General Journal Entry

What You Need

• Details of the Transactions
• Knowledge of which accounts to decrease
• Knowledge of which accounts to increase

Helpful Information

You are writing out a transaction (an event that has happened to your company) that will be recorded in your General Ledger.

To do this you must know which accounts are affected by the transaction. You have to debit and credit these accounts, and the total debits for the transaction have to equal the total credits for the transaction.

Increases in the following accounts are debits: Asset, Expense, Cost of Sales Decreases in the following accounts are debits: Liability, Income, Equity

Increases in the following accounts are credits: Liability, Income, Equity Decreases in the following accounts are credits: Asset, Expense, Cost of Sales

Example

To record monthly depreciation:

Depreciation is an expense. You are increasing the depreciation expense (the total amount of the value of the asset written off). An increase in an expense is a debit.

Depreciation is also a contra-asset. This is an asset with a negative balance. You are increasing the contra-asset (the amount of the asset written off). An increase in a negative asset is the same as a decrease in an asset, which is a credit.

The entry is therefore:

Debit Depreciation Expense $X

Credit Depreciation (Contra-Asset Account) $X

 

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