Last reviewed: July 2026.
This worked bookkeeping example follows transactions from source documents through journal analysis, ledger posting and a trial balance. It shows how the accounting equation and double-entry rules remain balanced throughout the process.
The example uses a small service and trading business called Nova Supplies.
Opening transaction list
| No. | Transaction | Source evidence |
|---|---|---|
| 1 | Owner invests 20,000 CU cash | Bank deposit and capital record |
| 2 | Buy equipment for 6,000 CU cash | Supplier invoice and payment |
| 3 | Buy inventory on credit for 4,500 CU | Purchase invoice and goods receipt |
| 4 | Cash sales of inventory for 3,200 CU; cost 1,800 CU | Sales receipt and inventory record |
| 5 | Credit sales of 2,500 CU; cost 1,400 CU | Sales invoice and dispatch record |
| 6 | Receive 2,000 CU from customer | Bank receipt |
| 7 | Pay supplier 3,000 CU | Payment approval and bank record |
| 8 | Pay rent 1,200 CU | Lease invoice and payment |
| 9 | Owner withdraws 500 CU | Approved drawings record |
Transaction 1: owner investment
- Debit cash 20,000 CU
- Credit capital 20,000 CU
Assets increase and equity increases by the same amount.
Transaction 2: equipment purchase
- Debit equipment 6,000 CU
- Credit cash 6,000 CU
One asset increases while another decreases. Total assets do not change.
Transaction 3: inventory on credit
- Debit inventory 4,500 CU
- Credit trade payables 4,500 CU
Assets and liabilities increase.
Transaction 4: cash sale
Record both revenue and the inventory cost:
- Debit cash 3,200 CU
- Credit sales revenue 3,200 CU
- Debit cost of sales 1,800 CU
- Credit inventory 1,800 CU
Transaction 5: credit sale
- Debit trade receivables 2,500 CU
- Credit sales revenue 2,500 CU
- Debit cost of sales 1,400 CU
- Credit inventory 1,400 CU
A credit sale creates revenue and a customer receivable.
Transaction 6: customer receipt
- Debit cash 2,000 CU
- Credit trade receivables 2,000 CU
The receipt settles part of the receivable and does not create new revenue.
Transaction 7: supplier payment
- Debit trade payables 3,000 CU
- Credit cash 3,000 CU
Payment reduces the liability and does not create a new purchase expense.
Transaction 8: rent payment
- Debit rent expense 1,200 CU
- Credit cash 1,200 CU
Transaction 9: drawings
- Debit drawings 500 CU
- Credit cash 500 CU
Drawings reduce owner equity and are not a business expense.
Ledger balances
| Account | Debit balance | Credit balance |
|---|---|---|
| Cash | 14,500 | |
| Trade receivables | 500 | |
| Inventory | 1,300 | |
| Equipment | 6,000 | |
| Cost of sales | 3,200 | |
| Rent expense | 1,200 | |
| Drawings | 500 | |
| Trade payables | 1,500 | |
| Capital | 20,000 | |
| Sales revenue | 5,700 |
Trial balance
Total debit balances are 27,200 CU and total credit balances are 27,200 CU. The trial balance agrees.
A balanced trial balance does not prove every transaction is correct, but it confirms arithmetic equality of posted debits and credits.
Profit calculation
- Revenue: 5,700 CU
- Cost of sales: 3,200 CU
- Rent expense: 1,200 CU
- Profit: 1,300 CU
Closing equity
Closing equity is opening capital 20,000 + profit 1,300 − drawings 500 = 20,800 CU.
Statement of financial position check
- Total assets: cash 14,500 + receivables 500 + inventory 1,300 + equipment 6,000 = 22,300 CU
- Liabilities: trade payables 1,500 CU
- Equity: 20,800 CU
Assets 22,300 = liabilities 1,500 + equity 20,800.
Source documents and audit trail
Each entry should link to an invoice, receipt, bank record, inventory movement or approved journal. Review the source documents guide.
Posting to ledger accounts
Journals classify transactions, while ledger accounts collect all entries for each account. Use the ledger accounts guide.
Accounting equation connection
Every transaction preserves assets = liabilities + equity. Revenue increases equity through profit, expenses reduce equity and drawings reduce owner capital directly.
Review the accounting equation examples.
Computerised systems
Software may generate the entries automatically from invoices, receipts and payments, but the underlying double-entry logic remains the same. Users must still verify coding, dates, tax, amounts and approvals.
Bank and cash reconciliation
The cash ledger balance should be reconciled to the bank statement. Outstanding payments and deposits in transit explain timing differences, while bank charges and direct debits may require new ledger entries.
Inventory count check
The closing inventory balance should agree with physical count records and valuation schedules. Count differences, damaged goods and obsolete items require investigation before final statements.
Posting reference system
Use document numbers, journal references and ledger folios so every entry can be traced backward to evidence and forward to the trial balance. Computerised systems provide equivalent transaction IDs and audit trails.
Adjusted trial balance
After year-end adjustments, prepare an adjusted trial balance. This becomes the controlled source for the statement of profit or loss, statement of financial position and supporting notes.
Year-end adjustments
A complete year-end example can also require accruals, prepayments, depreciation, inventory write-downs and expected credit losses. These are posted before the adjusted trial balance and financial statements.
Use the accounting process guide.
Common mistakes
- recording customer receipts as new sales;
- recording supplier payments as purchases;
- forgetting the cost-of-sales entry;
- treating equipment as an immediate expense;
- treating drawings as an expense;
- posting only one side of a transaction;
- assuming a balanced trial balance proves accuracy.
Key takeaway
Bookkeeping follows a clear chain: source document, transaction analysis, debit and credit, ledger balance, trial balance and financial statements. Each stage should reconcile with the accounting equation.
Official learning references: ACCA accounting equation, ACCA process for preparing financial statements, and ACCA computerised accounting systems.