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Financial Accounting · General ledger accounts and journal entries

How to Write Journal Entries in ACCA Financial Accounting

Updated 11 October 2026 · Fact-checked

A journal entry is a record of a transaction in the journal, showing the date, accounts to debit and credit, amounts and a short narrative. You use it for non-routine items such as asset purchases, disposals, opening entries and corrections. To solve a question, identify the accounts, apply debit and credit rules, and check that totals balance.

Understand Journal Entries

The journal is a book of prime entry for transactions that do not fit the day books or the cash book. Sales, purchases, returns and cash receipts have their own books. Everything else goes through the journal first, then to the ledger.

Each entry has a date, the account(s) to be debited, the account(s) to be credited, the amounts and a narrative. The narrative is a brief explanation of why the entry is made. Total debits must always equal total credits.

You use the journal for items such as: purchase or disposal of non-current assets, opening entries when a business starts or a new ledger is opened, write-off of irrecoverable debts, depreciation and other period-end adjustments, correction of errors, and transfers between accounts.

The journal gives an audit trail. It shows who or what authorised an unusual entry and why it was made. This reduces errors and fraud.

In the FA objective test, you will not write full journal layouts. You will be asked to pick the correct debit and credit, or to enter an amount. So the skill is working out the right accounts and amounts quickly.

Key formulas to remember

Basic rule
Total debits = Total credits
Every journal entry must balance. Use it to check your answer.
Debit and credit effects
Debit: increase assets and expenses, decrease liabilities, equity and income. Credit: the opposite.
Use this to decide each side of the entry.
Journal layout
Dr Account A amount / Cr Account B amount / Narrative
Debit line first, credit line indented or second.
Opening entry
Dr Assets; Cr Liabilities; Cr Capital (balancing figure)
Capital = assets − liabilities.
Disposal of non-current asset
Profit or loss = Proceeds − Carrying amount
Carrying amount = cost − accumulated depreciation at disposal date.
Disposal entries
Dr Disposals cost; Cr Asset cost. Dr Accumulated depreciation; Cr Disposals. Dr Bank/Receivable; Cr Disposals.
The balance on the disposals account is the profit (credit) or loss (debit).

How to solve Journal Entries questions

Use the same method for any journal question, whether you must write an entry or choose one.

  1. 1Read the transaction and decide what happened in plain words.
  2. 2List every account affected. Many journals involve three or more accounts.
  3. 3Decide for each account whether it increases or decreases.
  4. 4Apply the rule: debit increases in assets and expenses, credit increases in liabilities, equity and income.
  5. 5Calculate the amounts. Work out depreciation, carrying amounts or balancing figures first.
  6. 6Check that total debits equal total credits.
  7. 7Add a short narrative if asked, stating the reason for the entry.

Quickest way: Debit-credit sense check

When to use it: Use this in the computer-based test when you must choose from four journals or enter one amount.

  1. Ask: what did the business gain or lose, and what was given up?
  2. Write the debit and credit in your head or on scrap paper before looking at the options.
  3. Eliminate options where debits and credits do not match in total.
  4. Eliminate options that put the right amount on the wrong side.
  5. For disposals, compute carrying amount and profit or loss first, then match to the options.

Common mistakes in Journal Entries

  • Reversing debit and credit on a disposal or correction.

    Students memorise entries instead of reasoning about each account.

    Fix: Ask whether each account is increasing or decreasing, then apply the debit and credit rule.

  • Forgetting to remove accumulated depreciation when an asset is sold.

    Students focus on cost and proceeds only.

    Fix: Always clear both the cost and the accumulated depreciation, then take the difference to disposals.

  • Putting a purchase of a non-current asset through purchases.

    Students confuse routine trading goods with capital items.

    Fix: Debit the non-current asset account. Purchases is only for goods bought for resale.

  • Omitting capital as the balancing figure in an opening entry.

    Students list assets and liabilities but stop there.

    Fix: Capital = total assets − total liabilities. Credit it to make the entry balance.

  • Treating a profit on disposal as a debit.

    The disposals account is confusing in direction.

    Fix: A credit balance on the disposals account is a profit. Move it to profit or loss as income.

  • Ignoring sales tax or other related accounts in the entry.

    Students look only at the main amount.

    Fix: Check whether the question includes tax, then split the amount between the asset or expense and the tax account.

Worked examples

Example 1

A business buys a machine for $12,000 on credit from Zeta Ltd, and pays $500 cash for delivery and installation, which is part of the cost. What is the journal?

Show the solution
  1. The machine's cost includes delivery and installation: $12,000 + $500 = $12,500.
  2. The machine is an asset, so debit machinery $12,500.
  3. Credit the payable Zeta Ltd $12,000, because it is owed.
  4. Credit cash $500, because it was paid.
  5. Check: debits $12,500 = credits $12,000 + $500.

Answer: Dr Machinery $12,500; Cr Zeta Ltd $12,000; Cr Cash $500. Narrative: purchase of machine on credit with installation paid in cash.

Example 2

A machine cost $20,000 and has accumulated depreciation of $14,000. It is sold for $4,500 cash. What is the profit or loss, and what are the journal entries?

Show the solution
  1. Carrying amount = $20,000 − $14,000 = $6,000.
  2. Profit or loss = proceeds $4,500 − carrying amount $6,000 = loss of $1,500.
  3. Transfer cost: Dr Disposals $20,000; Cr Machinery cost $20,000.
  4. Remove depreciation: Dr Accumulated depreciation $14,000; Cr Disposals $14,000.
  5. Record proceeds: Dr Cash $4,500; Cr Disposals $4,500.
  6. Disposals account: debit $20,000, credits $14,000 + $4,500 = $18,500, so a debit balance of $1,500, which is the loss.

Answer: Loss on disposal of $1,500. The entries are Dr Disposals $20,000 / Cr Machinery $20,000; Dr Accumulated depreciation $14,000 / Cr Disposals $14,000; Dr Cash $4,500 / Cr Disposals $4,500.

Exam tips

  • In objective tests, work out the answer before reading the options. This stops attractive wrong options from misleading you.
  • For disposals, calculate carrying amount first. Most wrong options come from using cost or forgetting accumulated depreciation.
  • In multiple response questions, select exactly the stated number of entries, and check each one balances.
  • For number entry, read whether the question asks for the amount of a debit, a credit or a profit or loss, and note the sign.
  • Opening entries and corrections often need a balancing figure. Compute it from total assets minus total liabilities.

Practice questions from General ledger accounts and journal entries

Journal Entries in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Journal Entries: frequently asked questions

When should I use the journal rather than a day book?

Use the journal for transactions that do not fit the sales, purchases, returns or cash books. Examples are asset purchases and disposals, opening entries, adjustments and error corrections. Routine credit sales and purchases go in the day books.

Do I need to write a narrative in the exam?

In the computer-based FA exam you usually choose or enter figures rather than write text. The narrative still helps you think clearly and is good practice in real accounting. Know what a good narrative says: the reason for the entry.

How do I journalise opening balances?

Debit all asset balances and credit all liability balances. Credit the capital or equity account with the difference, since capital equals assets minus liabilities. Total debits will then equal total credits.

Is the journal part of the double-entry system?

The journal is a book of prime entry, so it records the transaction before posting. The actual double entry takes place when you post the debits and credits to the ledger accounts.