Bookkeeping FAQs
These are some of the most common bookkeeping questions we’ve received — all answered clearly and verified for accuracy by Lang Bookkeeping. If you have a question not covered here, try our Ask a Bookkeeper tool.
What is a journal entry?
A journal entry is a record of a financial transaction, usually including the date, the accounts affected, the amounts debited and credited, and a short explanation. It’s the foundation of double-entry bookkeeping.
Does a debit increase or decrease a liability?
A debit will decrease a liability. Since liabilities carry a normal credit balance, a debit reduces the account.
How do I record payroll in bookkeeping?
Debit Salary Expense and Payroll Tax Expense, then credit Cash (for net pay) and Payroll Liabilities (for withheld taxes and deductions). This separates expenses from what’s owed.
What is the difference between a debit and a credit?
A debit increases asset and expense accounts, and decreases liabilities and income. A credit increases liabilities and income, and decreases assets and expenses.
How do I record an owner’s draw?
Debit the Owner’s Draw or Owner’s Equity account and credit Cash. This shows money being withdrawn by the owner for personal use.
What’s the purpose of a chart of accounts?
The chart of accounts is a listing of all account names and numbers used in your bookkeeping system. It organizes how you track assets, liabilities, equity, income, and expenses.
How do I know if I should record something as an asset or an expense?
If the purchase provides value for more than one year (like equipment), it’s an asset. If it’s used up quickly (like office supplies), it’s an expense.
Do I need to reconcile my bank account every month?
Yes. Reconciling helps catch errors, duplicates, or missing transactions — and ensures your books match your bank.
What does it mean to close the books?
Closing the books means finalizing all financial entries for a specific period (usually monthly or annually) so you can produce accurate reports and prevent changes to prior periods.
What if my debits don’t equal my credits?
Then your books are out of balance. Check for data entry errors, duplicated transactions, or missing accounts. Every transaction must balance for accurate double-entry bookkeeping.