Bookkeeping Practice Exercises
This lesson is a hands-on workbook, not a lecture. You'll work through ten realistic small-business transactions, one at a time, writing your own journal entry before checking the worked solution. The goal is repetition with immediate feedback — the fastest way to convert bookkeeping rules from something you look up into something you just know. Grab a notebook, cover the solutions with your hand, and actually write out each entry before peeking.
Why this skill matters professionally
Reading about debits and credits and being able to produce a correct journal entry under time pressure are two very different skills, and employers test the second one, not the first. Timed practice exercises like these mirror exactly what bookkeeping certification exams and employment screening tests look like, and building real repetitions now means you won't freeze on a live client's books during your first week on a job.
Learning objectives
- Journalize common business transactions.
- Classify accounts correctly.
Background concepts
How to use this workbook
Each exercise gives you a realistic transaction. Before looking at the solution, write down: (1) which accounts are affected, (2) what type each account is, (3) whether each is increasing or decreasing, and (4) the full formatted journal entry. Then compare against the worked solution and note exactly where your reasoning diverged, if it did.
The four-question method
This is the same method professional bookkeepers use mentally on every transaction, just slowed down so you can see each step.
- 1. What accounts are involved?
- 2. What type is each account (Asset, Liability, Equity, Revenue, Expense)?
- 3. Is each account increasing or decreasing?
- 4. What's the debit/credit rule for that type and direction?
Difficulty progression
The exercises below move from simple two-line entries to compound entries and a couple of judgment calls that require you to think about *when* revenue or an expense should actually be recognized, not just how to record it mechanically.
Step-by-step
1. Exercise 1 (easy): Owner investment
The owner invests $10,000 cash to start the business. Work it out, then check below.
SOLUTION
Accounts: Cash (Asset), Owner's Capital (Equity)
Both increase.
Dr Cash ..................... 10,000
Cr Owner's Capital ........... 10,000
(Owner's initial cash investment)2. Exercise 2 (easy): Cash sale
The business sells $850 of merchandise for cash.
SOLUTION
Accounts: Cash (Asset, increases), Sales Revenue (Revenue, increases)
Dr Cash ....................... 850
Cr Sales Revenue ................ 850
(Cash sale of merchandise)3. Exercise 3 (easy-medium): Purchase on account
The business buys $2,200 of inventory on account from a supplier, due in 30 days.
SOLUTION
Accounts: Inventory (Asset, increases), Accounts Payable (Liability, increases)
Dr Inventory .................. 2,200
Cr Accounts Payable ............. 2,200
(Purchased inventory on account, terms n/30)4. Exercise 4 (medium): Paying a supplier
The business pays the $2,200 owed to the supplier from Exercise 3.
SOLUTION
Accounts: Accounts Payable (Liability, decreases), Cash (Asset, decreases)
Dr Accounts Payable ........... 2,200
Cr Cash ......................... 2,200
(Paid supplier invoice in full)5. Exercise 5 (medium): Judgment call — deposit vs. revenue
A client pays $1,000 upfront for a project that hasn't started yet. Is this revenue?
SOLUTION
No — the work hasn't been performed, so this cannot be recognized as revenue yet.
Accounts: Cash (Asset, increases), Unearned Revenue (Liability, increases)
Dr Cash ......................... 1,000
Cr Unearned Revenue ............... 1,000
(Client deposit for project not yet started)6. Exercise 6 (medium): Recognizing that revenue later
One month later, the project from Exercise 5 is complete, and the client is billed the remaining $1,500 of a $2,500 total project (the $1,000 deposit applies).
SOLUTION
Accounts: Unearned Revenue (Liability, decreases by the 1,000 already collected),
Accounts Receivable (Asset, increases by the 1,500 still owed),
Service Revenue (Revenue, increases by the full 2,500 earned)
Dr Unearned Revenue ............. 1,000
Dr Accounts Receivable .......... 1,500
Cr Service Revenue ................ 2,500
(Recognized revenue on completed project; applied prior deposit)7. Exercise 7 (medium-hard): Compound entry — equipment purchase
The business buys a $9,000 piece of equipment, paying $3,000 cash and financing the rest with a note payable.
