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+1-802-778-9005Journal entries are the last resort for entering transactions. They allow you to move money between accounts and force your books to balance in specific ways. It is a record of accounting transactions that are kept in a general ledger.
In simple words, it is a record of transactions that shows the credit and debit balance of the company. Journal entries are considered to be a very important and essential part of business accounting as all of your business’s financial reports depend on them. All the journal entries are the foundation of Balance sheets, income statements, and cash flow statements, etc. So, you’re recommended to use them only if you understand accounting or by following the advice of your accountant. Plus, you must have a good understanding of debits and credits to keep your books up-to-date.
Each journal entry contains the data significant to a single business transaction, including the date, the amount to be credited and debited, a brief description of the transaction and the accounts affected. Depending on the company, it may list affected subsidiaries, tax details and other information.
It’s crucial to accurately enter complete journal data so that the general ledger and financial reports based on this information are also accurate and reliable. Journal entries are made in chronological order and follow the double-entry accounting system, meaning each will have both a credit and a debit column. Even when debits and credits are linked to multiple accounts, the amounts in both columns must be equal.
For instance, let’s say a company spends $277.50 catering lunch for employees. The expenses account increases by that amount, while the cash account, which is an asset, decreases by $277.50 because that money is now spent.
The purpose of a journal entry is to physically or digitally record every business transaction properly. If a transaction affects multiple accounts, the journal entry will detail that information as well.
The primary purpose of journal entries include:
In double-entry accounting, every transaction is recorded with a debit and credit in two or more accounts, which categorize different types of financial activities in a company’s general ledger. Debits and credits are both opposite and equal (though each line debit/credit doesn’t necessarily have an equal counterpart), occur simultaneously and represent a transfer of value.
Debits add to expense and asset accounts and subtract from liability, revenue and equity balances, while credits subtract from expense and asset balances and add to liability, revenue and equity accounts.
For example, if a company purchases a new computer for $1,200 on credit, it would record $1,200 as a debit in its account for equipment (an asset) and $1,200 as a credit in its accounts payable account (a liability). However,if instead, it pays for the computer with cash at the time of purchase, it would debit and credit two types of asset accounts: debit for equipment and credit for cash.
The precise journals you use for your bookkeeping will depend on what kind of business you run. They’re split into two categories: The general journal and the special journals.
The general journal contains entries that don’t fit into any of your special journals—such as income or expenses from interest. It can also be the place you record adjusting entries.
On the other hand, the special journals, also referred to as accounts, are used to record the common, day-to-day transactions in your accounting system. All of your special journals are listed in your chart of accounts.
Here are some common examples of account names include:
A journal entry is the fundamental record of every financial transaction. Here’s some basic examples:
Let’s see how:
Date: July 7, 20XX
| Particulars | LF | Amount (Dr.) | Amount (Cr.) |
| Cash Account | 1,000 | ||
| Sales Revenue | 1,000 |
Explanation: This entry reflects a cash sale of $1,000. The Cash Account is debited to show the increase in cash, and the Sales Revenue Account is credited to record the revenue generated.
Cash Sales Journal Entry: When goods or services are sold for cash, the entry will be:
Date: July 12, 20XX
| Particulars | LF | Amount (Dr.) | Amount (Cr.) |
| Cash Account | 800 | ||
| Sales Revenue | 800 |
Explanation: This entry represents a cash sale of 800. The Cash Account is debited to reflect the increase in cash, while the Sales Revenue Account is credited to show the revenue.
Salary Paid Journal Entry: When salaries are paid to employees, the entry is:
Date: July 23, 20XX
| Particulars | LF | Amount (Dr.) | Amount (Cr.) |
| Salary Expenses | 2,500 | ||
| Cash Account | 2,500 |
Explanation: This entry records the payment of salaries. The Salary Expenses Account is credited to recognize the expense, and the Cash Account is debited to show the cash outflow.
Below we’ve listed why you need to create Journal entries in QuickBooks:
Creating and managing Journal entries is a great help to managers and accountants to record transactions or transfers amounts between accounts.
By following this step-by-step guide, you can easily make the most general journal entries in QuickBooks Desktop which are as follows:
After entering the date and journal entry number, fill out the other required information.
To make the entry balanced sum of both the debit and credit entries must match otherwise repeat the same steps. You need to repeat until the entries completely match with each other and the transaction reaches a zero balance then only the journal entries will be properly balanced.
If the total of the debit column doesn’t tally with that of the credit column, then fill out the distribution line until the total of both tallies.
