Student Academic Learning Services
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Accounting: Journal Entries
A Student Academic Learning Services Guide
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905.721.2000 ext. 2491
This document last updated: 7/21/2011
Student Academic Learning Services
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Journal Entries
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Journal entries are used to record financial transactions.
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They are made in the General Journal.
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Journal entries are made on a daily basis as transactions occur, at the end of the
accounting period for adjusting entries, and also for closing entries.
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The generic format of the General Journal is…
Date
Titles & Explanation
PR
Dr
Cr
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The Date column is used to record the date of the transaction.
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The Title & Explanation column is used to record which accounts were affected by the
transaction and a brief explanation/details of what occurred.
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The PR (posting reference) column is used for cross-referencing information at a later
step in the accounting process.
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The Dr (debit) column is used to record the value of the debit applied to the account
listed in the Titles & Explanation column.
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The Cr (credit) column is used to record the value of the credit applied to the account
listed in the Titles & Explanation column.
www.durhamcollege.ca/sals
Student Services Building (SSB), Room 204
905.721.2000 ext. 2491
This document last updated: 7/21/2011
Student Academic Learning Services
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Journal Entries: Conventions
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It is important that journal entries follow the conventions of accounting and are
formatted in a specific way, so that anyone may look at an entry and know what has
occurred. Several different accountants may work with the information and it is
important the each can understand the transaction in the same way.

When making journal entries, the debited accounts are always listed first, in the left most
part of the column, with their respective debit amounts in the debit column
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The credited accounts are listed below them, indented to the right, with their respective
credit amounts in the credit column
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Because we record debits on the left side of T-charts, and credits on the right, the
indent of the credited accounts helps the user “see” that those accounts were credited
Example
On March 3rd the Max Power contracting company purchased new equipment with a value of
$27000.00. They paid $7000 in cash and signed a note payable for the remainder
Analysis
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The new equipment becomes an asset of the company. This means that the company’s
assets are increasing. We must use a debit to increase an asset, so we know that the
debit of the transaction is to the “Equipment” account. So far the transaction looks like
this…
Date
rd
Mar. 3

Titles & Explanation
Dr
Equipment
Cr
27000
We know the company used cash to pay for part of the total cost. That means the
company cash account must have gone down in value. Cash is an asset and to make
assets go down we apply credits. Therefore we know that crediting the “Cash” account
is also part of the transaction. Now the transaction looks like this…
Date
Mar. 3rd
PR
Titles & Explanation
Equipment
Cash
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PR
Dr
Cr
27000
7000
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
Looking at the transaction we’ve recorded, we can see that the total debits do not
balance the total credits (they are not equal). Also, we have not recorded anything about
the note payable that was mentioned
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A note payable is like a loan, the company has promised to pay that amount of money
in the future. A loan is a liability to the company, and in this situation the company
liability is increasing. We must use a credit to increase liability accounts and so the
“Note Payable” account is another credit in the transaction. The transaction then looks
like this…
Date
Mar. 3rd
Titles & Explanation
PR
Dr
Equipment
Cr
27000
Cash
7000
Note Payable
20000
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The amount of the credit is simply the total cost of the equipment minus what was paid
for using cash.
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We can see now that the transaction is balanced, the total debits are equal to the total
credits.
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Your instructor may want to see a brief explanation of the transaction in the journal
entry. This might look something like this…
Date
Mar. 3rd
Titles & Explanation
Equipment
PR
Dr
Cr
27000
Cash
7000
Note Payable
20000
(purchased new equipment using
cash and signed note payable for
balance)

The entry is now complete

Leave a blank line after the entry and begin recording the next transaction
www.durhamcollege.ca/sals
Student Services Building (SSB), Room 204
905.721.2000 ext. 2491
This document last updated: 7/21/2011