SOLUTION
Accounts: Equipment (Asset, increases 9,000), Cash (Asset, decreases 3,000), Notes Payable (Liability, increases 6,000)
Dr Equipment .................... 9,000
Cr Cash ........................... 3,000
Cr Notes Payable .................. 6,000
(Purchased equipment, partial cash / financed balance)8. Exercise 8 (hard): Payroll compound entry
Total gross wages for the week are $4,000. Withholdings: $500 federal income tax, $306 FICA, $180 state tax. Calculate net pay and write the entry.
SOLUTION
Net pay = 4,000 - 500 - 306 - 180 = 3,014
Dr Wages Expense ................ 4,000
Cr Federal Income Tax Payable ..... 500
Cr FICA Payable ................... 306
Cr State Tax Payable .............. 180
Cr Cash (net pay) ................. 3,014
(Weekly payroll, gross 4,000 less withholdings)9. Exercise 9 (hard): Bad debt write-off
A client's $650 invoice, originally billed as revenue, is now deemed uncollectible after 120 days past due.
SOLUTION
Accounts: Bad Debt Expense (Expense, increases), Accounts Receivable (Asset, decreases)
Dr Bad Debt Expense .............. 650
Cr Accounts Receivable .............. 650
(Wrote off uncollectible invoice, 120+ days past due)10. Exercise 10 (hard): Correcting entry
You discover that last week's $400 internet bill was accidentally recorded as Dr Office Supplies Expense / Cr Cash 400 instead of Dr Utilities Expense. Write the correcting entry.
SOLUTION
Dr Utilities Expense .............. 400
Cr Office Supplies Expense ........... 400
(Correcting entry: reclassifies internet bill originally miscoded on 4/3 as office supplies)Real-world workplace examples
Why Exercise 5 and 6 matter most
The deposit-then-recognize-revenue pattern (Exercises 5-6) is one of the most common real-world scenarios in service businesses — law firms, consultants, wedding vendors, contractors — and it's also the single most common area where inexperienced bookkeepers overstate revenue by recording cash deposits as immediate income.
Payroll entries appear in almost every business
Even a business with a single employee will generate an entry like Exercise 8 at least biweekly. Getting comfortable with the compound structure (one expense, multiple liabilities, one net cash line) pays off immediately on the job.
Correcting entries are routine, not rare
Every bookkeeper, no matter how experienced, occasionally miscodes a transaction. What separates professionals from beginners isn't zero mistakes — it's catching and correcting them cleanly, the way Exercise 10 demonstrates.
Practical scenarios
Full month simulation
Try this as a capstone: a freelance consultant has the following month — (1) invests $5,000 cash to start, (2) bills a client $3,000 for completed work, (3) collects $2,000 of that receivable, (4) pays $600 rent in cash, (5) buys a $1,200 laptop on a credit card. Work out all five entries, then verify: ending Cash should be 5,000 + 2,000 - 600 = 6,400. Ending Accounts Receivable should be 3,000 - 2,000 = 1,000. Total assets: Cash 6,400 + Accounts Receivable 1,000 + Laptop 1,200 = 8,600. Liabilities: Credit Card Payable 1,200. Equity: Owner's Capital 5,000 + Net Income (3,000 revenue - 600 rent = 2,400) = 7,400. Check: 8,600 = 1,200 + 7,400. Balanced — if your numbers don't match, work backwards through each entry to find the discrepancy.
Common mistakes beginners make
Peeking at the solution before attempting the entry
It feels efficient but builds false confidence — recognizing a correct answer is much easier than producing one from scratch. The fix: physically cover the solution and commit to an answer before checking.
Skipping the four-question method once entries feel 'obvious'
Overconfidence on easy exercises causes sloppiness on the harder compound ones later in the set. The fix: run through all four questions (accounts, types, direction, rule) even when you're confident — it takes seconds and prevents careless errors.
Not checking that compound entries balance
With three or four lines, it's easy to miscopy a number. The fix: always total both columns before considering a compound entry finished.
