Common Double-Entry Bookkeeping Examples
Worked examples of common double-entry bookkeeping transactions for UK businesses, showing the debit and credit entries for sales, purchases, VAT, payroll, fixed assets and adjustments.
Double-entry bookkeeping requires every transaction to be recorded as both a debit and a credit . Understanding how to construct these entries is essential for anyone managing UK business accounts. This article provides practical, worked examples covering the transactions that UK businesses encounter most frequently.
For the underlying principles, see our guide to double-entry bookkeeping .
Quick reference: debit and credit rules
Before working through examples, the core rules are worth restating:
| Account type | Debit increases | Credit increases |
|---|---|---|
| Assets | Yes | – |
| Liabilities | – | Yes |
| Equity | – | Yes |
| Revenue / Income | – | Yes |
| Expenses | Yes | – |
Every journal entry must have total debits equal to total credits.
Sales transactions
Cash sale (no VAT)
A sole trader sells goods for £500 and receives immediate payment.
| Account | Debit | Credit |
|---|---|---|
| Bank | £500 | |
| Sales revenue | £500 |
The bank (asset) increases. Revenue increases.
Credit sale with VAT
A limited company invoices a customer £2,000 plus 20% VAT (£400), totalling £2,400.
| Account | Debit | Credit |
|---|---|---|
| Trade debtors | £2,400 | |
| Sales revenue | £2,000 | |
| VAT output (liability) | £400 |
Trade debtors (asset) increase by the full invoice amount. Revenue is recorded net of VAT. The VAT owed to HMRC is a liability.
Customer pays the invoice
When the customer pays the £2,400:
| Account | Debit | Credit |
|---|---|---|
| Bank | £2,400 | |
| Trade debtors | £2,400 |
Cash increases; the debtor balance is cleared. No revenue is recorded here – it was already recognised when the invoice was raised.
Purchase transactions
Cash purchase (no VAT)
A business buys office supplies for £120 cash.
| Account | Debit | Credit |
|---|---|---|
| Office supplies expense | £120 | |
| Bank | £120 |
The expense increases. Cash decreases.
Credit purchase with VAT
The business receives a supplier invoice for £800 plus 20% VAT (£160), totalling £960.
| Account | Debit | Credit |
|---|---|---|
| Purchases / cost of sales | £800 | |
| VAT input (asset) | £160 | |
| Trade creditors | £960 |
The expense is recorded net of VAT. The reclaimable VAT is an asset. Trade creditors (liability) increase.
Paying the supplier
When the business pays the £960:
| Account | Debit | Credit |
|---|---|---|
| Trade creditors | £960 | |
| Bank | £960 |
The creditor liability is cleared. Cash decreases.
VAT settlement
Paying VAT to HMRC
At the end of the VAT quarter, the business owes HMRC £3,200 (output VAT of £5,000 less input VAT of £1,800).
| Account | Debit | Credit |
|---|---|---|
| VAT output (liability) | £5,000 | |
| VAT input (asset) | £1,800 | |
| VAT control / HMRC payable | £3,200 |
When the payment is made:
| Account | Debit | Credit |
|---|---|---|
| VAT control / HMRC payable | £3,200 | |
| Bank | £3,200 |
Payroll
Recording monthly salaries
The company’s gross payroll is £10,000. Deductions are PAYE income tax £1,500, employee National Insurance £800 and employee pension contributions £400. The net pay is £7,300.
| Account | Debit | Credit |
|---|---|---|
| Salary expense | £10,000 | |
| PAYE liability | £1,500 | |
| Employee NIC liability | £800 | |
| Pension liability (employee) | £400 | |
| Net pay liability / Bank | £7,300 |
Employer’s National Insurance and pension
The employer’s NIC is £1,100 and employer pension contributions are £300.
| Account | Debit | Credit |
|---|---|---|
| Employer NIC expense | £1,100 | |
| Employer pension expense | £300 | |
| Employer NIC liability | £1,100 | |
| Pension liability (employer) | £300 |
Paying HMRC
When PAYE, employee NIC and employer NIC are paid to HMRC:
| Account | Debit | Credit |
|---|---|---|
| PAYE liability | £1,500 | |
| Employee NIC liability | £800 | |
| Employer NIC liability | £1,100 | |
| Bank | £3,400 |
Fixed assets
Purchasing a fixed asset
The business buys a delivery van for £24,000 plus VAT (£4,800).
| Account | Debit | Credit |
|---|---|---|
| Motor vehicles (fixed asset) | £24,000 | |
| VAT input (asset) | £4,800 | |
| Bank | £28,800 |
Depreciation
The van is depreciated over four years using the straight-line method. Annual depreciation is £6,000.
| Account | Debit | Credit |
|---|---|---|
| Depreciation expense | £6,000 | |
| Accumulated depreciation – motor vehicles | £6,000 |
The expense reduces profit. Accumulated depreciation is a contra asset that reduces the carrying value of the van on the balance sheet.
Year-end adjustments
Accruing an expense
The business owes £900 for electricity consumed in the year but not yet invoiced at the year end.
| Account | Debit | Credit |
|---|---|---|
| Electricity expense | £900 | |
| Accruals (liability) | £900 |
Writing off a bad debt
A customer owing £1,200 has gone into liquidation and will not pay.
| Account | Debit | Credit |
|---|---|---|
| Bad debt expense | £1,200 | |
| Trade debtors | £1,200 |
If the original sale included VAT and the debt is over six months old, the business can reclaim the VAT from HMRC through a bad debt relief claim.
Tips for recording journal entries
- Always check that debits equal credits before posting
- Include a clear narrative describing the transaction
- Reference the source document (invoice number, receipt, contract)
- Post entries to the correct accounting period
- Use the correct VAT treatment for each transaction
- Review entries as part of the regular bank reconciliation process