Golden Rule: For every debit, there must be an equal and corresponding credit. Total debits must always equal total credits. |
3 Golden Rules of Accounting — Quick Reference
Journal entries are governed by the three golden rules of accounting:
- Personal Account: Debit the Receiver, Credit the Giver
- Real Account: Debit What Comes In, Credit What Goes Out
- Nominal Account: Debit All Expenses and Losses, Credit All Incomes and Gains
Journal Entry Format
| Date | Particulars | L.F. | Debit (£) |
| 01 Jan 2026 | Cash A/c Dr. | To Capital A/c | – | £10,000 |
| 05 Jan 2026 | Purchases A/c Dr. | To Cash A/c | – | £2,500 |
| 10 Jan 2026 | Salary A/c Dr. | To Bank A/c | – | £5,000 |
Types of Journal Entries with Examples
1. Simple Journal Entry
A simple journal entry involves only two accounts — one debit and one credit.
| Example: Paid rent £1,200 by bank transfer. |
| Rent A/c Dr. £1,200 |
| To Bank A/c £1,200 |
2. Compound Journal Entry
A compound journal entry involves more than two accounts in a single transaction.
| Example: Purchased goods worth £5,000 — paid £2,000 by cash, £3,000 on credit. |
| Purchases A/c Dr. £5,000 |
| To Cash A/c £2,000 |
| To Creditors A/c £3,000 |
3. Reversing Journal Entry
A reversing entry is made at the beginning of the new accounting period to reverse a specific adjusting entry from the prior period. It prevents double-counting of accrued income or expenses.
| Example: Accrued salary of £3,000 recorded in December. Reversed on 1 January: |
| Salary Payable A/c Dr. £3,000 |
| To Salary Expense A/c £3,000 |
4. Adjusting Journal Entry
Adjusting entries are made at the end of an accounting period to ensure income and expenses are recorded in the correct period (accrual basis).
5. Opening & Closing Entries
Opening entries are passed at the start of a new financial year to bring forward balances. Closing entries are passed at year-end to close nominal accounts (revenue & expense) to the profit and loss account.
Journal Entries for Common Business Transactions
Journal Entry for Depreciation
| Depreciation A/c Dr. £X |
| To Accumulated Depreciation A/c £X |
| (Being depreciation charged on fixed asset for the year) |
Depreciation reduces the book value of an asset over its useful life. In UK accounting, the straight-line and reducing balance methods are most commonly used.
Journal Entry for Salary
| Salary A/c Dr. £X |
| To Bank A/c / Salary Payable A/c £X |
Journal Entry for Drawings
When an owner withdraws cash or goods from the business for personal use:
| Drawings A/c Dr. £X |
| To Cash / Bank / Stock A/c £X |
For a full explanation of drawings and their treatment, see our guide on Drawings in Accounting.
Journal Entry for Purchase
| Purchases A/c Dr. £X |
| To Cash A/c £X (cash purchase) |
| To Creditors A/c £X (credit purchase) |
Journal Entry for Sales
| Cash / Debtors A/c Dr. £X |
| To Sales A/c £X |
Journal Entry for VAT (UK)
| Purchases A/c Dr. £X (net) |
| Input VAT A/c Dr. £X (VAT amount) |
| To Creditors A/c £X (gross) |
| For sales: |
| Debtors A/c Dr. £X (gross) |
| To Sales A/c £X (net) |
| To Output VAT A/c £X (VAT amount) |
Journal Entry in Tally Prime — Step-by-Step
Tally Prime is widely used in India and by UK businesses with Indian operations. Here is how to record journal entries in Tally Prime:
- Open Tally Prime and go to Gateway of Tally
- Select Accounting Vouchers > F7: Journal
- Enter the date of the transaction
- In the ‘Account’ field, select the account to debit and enter the amount
- Press Enter and select the account to credit
- Add narration describing the entry and press Enter to save
| Shortcut: In Tally Prime, press F7 from the voucher screen to directly open the Journal Voucher entry screen. |
7 Types of Journals in Accounting
- Sales Journal — Records all credit sales
- Purchase Journal — Records all credit purchases
- Cash Receipts Journal — Records all cash received
- Cash Payments Journal — Records all cash paid
- Sales Returns Journal — Records goods returned by customers
- Purchase Returns Journal — Records goods returned to suppliers
- General Journal — Records all other transactions not in the above journals
Basic Journal Entries for Accounting Interviews
These are the most frequently asked journal entry questions in accounting interviews in the UK and India:
|
Scenario |
Debit |
Credit |
| Started business with capital | Cash/Bank A/c | Capital A/c |
| Purchased goods on credit | Purchases A/c | Creditors A/c |
| Received payment from debtor | Cash/Bank A/c | Debtors A/c |
| Paid salaries | Salary A/c | Bank A/c |
| Charged depreciation | Depreciation A/c | Asset A/c |
| Owner withdrew cash | Drawings A/c | Cash A/c |
| Sold goods for cash | Cash A/c | Sales A/c |
| Accrued expenses | Expense A/c | Accrued Liabilities A/c |
| Prepaid expenses | Prepaid Expense A/c | Cash A/c |
| Bad debts written off | Bad Debts A/c | Debtors A/c |
Frequently Asked Questions — Journal Entries
Q: What are the 3 golden rules for journal entries?
A: The three golden rules are: (1) Personal Account — Debit the Receiver, Credit the Giver; (2) Real Account — Debit What Comes In, Credit What Goes Out; (3) Nominal Account — Debit All Expenses and Losses, Credit All Incomes and Gains.
Q: What is the difference between a journal entry and a ledger entry?
A: A journal entry is the first record of a transaction (book of original entry), while a ledger entry is the posting of that transaction to individual account heads (book of final entry). Every journal entry is posted to the ledger.
Q: How do you record a journal entry in QuickBooks?
A: In QuickBooks Online, go to +New > Journal Entry. Enter the date, select the accounts to debit and credit, enter amounts, add a memo, and click Save.
Q: What is a reversing journal entry and when is it used?
A: A reversing entry is made on the first day of a new accounting period to cancel out an adjusting entry made in the previous period. It is used for accrued income and expenses to avoid double counting.
Q: How many types of journal entries are there?
A: The main types are: Simple, Compound, Adjusting, Closing, Opening, and Reversing journal entries. In accounting books, special journals include Sales, Purchase, Cash Receipts, and Cash Payments journals.
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