What are journal entries?

Double entry in one sentence

Every transaction has at least two effects: something comes in and something goes out, or one account rises and another falls. Double entry records both effects together for equal amounts, so total debits always equal total credits. That balance is what makes errors detectable: an unbalanced entry means something was forgotten.

Practical examples

A sales invoice with VAT

You sold goods for SAR 10,000 on credit. VAT at 15% = SAR 1,500. The entry: debit Customers 11,500; credit Sales 10,000 and Output VAT 1,500. Debits 11,500, credits 11,500, balanced.

Buying goods from a supplier

You bought goods for SAR 4,000 plus 600 VAT on credit. The entry: debit Inventory 4,000 and Input VAT 600; credit Suppliers 4,600. Note the purchase went into inventory as an asset, not an expense.

Collecting from a customer

The customer paid SAR 11,500 by bank transfer. The entry: debit Bank 11,500; credit Customers 11,500. The customer’s balance is now zero.

The payroll run

A month’s payroll of SAR 50,000, with 5,000 in advances deducted. The entry: debit Salary expense 50,000; credit Employee advances 5,000 and Accrued salaries 45,000. On the bank transfer: debit Accrued salaries 45,000; credit Bank 45,000.

A rent expense

Office rent of SAR 8,000 plus 1,200 VAT paid from the bank. The entry: debit Rent expense 8,000 and Input VAT 1,200; credit Bank 9,200.

From the entry to the report

Entries are grouped in the general ledger by account, giving each account’s balance. The trial balance is built from these balances (and must balance), and from it the income statement (revenue minus expenses) and the balance sheet (assets = liabilities + equity). In our example, the difference between output and input VAT is what you pay on the return.

Manual and automatic entries

In modern systems nobody writes sale, purchase or payroll entries by hand. The invoice generates its entry through the default account mappings, as do the supplier bill, the receipt and the payroll run. What remains for the accountant are entries with no document: accruals, provisions, depreciation and opening balances, and a manual entry may pass through review and approval before posting.