How to use the journal entry builder
- Choose A common transaction and pick one from the list, such as a cash sale or buying equipment. Enter the amount in dollars and cents. A few transactions take a second amount, such as the cost of goods or sales tax collected.
- Or choose My own lines and enter an account name with either a debit or a credit on each line. The two sides must add up to the same total.
- Optionally add a date and a description. They appear in the table title.
- Read the entry, with debits first and credits indented below. Use Copy, Print or CSV to keep it.
Formula
Total debits = total credits
Assets and expenses increase with a debit
Liabilities, owner equity and revenue increase with a credit
This is the double entry rule: every transaction is recorded with equal debits and credits. Amounts are handled in whole cents, so the totals are exact.
A cash sale
A $500 cash sale increases cash, an asset, so you debit Cash $500. It also increases revenue, so you credit Sales Revenue $500. Total debits and total credits are both $500.
A sale of $500 with goods that cost $300 adds a second pair of lines: debit Cost of Goods Sold $300 and credit Inventory $300. A cash sale of $100 with $8.25 of sales tax collected debits Cash $108.25, credits Sales Revenue $100.00 and credits Sales Tax Payable $8.25. The tax amount is whatever you enter, since rates vary by place.
Debits and credits in plain terms
A debit is an entry on the left side of an account and a credit is an entry on the right side. Neither means good or bad. Which one increases an account depends on the kind of account. Assets, such as cash and equipment, and expenses grow with debits. Liabilities, such as loans and bills you owe, and equity and revenue grow with credits.
Because every entry has equal debits and credits, the accounting equation stays in balance: assets equal liabilities plus equity. The tool checks the balance for entries you write yourself and tells you the difference when they do not match.
Using the entry in your books
The account names are plain examples. Rename them to match your chart of accounts when you copy the entry into a ledger or accounting software. Some businesses use more detailed accounts, for example separate revenue accounts for each product.
This tool shows a standard way to record each transaction and does not give accounting or tax advice. Your accountant may treat a transaction differently. For related documents, see the invoice generator, the expense report generator and the profit and loss statement generator. For depreciation amounts, the depreciation calculator helps.
Assumptions and limits
- Amounts are in dollars and cents with at most two decimals, and entries are checked in whole cents.
- Common transactions use plain account names, such as Cash and Sales Revenue, that you can rename.
- Sales tax, interest and other amounts are values you enter. No rates are built in.
- Each custom line has either a debit or a credit, not both. Lines with no amount are ignored.
Frequently asked questions
What is a journal entry?
A record of a transaction in the books, listing the accounts affected and the amounts debited and credited. Every entry must have equal debits and credits.
Why do debits come first?
It is the usual convention. Debit lines are written first and credit lines are indented beneath them, which makes entries easy to read.
What if my own entry does not balance?
The tool shows the total of each side and the difference, and does not create an entry until the sides match.
Does it work for tax or payroll entries?
You can enter any accounts and amounts yourself in the custom mode, but the tool does not know tax rules or payroll rates. Ask your accountant about those.