TL;DR:
Debit what you owe or own more of. Credit what you earn, owe less of, or gain in equity. For sales tax, debit Cash and credit Sales Revenue plus Sales Tax Payable. For income tax, debit Income Tax Expense and credit Income Tax Payable. Refunds? They cut expenses or liabilities—not revenue. Depreciation? Debit Depreciation Expense, credit Accumulated Depreciation. Always double-check those account balances before hitting save.
What’s really going on in a journal entry?
Double-entry accounting forces every transaction to hit at least two accounts—one debit, one credit—and keep the totals equal. That’s not just textbook theory; it’s the backbone of GAAP and IFRS, and it hasn’t changed since the days of quill pens. The confusion usually starts with account types. Take Accounts Payable, for instance—it’s a liability, so it naturally carries a credit balance because you owe money. Meanwhile, Depreciation Expense lands on the income statement as a debit because it eats into your net income. Slip up and call a refund “revenue,” and suddenly your profit looks healthier than it really is. Always flip through your chart of accounts before you post anything.
How to actually record these entries—step by step
1. Recording sales tax (when customers pay you)
- Fire up your general ledger or favorite accounting software—QuickBooks 2026, Xero, NetSuite, whatever you use.
- Head to Transactions > Journal Entry.
- Drop the full invoice amount in the debit column for Cash or your Bank Account.
- Enter the sales amount—tax-free—in the credit column for Sales Revenue.
- Plug the tax portion into the credit column for Sales Tax Payable.
- Save it. Make sure debits and credits match—if they don’t, the software will yell at you.
2. Remitting sales tax to the government
- Back to Transactions > Journal Entry.
- Debit Sales Tax Payable (you’re wiping out that liability).
- Credit Cash or your Bank Account for the exact payment amount.
- Save, then reconcile the transaction so your records stay clean.
3. Recording income tax expense
- Open the Journal Entry screen again.
- Debit Income Tax Expense for the estimated tax bill.
- Credit Income Tax Payable.
- When the check goes out, flip it: debit Income Tax Payable and credit Cash.
4. Handling refunds (say a customer overpaid)
- Pull up the original invoice.
- Use the Credit Memo function—don’t try to force a journal entry here.
- Apply the refund as a credit on the customer’s account or cut a check.
- Never, ever book a refund as revenue; that’s a quick ticket to an audit.
5. Depreciation journal entry
- Figure the annual depreciation: (Cost minus Salvage Value) divided by Useful Life.
- In your software, go to Fixed Assets > Depreciation Run.
- The system spits out two lines:
- Debit: Depreciation Expense
- Credit: Accumulated Depreciation (the sneaky contra-asset account that offsets your fixed assets)
- Post it. Then peek at the balance sheet—your asset should now show cost minus accumulated depreciation.
When the entry just won’t go through
1. Software says “Access denied” Check your user settings. In QuickBooks 2026, hit Company > My Company > Set Up Users and confirm you’ve got full permissions. Also poke around the Chart of Accounts (Lists > Chart of Accounts) to make sure the account isn’t locked or inactive.
2. Debits and credits refuse to balance Re-enter the numbers. Run the Trial Balance report (Reports > Accountant Reports > Trial Balance) to see which accounts are out of whack. If something’s still unbalanced, dig into unposted transactions or reverse and redo the entry.
3. You accidentally booked a refund as revenue Undo the mistake right away. Then reclassify the refund to Sales Returns & Allowances (that contra-revenue account that keeps your books honest) or knock it straight off Accounts Receivable.
How to keep tax entries from becoming a headache
Give your Chart of Accounts a once-a-year tune-up. As of 2026, make sure every account still lines up with FASB’s latest revenue-recognition rules.
Let technology do the heavy lifting for recurring entries—monthly depreciation, for example. In Xero 2026, set up Fixed Asset Registers and let the software auto-calculate and post the numbers.
Train your team on the basics. Keep these two rules in mind:
- Assets and Expenses: Debit to add, credit to subtract.
- Liabilities, Equity, and Revenue: Credit to add, debit to subtract.
Set a monthly calendar reminder to reconcile Sales Tax Payable and Income Tax Payable against the government filings. NetSuite’s Account Reconciliation tool can flag mismatches before they snowball into bigger problems.
