A Journal Entry is an entry made in the general ledger and it indicates the affected accounts.
A Journal Entry is a multi purpose transaction where the debit and credit accounts can be selected.
All types of accounting entries other than Sales and Purchase transactions are made using the Journal Entry. A Journal Entry is a standard accounting transaction that affects multiple Accounts and the sum of debits is equal to the sum of credits. A Journal Entry Impacts the main ledger.
Journal Entries can be used for entering expenses, opening entries, contra entries, bank payments, excise entries, etc. For example, booking running expenses, direct expenses like petrol/transport, sundry expenses, adjustment entries, and adjusting invoice amount.
To access the Journal Entry list, go to:
Home > Search Bar > Search for "Journal Entry"
1. How to create a Journal Entry
- Go to the Journal Entry list, click on New.
- The default Entry Type will be 'Journal Entry'. This is a general purpose entry type. Visit content #3 for more Journal Entry types
- You can change the Posting Date.
- Expand the table, select an Account from which amount is debited.
- Select the Party Type and Party if it's a Debtor entry.
- Add a row where the amount will be credited.
- Note that, in the end, total debit and credit amounts should add up to be the same.
- Save and Submit.
Finance Book: You can post this entry to a specific Finance Book. On leaving this field blank, this Journal Entry will show up in all Finance Books. This field will only be visible if 'Enable Finance Books' under the Fixed Asset Defaults section of the Company master is checked.
1.1 Quick Entry
When creating a Journal Entry, a Quick Entry button can be seen on the top right. This makes creating the Journal Entry a bit easier. Enter the amount, select the accounts, add a remark. This will populate the 'Accounting Entries' table with the selected details.
2.1 Multi Currency entries
If the accounts selected are in different currencies, tick the 'Multi Currency' checkbox. If this checkbox is not enabled, you will not be able to select any foreign currencies in the Journal Entry. This will show the different currency and fetch the 'Exchange Rate'. To know more, visit the Multi-Currency Accounting page.
2.2 Print Settings
Pay To / Recd From: The name entered here will show up in the Sales Invoice. This is useful for printing cheques. Go to the print view in the Journal Entry
You can print your Journal Entry on your company's letterhead.
2.3 More Information
- Mode of Payment: Whether the payment was done using Wire Transfer, Bank Draft, Credit Card, Cheque, or Cash. New Modes of Payment can also be created. If a Bank Account is set in Mode of Payment, it will be fetched here when the Mode of Payment is selected.
- Is Opening: If the Journal Entry is of type 'Opening Entry' this field will be set to 'Yes'.
3. Journal Entry Types
Let's take a look at some of the common accounting entries that can be done via Journal Entry
3.1 Journal Entry
This is a general purpose entry type which can be used for different purposes. Let's see a few examples.
Expenses (non accruing)
Many times it may not be necessary to accrue an expense, but it can be directly booked against an expense Account on payment. For example, a travel allowance or a telephone bill. You can directly debit Telephone Expense (instead of your telephone company) and credit your Bank on payment.
- Debit: Expense Account (like Telephone expense).
- Credit: Bank or Cash Account.
For crediting employee salaries, 'Journal Entry' type is used. In this case,
- Debit: The salary components.
- Credit: The bank account.
3.2 Bank Entry
Use this type when making or receiving a payment using a Bank Account. For example, paying for an entertainment charges etc using the Company's bank account.
3.3 Cash Entry
This is the same as 'Bank Entry' but the payment is made via Cash Account.
3.4 Credit Card Entry
This is a type of entry to easily identify all credit card entries.
3.5 Debit Note
This is a document sent by a customer (your Company) to a supplier (your Supplier) when returning goods/items.
You can also create a Debit Note directly from a Purchase Invoice.
"Debit Note" is made for a Supplier against a Purchase Invoice or accepted as a credit note from Supplier when a company returns goods. When a Debit Note is made, the Company can either receive a payment from the Supplier or adjust the amount in another invoice.
- Debit: Supplier Account.
- Credit: Purchase Return Account.
To know more, visit this page.
3.6 Credit Note
This is a document sent by a supplier to a customer when returning goods/items.
"Credit Note" is made for a Customer against a Sales Invoice when the company needs to adjust a payment for returned goods. When a Credit Note is made, the seller can either make a payment to the customer or adjust the amount in another invoice.
- Debit: Sales Return Account.
- Credit: Customer Account.
A debit/credit note is usually issued for the value of the goods returned or lesser.
3.7 Contra Entry
A Contra Entry is booked when the transaction is booked within the same Company of types:
- Cash to Cash
- Bank to Bank
- Cash to Bank
- Bank to Cash
This is used to record withdrawing or depositing money from a Bank Account. When this entry is used, the money does not leave the company unless it is again used to pay for something.
Depreciation is when you write off certain value of your assets as an expense. For example if you have a computer that you will use for say 5 years, you can distribute its expense over the period and pass a Journal Entry at the end of each year reducing its value by a certain percentage.
- Debit: Depreciation (Expense).
- Credit: Asset (the Account under which you had booked the asset to be depreciated).