Treating every cash receipt as revenue
Exercises 5 and 6 exist specifically to break this habit. The fix: always ask whether the business has actually earned the money by performing the service or delivering the goods yet.
Best practices
- Write out every exercise by hand before checking the solution.
- Use the four-question method (accounts, types, direction, rule) on every transaction, even easy ones.
- Always verify compound entries balance before moving on.
- Redo any exercise you got wrong at least once more, a day later, from memory.
- Time yourself once you've done the set once — aim for under 90 seconds per simple entry.
- Keep a running list of your own recurring mistakes and review it before starting a new practice set.
Professional tips
- Retype or rewrite the ten exercises with different dollar amounts and try them again cold a few days later.
- Practice explaining your reasoning for each entry out loud — teaching yourself catches gaps fast.
- Group your mistakes by pattern (e.g., 'I keep treating deposits as revenue') rather than by individual exercise, so you fix the root habit.
- Once comfortable, try writing entries directly in T-account form instead of formal journal format, for speed drills.
Practice exercises
Bonus Exercise A: Rent paid in advance
A business pays $6,000 for six months of rent upfront. Journalize the initial payment (treated as a prepaid asset).
SOLUTION
Dr Prepaid Rent ................... 6,000
Cr Cash .............................. 6,000
(Paid six months rent in advance)Bonus Exercise B: Recognizing one month of that prepaid rent
One month passes; $1,000 of the prepaid rent from Exercise A is now used up. Journalize the adjustment.
SOLUTION
Dr Rent Expense .................... 1,000
Cr Prepaid Rent ....................... 1,000
(Recognized one month of prepaid rent as expense)Bonus Exercise C: Owner draw
The owner withdraws $800 cash for personal expenses. Journalize it.
SOLUTION
Dr Owner's Draws .................... 800
Cr Cash ................................ 800
(Owner withdrawal for personal use)Review questions
What four questions should you ask for every transaction?
What accounts are involved, what type is each, is each increasing or decreasing, and what's the debit/credit rule for that type and direction.
Why isn't a client deposit recorded as revenue immediately?
Revenue can only be recognized once the goods or service has actually been provided; until then, the deposit is a liability (Unearned Revenue) because the business owes the work.
In the payroll exercise, why are there multiple credit lines?
Because a single payroll run creates several distinct liabilities (federal tax, FICA, state tax) plus the net cash paid out, all stemming from one gross wage expense — a compound entry.
How do you fix a journal entry that was coded to the wrong account?
Post a new correcting entry that reverses the miscoded amount and reclassifies it to the correct account, dated the day the error was found.
What's the fastest way to catch a mistake in a compound entry?
Add up the full debit column and the full credit column separately and confirm they're equal before considering the entry finished.
Key takeaways
- The four-question method (accounts, types, direction, rule) works on every transaction, simple or compound.
- Cash received isn't automatically revenue — check whether it's actually been earned yet.
- Compound entries just extend the same rules across more than two lines; the totals still must match.
- Correcting entries are a normal, expected part of bookkeeping — clean handling matters more than never erring.
- Practicing by hand, without peeking at solutions first, builds real recall speed.
- Payroll entries are the most common real-world compound entry you'll encounter early in a bookkeeping job.
- Revisiting missed exercises a few days later cements the correction far better than immediate repetition.
Frequently asked questions
How many practice transactions should I do before I feel ready for a job?
Most learners need 50-100 varied transactions before entries start feeling automatic rather than something to reason through slowly.
Should I practice with a calculator or by hand?
Do the arithmetic by hand at first — it forces you to actually process the numbers rather than trust an unchecked calculator entry.
What if my entry balances but doesn't match the solution?
A balanced entry can still be coded to the wrong account (see the bookkeeping-journal-entries lesson's laptop example) — always compare account choice, not just whether debits equal credits.
Is it normal to still second-guess myself on compound entries?
Yes, compound entries take longer to feel automatic than simple ones; keep practicing payroll-style entries specifically since they're the most common real-world compound case.
Should I move on to the quiz if I got some exercises wrong?
Redo the specific exercises you missed at least once more first — the quiz assumes the reasoning patterns from this workbook are already solid.
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