Journal entries record accounting transactions of a business. The terminology refers to the days of hand-written accounting records, when daily transactions were were entered in a journal and later posted to individual account ledgers.
In Manager, most transactions are entered in other functional tabs, thereby automating many decisions about account posting and reducing errors. So journal entries are relatively few; most record transfers between accounts. In fact, no transaction involving the actual receipt or payment of funds by a business can be recorded via a journal entry.
The Journal Entries tab is always enabled for every business. To make a journal entry, go to that tab and click New Journal Entry:
Complete the entry:
Date is prefilled with today’s date, but can be edited.
Reference can be used for any form of identifier. If the box within the field is checked, Manager will add a sequence number automatically when the journal entry is created. Manager finds the highest
Reference among existing journal entries and adds 1.
Narration should be a brief description of the overall transaction being entered.
Account indicates which account the line will post to. If necessary, subaccount fields appear and must be completed.
The journal entry form initially opens with fields for two line items, and every journal entry must include lines for at least two accounts. More can be entered, as long as the sum of all debits equals the sum of all credits. Click Add line if more lines are needed.
If an account is chosen that involves previously specified inventory locations, an
Inventory location field appears below the
Description accepts information about the individual line item.
Enter debit amounts under the
Debit column and credit amounts under
Tax codes and
Tracking Codes if applicable. Frequently they are not for journal entries. (These fields do not appear unless tax codes and tracking codes have been defined under Settings.
Custom theme can be selected if any are active.
If a journal entry requires a tax code, enter the gross amount, including tax. The amount debited or credited to the selected account is automatically reduced, proportionate to the tax code. The reduction is debited or credited to Tax payable (or another account designated in the tax code’s definition). See the example below.
Because debits and credits must balance for all journal entries, Manager calculates the difference between their sums as inputs are made. The difference shows in red to the right of the totals. A red zero indicates a balanced transaction:
Order of lines can be changed by dragging the arrow symbols to their left. Lines can be deleted by clicking X to their right.
By long tradition in accounting, debits in a transaction are entered first, followed by credits. But the order has no financial impact.
Click Create to save the entry. If the journal entry includes more than one debit or credit, the finished transaction view will show totals for both:
Brilliant Industries purchases a delivery truck and records it as a fixed asset. At the same time, it buys and installs a package rack in the truck. The rack costs 100.00, inclusive of 10% tax. Brilliant posts the tax-inclusive payment to its Motor vehicle expenses account, applying the 10% tax code.
Brilliant’s accountant later determines that local tax law requires the cost of the rack, including tax, to be capitalized and depreciated as part of the cost of the truck, not taken as a current operating expense. So the rack’s full cost, including tax, must be shifted to the Fixed assets account. And since the tax can no longer be counted as an offsetting input tax, it must be removed from the Tax payable account.
This oversight is corrected with a single journal entry. The transaction records a 100.00 debit to Fixed assets and the subaccount for the truck. No tax code is selected. To balance this, a 100.00 credit is posted to Motor vehicle expenses with a 10% tax code applied:
When the journal entry is created, the book value of the truck in Fixed assets goes up by 100.00. But the balance of the Motor vehicle expenses account only goes down by 90.91. The remaining 9.09 is added to Tax payable to compensate for the input tax that can no longer be claimed. The accuracy of the Motor vehicle expenses account is preserved because, when the rack was originally recorded as a tax-inclusive payment, only 90.91 was posted to the expense account. (90.91 x 1.10 = 100.00)