Here are some quick steps to edit a journal entry in QuickBooks.
Let’s have a look:
You can only edit a journal entry as long as:
When you void a transaction in QuickBooks, you still have a record of the transaction, but it won’t affect your account balances or reports.
On the other hand, when you delete a transaction in QuickBooks, the transaction is completely erased from your books, and it won’t display on any reports or in any accounts.
You can recover some details of the transaction using the audit log in QuickBooks, but you can’t recover the whole transaction. Only delete a transaction if you’re sure you don’t need a record of it.
For good bookkeeping, it’s better to void a transaction rather than delete it so you keep a record of the transaction. You can delete all transaction types in QuickBooks, but you can only void certain transaction types.
The following transactions can’t be voided:
Note: You can’t void bills, but you can void bill payments.
Step-by-Step Instructions for Each Process:
Sometimes, you might need to delete or void a journal entry in QuickBooks.
The steps are as follows:
Reversing entries are accounting journal entries you make in a certain period to reverse, or cancel out, some entries of a previous accounting period. Such as wage accrual which is replaced by an actual payroll expenditure. You can make them at the beginning of an accounting period, and they usually adjust some entries for accrued expenses and revenues from the end of the previous period. You can use reversing entries to adjust records instead of deleting them to help you maintain the integrity of your company’s financial records.
Reversing entries are optional to use as they don’t have a significant effect on financial statements. The purpose of these entries is to reverse the adjusting entries that were made in the previous financial reporting period. It is commonly used for revenue and expense accounts which had accruals or prepayments in the preceding accounting cycle and the accountant prefers not to keep these in the accounting system.
The process to reverse a journal entry in QuickBooks Desktop involves the following steps:
Note: The Reversed Journal has an R next to the entry number and any debit and credit amounts that are reversed. The new entry will be dated the first day of the next month, following the original transaction date.
If you’re using a recurring template for your journal entries and it stopped creating transactions, there are a few reasons for it. It’s possible that either the recurrence has been turned off or the template is corrupted.
To get it fixed, you can delete and recreate the recurring template to refresh everything. Then, you can manually create the Journal Entries that were not created before.
Follow the steps below to delete an old template:
Automating journal entries can lead to an accounting environment that is more accurate, more efficient and better able to focus on higher value tasks. At the same time, automation lowers several risks endemic to the accounting close process. Here are the benefits of automating journal entries:
Reducing the degree of manual intervention in the journal entry process can cut down on errors in amounts, account coding and instances of journal entry duplication and omission. It also ensures that transactions are coded consistently.
When the majority of journal entries are automated, staff can be redeployed to dealing with exceptions and to higher-level activities, such as reviewing, approving, reconciling and analyzing financials, rather than simply recording.
The combination of automated journal entries with redeployed manpower can help companies close their books more quickly. A continuous close is more easily achieved as well. Plus, the increased transparency, streamlined approvals and process monitoring help resolve speedbumps more quickly.
Information used for decision-making, such as financial reporting, forecasting and key performance indicator (KPI) analysis, can be available sooner because the financial close is completed more quickly.
Several features of journal entry automation — including less manual intervention, increased controls and earlier visibility into the data — can have the synergistic effect of detecting fraud faster and reducing the likelihood of it occurring.
Digital storage of journal entry supporting documents makes it easier for auditors to access data and verify transactions. Audits that run more smoothly minimize effort for all parties and can lessen fees.
Journal entries are essential for maintaining accurate financial records and streamlined workflow. Here are some best practices to consider:
You can use journal entries for transactions that cannot be entered through standard QuickBooks modules (e.g., adjusting entries, depreciation, accruals).
Use the memo field to describe why the journal entry was created. This helps during audits or when reviewing past entries. Make sure you avoid vague descriptions like “Adjustment.” Instead, use specifics like Adjust accrued revenue for December.
Ensure that journal entries align with bank statements, subsidiary ledgers, or other supporting documents. Always verify that the total debits equal total credits in each journal entry.
For regular adjustments like monthly depreciation, set up recurring journal entries to save time and reduce errors. Ensure that you review recurring entries for accuracy before posting them.
Add journal entry reviews in your monthly closing process to catch errors early. If using reversing entries, ensure they’re set to reverse in the correct period.
Below are some common instances for Journal Entries in QuickBooks Desktop:
To simplify audits and manage accurate financial records, you need to effectively report and analyze journal entries in QuickBooks.
Here’s how:
