January 22, 2021


Accounting + Finance Blog

Posting Transactions in Journal Entries

Posting Transactions in Journal Entries

Transactions passed what is referred to as the Accounting cycle. The first step in this cycle is the subsidiary books. In practice, however, most of the types of this book are not used. Journal entries and cash books are the only common prime books used by most entities. I have discussed the cash book here. In this article, a practical guide on journal entry is discussed.

Definition of Journal Entries

A book where transactions are recorded as they occur or in chronological order.

It is a book in which transactions are recorded first before they are recorded in the general ledger.

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Format of a Journal Entry

A journal entry contains the following data

1 Date

2 Name(s) of account to debit and the amount

3 Name(s) of account to credit and the amount

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4 Narration or summary of the transaction

How to post a journal entry

Posting a journal entry is one of the simple and most important aspects of accounting. The following step can be applied to draw up a journal entry.

Step 1: Understand the transaction. Without a transaction there cannot be a journal entry. Therefore, you need to understand the transaction. If you do not understand it, ask a question from your superior or the person initiating the transaction. It is when you have an understanding of the transaction you can move to the next step.

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Step 2: Identify the accounts in the transaction. You can learn more about how to understand a transaction here. Generally, a transaction usually has two accounts. However, some transactions may involve more than two accounts. If you have understood the first step, there will be little difficulty in identifying the accounts involved.

Step 3: Identify the account(s) to debit and that to credit. This can be done by applying the double-entry principle. That is, debit the receiver of value and credit the giver of value.

Step 4: Draw up the Journal Entry. Now you can write up the journal entry and post the debit and credit account and amount accordingly. The debit and credit side must have the same amount.

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Step 5: Give a narration. The last step is to provide narration or summary of the transaction. Your narration should be simple and easy to understand by someone who wasn’t there when the transaction was initiated and recorded. The narration may also include the date the transaction occurs if such date is different from the date the Journal entry is prepared.

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Below are two examples of recording transactions in a journal entry.

Example One: Payment of electricity bill through a bank debit of 5,000 Naira on 15th September 2020.

Here the accounts involved are Electricity bill and bank account. While the amount is N5,000 Naira and the date is the 15th of September.

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Remember that double-entry principle requires debit of the receiver of value and credit of the giver of value.

From the above, Electricity bill is receiving the value while the bank is giving or paying the bill. Therefore, Debit the Electricity bill account and Credit Bank account. This is shown in the journal entry as seen below.

Posting transactions in the journal entry

Example Two: A customer, Mr Dennis was mistakenly credited by an amount of 100,000 Naira for repayment of debt instead of Mr Daniel’s.

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The person who initiated the transaction was Mr Daniel. But, Mr Dennis’ account was credited. This is an error and correction or reversal of the entry must be done using a journal entry.

Therefore, Mr Dennis’ account will be debited to remove the money from his account. Then, Mr Daniel’s account will be recorded correctly by crediting his account with the amount. This is shown in the MS Excel sheet below. You may also notice the narration.

Posting Transactions in Journal Entries


Journal entries as you may have learned are for day to day transactions. It is the first stage of the accounting cycle and also very important subsidiary book. Without it records in the general ledger will not be done and it may be difficult to prepare a financial statement.

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