What is a journal entry?
A journal entry is the short report of one event involving money. You send an invoice, you pay your phone bill, a payment comes in — every time, the books write a journal entry: this is what happened, these are the amounts, and here is where they belong.
What makes it special is that such a report always consists of at least two lines. With money there are always two sides to the story: something goes off somewhere and something is added somewhere else. Pay your phone bill and your bank balance goes down — but at the same time you have incurred a cost. One event, two sides. The journal entry records them both, and that is called double-entry bookkeeping.
Debit and credit, without the mystique
This is where most people drop out, so let's disarm it straight away. Debit means: the left-hand side. Credit means: the right-hand side. That's all. It comes from Latin, it sounds weighty, but there is no deeper truth behind it — they are the two columns of an old-fashioned cash book.
Every account in your books has those two sides. And there is one convention: assets and costs grow on the left-hand side (debit), liabilities and revenue grow on the right-hand side (credit). Why exactly that way? Because that is what we agreed long ago, the same way we agreed to drive on the right. You don't have to reason it out — you only have to remember that the convention is fixed.
Debit is the left-hand side, credit is the right-hand side — and in every entry the two sides carry exactly the same weight. To the cent.
That last sentence is the golden rule. What you book on the left-hand side and what you book on the right-hand side must be exactly equal in every journal entry. Not roughly. Not rounded. To the cent.
A real example: your phone bill
Say € 50.00 is debited from your bank account for your phone subscription. That amount includes 21% VAT. So three things have actually happened: you have incurred € 41.32 in phone costs, you have paid € 8.68 in VAT that you can reclaim on your VAT return (btw-aangifte), and your bank balance is € 50.00 lower. The journal entry records all three:
left and right equally heavy — only then may the stamp go on
Line by line: the phone costs (€ 41.32) are a cost, and costs grow on the left — so debit. The VAT receivable (€ 8.68) is quietly an asset: it is an amount the Dutch tax authority (Belastingdienst) pays back to you — how reclaiming works is covered in VAT for starters. Assets also grow on the left — debit. And the bank goes down by € 50.00; an asset that shrinks is booked on the right-hand side — credit. Add it up: 41.32 + 8.68 on the left-hand side, 50.00 on the right-hand side. Equally heavy. The entry balances.
Those numbers — 4110, 1530, 1100 — come from the chart of accounts: the fixed cabinet of numbered drawers in which every entry is filed. Every business has one, and the layout looks much the same everywhere: accounts starting with 4 are usually costs, accounts starting with 1 are usually assets and receivables.
Why two sides catch mistakes
This is the ingenious part of the system, and the reason it has lasted for centuries. Type 41.23 by accident instead of 41.32, and the left-hand side adds up to 49.91 — while the right-hand side still adds up to 50.00. The entry does not balance, and those nine cents of difference start ringing. A forgotten line, a wrong amount, an amount on the wrong side: the balance gives it away immediately. Double-entry bookkeeping is a built-in alarm.
Compare that with keeping a simple list of expenses: there, a typo is only noticed if someone happens to read over it — or never. In fairness, the alarm does not hear everything: book € 41.32 neatly and in balance to the wrong cost account and it still adds up arithmetically. That is why there are further checks on top of balancing — but the crudest mistakes, the arithmetic ones, simply do not get through.
Ledger and trial balance, in one paragraph
All journal entries in sequence form the journal: the daybook of your records, in the order things happened. Sort those same lines by account — all phone costs together, all bank movements together — and that is called the general ledger (grootboek): per drawer from the chart of accounts you see everything that went in and out. And put the balance of every ledger account underneath each other in one list, and you have the trial balance (proefbalans): if debit and credit are equal at the bottom, your whole administration balances. Three names, one and the same stack of lines — only sorted differently.
Want to know what you should keep and retain alongside these entries as a self-employed person? That is covered in Setting up your books as a freelancer.
And what about Solvo?
This guide explains the craft in plain language, but is not tax or legal advice. For choices in your own situation, your own specialist or adviser remains the right person to ask.