Bookkeeping · Basics

How to Write a Journal Entry: Step by Step

Published on 3 November 2026 · Matthias Beurer

Note on number format: bookkeeping in this article follows German practice, so amounts are written the German way. 1.500,00 € means one thousand five hundred euros (in English: €1,500.00). In the German format the period separates thousands and the comma separates decimals.

The journal entry is the heart of bookkeeping. Almost every task at school, in training or in retraining comes down to this: a business transaction is described, and you have to write it down as a journal entry. That seems confusing at first. With a fixed routine, though, it quickly becomes second nature. This article follows German bookkeeping rules (HGB, UStG and the IKR chart of accounts).

What is a journal entry?

A journal entry states briefly and clearly which accounts a business transaction is booked on. The basic form is always: Debit to Credit. First you name the account (or accounts) that are debited, then the word “an” (German for “to”), and then the account (or accounts) that are credited.

One fixed rule applies here: the total on the debit side is always exactly as large as the total on the credit side. That is double-entry bookkeeping.

The five steps to a journal entry

For every business transaction, go through these questions in order:

1. Which accounts are affected? Read the case carefully and pick the right accounts from the chart of accounts.
2. What type of account is it? Asset account, liability account, expense account or income account?
3. Does the value increase or decrease? Is there more or less on the account?
4. Debit or credit? This follows from steps 2 and 3 (see the table below).
5. Write down the journal entry and check it: Debit to Credit, and the amounts must be equal on both sides.

The rules of thumb for debit and credit

• Asset accounts (e.g. 2800 Bank, 2880 Cash, 2400 Trade receivables): increase on the debit side, decrease on the credit side.
• Liability accounts (Passivkonten, which include equity; e.g. 3000 Equity, 4400 Trade payables): increase on the credit side, decrease on the debit side.
• Expense accounts (e.g. 6000 Expenses for raw materials): expenses go on the debit side.
• Income accounts (e.g. 5000 Sales revenue from own products): income goes on the credit side.

A little trick: asset accounts and expense accounts “grow” on the debit side, liability accounts and income accounts “grow” on the credit side.

Example 1: A customer pays by bank transfer

Holzwerk Brandt GmbH receives a bank transfer of 2.380,00 € from a customer for an outstanding invoice.

• Accounts affected: 2800 Bank and 2400 Trade receivables.
• Both are asset accounts.
• The bank balance increases (debit), the receivable decreases (credit).

Said out loud, this is: “Bank to trade receivables 2.380,00 €”.

Example 2: A compound journal entry

Sometimes more than two accounts are affected. This is called a compound journal entry. Holzwerk Brandt GmbH buys raw materials for 5.000,00 € net on credit, that is, on invoice. On top of that comes 19 % VAT (Umsatzsteuer), which is 950,00 €. So the invoice total is 5.950,00 €.

• 6000 Expenses for raw materials: expense, so debit (5.000,00 €).
• 2600 Input VAT: asset account, increase, so debit (950,00 €).
• 4400 Trade payables: liability account, increase, so credit (5.950,00 €).

The check works out: 5.000,00 € + 950,00 € = 5.950,00 €.

Common mistakes

• Debit and credit swapped: This happens often with liability accounts. Remember: a new debt goes on the credit side.
• Gross and net mixed up: The expense account gets the net amount, the payables account gets the gross amount.
• No totals check: If debit and credit are not equal, there is a mistake somewhere.
• Wrong account chosen: Read the business transaction carefully. “In cash” means Cash, “by bank transfer” means Bank.

Summary

A journal entry always follows the same pattern: find the accounts, determine the account type, work out whether the value increases or decreases, assign debit and credit, check the totals. If you go through these steps consciously a few times, you will soon hardly have to think about it.

Practise it yourself

Reading is a good start, but you only become confident by practising. In FiBu to go you can practise journal entries under the IKR step by step. You can try the placement test and a sample exercise for free and without registering. If you like it, there is a weekly pass (€4.90) or a monthly pass (€9.90), each a one-off payment with no subscription. Are you training as a Kauffrau or Kaufmann für Büromanagement (office management clerk)? Then take a look at FiBu für Büromanager, which is tailored to vocational school and the IHK exam for your profession. Masterivo is an independent provider and is not affiliated with the IHK.

Frequently asked questions

More about the app: Learn bookkeeping with FiBu to go and FiBu für Büromanager

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