Bookkeeping Examples for Small Business and Students

Bookkeeping Examples Journal for sales

As a business owner bookkeeping will become an essential part of running the business. Bookkeeping is complicated, so we will look at the different steps and show bookkeeping examples.

The first thing to do is decide how you will complete the bookkeeping. Some businesses use manual systems like Excel, while others opt for accounting software. Accounting software makes posting transactions easier.

If you are in the UK, making tax digital is in the process of being introduced. It may therefore be worthwhile setting your bookkeeping up on accounting software which will submit the accounts to HMRC in the future.

There are two methods for completing bookkeeping, single entry and double entry; in this article, we will mainly look at the double entry bookkeeping examples. There is also a single entry example at the end, using our cashbook template. The double entry system means that for each entry, a second equal entry is made.

In our bookkeeping examples, we will use a business called ABC Computing. We will start with some of the everyday transactions and then move on to some more complex bookkeeping examples.

Business Investment

ABC Computing opens up the business by investing 5000.00; the company is self-employed, so the transactions are as follows:

AccountDebitCredit
Bank Account5000.00
Owners Equity5000.00

Both of these accounts are on the balance sheet, so they do not affect the trading profit and loss.

Sales Invoice

The sales invoice is a transaction that nearly every business will use. The sales invoice is issued to request payment of goods or services from a customer. When a sales invoice is issued in accounting software, it will have either two or three posts, depending on if you are VAT registered.

ABC Computing issues a sales invoice for 1000.00 plus 20% VAT, the transactions that take place in the accounts are as follows.

AccountDebitCredit
Bank Account1200.00
Vat Control Account200.00
Sales1000.00

The aged debtors and VAT are part of the balance sheet, while the sales are on the profit and loss account.

Debtors Receipt

When a debtor pays an invoice, the transaction is between the debtors to reduce the balance and the bank account. Both of the transactions are on the balance sheet and do not affect the profit and loss account.

AccountDebitCredit
Bank Account / Cash1200.00
Aged Debtors / Trade Receivables1200.00

Credit Note

A credit note is the opposite of a sales invoice, and therefore the transactions are reversed. If the company issues a credit note to cancel the above invoice, the transactions will be as follows:

AccountDebitCredit
VAT Control Account200.00
Sales1000.00
Aged Debtors / Trade Receivables1200.00

Cash Sale

In the sales invoice example above one of the transactions will post to the aged debtor’s account, if it is a cash sale, it will post to the bank or cash account.

AccountDebitCredit
Cash or Bank1200.00
VAT Control Account200.00
Sales1000.00

Cash sales can happen for several reasons, especially in retail or small businesses. It is still worth issuing a receipt for the transaction.

Below is our cash receipt template, which is free to download.

Cash Receipt Template printable

Purchase Invoice

A purchase invoice is received from a supplier for goods or services that you receive and will pay in the future. It will therefore post to the creditor’s account and also an expense to the profit and loss or balance sheet.

In this example, the purchase invoice is for goods purchased on credit.

AccountDebitCredit
Cost of Goods Sold500.00
VAT Control Account100.00
Aged Creditors / Accounts Payable600.00

Creditors Payment

When the purchase invoice is paid, the accounting transactions are between the bank and aged creditors account.

AccountDebitCredit
Aged Creditors600.00
Bank600.00

Accrual Bookkeeping Examples

Accruals are created by posting an accounting journal to the accounts. Businesses create accruals to account for invoices and paperwork not received within an accounting period.

An example of an accrual is a business has purchased and received stock, but as yet the purchase invoice is not available.

AccountDebitCredit
Stock500.00
Accruals500.00

Both of the transactions are on the balance sheet as stock is an asset to the business.

Prepayment Example

A prepayment is when you pay or receive an invoice for something over a longer period than the report is for. An example is you receive an invoice for a years insurance, but the accounting period it covers is six months. You, therefore, want to add the remaining six months to prepayments on the balance sheet.

Insurance is 1000.00 for May to April, but the annual accounts are year ended October. You would leave 500.00 in insurance as an expense on the profit and loss account and journal 500.00 to prepayment. 

The journal is shown here:

AccountDebitCredit
Prepayment500.00
Insurance500.00

Depreciation

Depreciation is an accounting method for reducing the value of an asset over time.

Business ABC computers purchases a laptop for 600.00, they estimate that it will have a useful life of three years. The depreciation will therefore be 200.00 per year.

The first journal shows the purchase of the laptop.

AccountDebitCredit
Fixed Asset600.00
Bank600.00

The second journal shows depreciation each year

AccountDebitCredit
Depreciation (expense on P&L)200.00
Accumulated Depreciation B/S200.00

The balance sheet at the end of the second year would show:

Balance Sheet
Fixed Assets600.00
Accumulated Depreciation200.00
Value of Fixed Assets400.00

Bookkeeping Examples in Excel

All the bookkeeping examples above are for double entry bookkeeping. In this section, we are looking at single entry bookkeeping using the free cash book available on this site.

Single entry bookkeeping is the simplest form of bookkeeping, and many small businesses prefer to use this method.

Below is a sample bank statement for ABC Computers:

Cash Book Bank Statement

Each row of the statement is entered into the cashbook allocating the different amounts to account codes. It allows the business to see the profit and loss for each month.

Cash Book Template

Using our spreadsheet is quick to set up and simple to use. Download the full example to see how it works:

Further bookkeeping examples are available on the Wall Street Mojo Website.

Return from bookkeeping examples to bookkeeping basics page.

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