How to Write a Journal Entry: The 4-Question Method for Debits and Credits, With 6 Solved Exercises

Mazen has just bought SAR 8,000 of chargers and phone cases on credit, and he opens his journal wondering which of the two accounts is the debit. Work out which accounts changed, what type each one is and whether it went up or down: increases in assets and expenses are debits, increases in liabilities, capital and revenue are credits, and the two sides always total the same. Here inventory, an asset, increased, so it is debited 8,000, and the amount owed to the supplier, a liability, increased, so the supplier is credited the same amount.

Those four questions handle most transactions in a small shop, with no need to memorize lists of ready-made entries. If the meaning of debit and credit itself still feels fuzzy, start with the difference between debit and credit, with everyday examples.

The method: four questions before you write a number

First describe the transaction in a plain sentence, such as "I paid the shop rent in cash." Then answer these in order:

1. Which accounts changed? Every transaction touches at least two.
2. What type is each account? Asset, liability, equity, revenue or expense.
3. Did each account increase or decrease? The type and the direction together give you the side, using the table below.
4. Do total debits equal total credits? If not, check the entry again.

All you really need to remember is that assets and expenses increase with debits and the other three types work the opposite way, as OpenStax explains when analyzing transactions.

The journal entry layout

An entry always follows the same order, also shown in OpenStax's guide to recording journal entries: the date, the debit account and amount, the credit account and amount, then a description that names, for example, the customer and the invoice number. Here is the first exercise in full:

Arabic textbooks read this entry as "from Cash account to Capital account." The account after "from" is the debit and is written first; the account after "to" is the credit and goes on the next line. English-language books show the same thing by listing the debit first and indenting the credit beneath it. When an entry has several debit accounts, Arabic books write "from the following" and list them; with several credit accounts, they write "to the following."

Six solved exercises from a phone-accessories shop

The shop belongs to Mazen, amounts are in Saudi riyals, and the exercises follow one another over a single month.

Exercise 1: Mazen puts his capital into the cash box

On opening day, Mazen puts 20,000 of his own money into the shop's cash box.

Cash and capital changed. Cash is an asset that increased, so it is debited. Capital is equity that increased, so it is credited. The sides are 20,000 and 20,000, and the reasoning is covered in is capital a debit or credit?

Exercise 2: buying stock from a supplier on credit

Mazen buys chargers and cases worth 8,000 from a wholesaler and agrees to pay later.

Inventory and the supplier's account changed. Inventory is an asset that increased, so it is debited. The supplier is a liability that increased, so it is credited. The sides are 8,000 and 8,000. If you use a Purchases account instead of Inventory, it is debited too, as shown in how purchase entries work.

Exercise 3: a cash sale in the shop

Mazen sells earphones and cases for 1,500 and is paid in cash.

Cash and sales changed. Cash is an asset that increased, so it is debited. Sales is revenue that increased, so it is credited. The sides are 1,500 and 1,500. If you track inventory with every sale, a second entry records the cost of the items sold.

Exercise 4: paying part of the supplier's balance

Mazen pays the supplier 5,000 in cash out of the 8,000 he owes.

The supplier's account and cash changed. The supplier is a liability that decreased, so it is debited. Cash is an asset that decreased, so it is credited. The sides are 5,000 and 5,000, and 3,000 is still owed to the supplier.

Exercise 5: paying the month's rent

Mazen pays the shop's October rent of 2,500 in cash.

Rent expense and cash changed. The expense increased, so it is debited. Cash is an asset that decreased, so it is credited. The sides are 2,500 and 2,500.

Exercise 6: a customer pays an old debt

Two weeks ago Mazen sold a customer a charger on credit for 600, and the sale was recorded that day. Today the customer pays the amount in cash.

Cash and the customer's account changed, and both are assets. Cash increased, so it is debited. The amount the customer owes decreased, so it is credited. The sides are 600 and 600, and sales do not move because they were recorded on the day of the sale.

After the six exercises, cash stands at 20,000 + 1,500 − 5,000 − 2,500 + 600 = 14,600, and 3,000 is still owed to the supplier. If you count the drawer and find a different figure, a transaction was either missed or recorded with the wrong amount.

Three mistakes beginners make

1. Starting with the person instead of the account: in Exercise 4 the supplier received the money, yet his account is debited, because what Mazen owes him went down.
2. Treating every cash receipt as revenue: record the payment in Exercise 6 as sales and the 600 sale shows up twice.
3. Assuming every account increased: debiting cash when paying rent gives an entry that still balances, but it puts cash 5,000 above its real figure.

The third mistake is the most dangerous because a balanced total will not reveal it, as why your trial balance doesn't balance explains alongside how to hunt down differences.

Zawid Accounts records what happened, not the journal entry

Zawid Accounts does not ask you to write "from account... to account...", and it does not post double-entry journals or produce a trial balance. You record what happened in shop terms: a payment to a supplier, an expense or a payment from a customer, in the treasury account involved.

So the payment in Exercise 6 is recorded against the customer's account, as in the debt and partial payment guide, and the rent as an expense, as in the guide to recording an expense. The four questions still help when you read a supplier statement or review entries your accountant prepares.