What Are Journal Entries?
Journal entries are the building blocks of financial accounting and record all transactions in your business. In FreshBooks, all your activities like sending Invoices, accepting payments, and creating Credits and Expenses are automatically recorded as Journal Entries.
- All transactions entered in your FreshBooks account will have a corresponding Journal Entry, that affects at least two accounts in your Chart of Accounts (see treatment of common transactions here)
- Whenever an amount is updated, the original entry will be updated on the General Ledger Report to reflect the change.
Create Journal Entries
If there are certain entries that need to be recorded or corrected in your FreshBooks account, creating a Journal Entry can be done with the below steps:
- As an Accountant, or with Advanced Accounting enabled, click on the Accounting section
- Then click on the Chart of Accounts sub-tab
- If the Journal Entry needs to go into a new Account, the Account must be created first with the steps here
- Click on the New Journal Entry button
- Fill out the Entry Name, Date and Currency
- Enter in a Description for easy reference
- Choose the Accounts and enter in the amount in either the Debit or Credit field (at least one Account should be debited and one Account should be credited)
- Use the Add a line button if you need to add more Accounts
- Click Save to finish and the Journal Entry will be recorded.
Viewing Journal Entries
To view all manually created Journal Entries, either:
- Use the General Ledger Report
- Use the Journal Entry Report (available for those with Advanced Accounting and the new customized Chart of Accounts)
Fixing Journal Entries
Journal Entries are historical and permanent records of transactions occurring inside the account and once created, cannot be edited or deleted. This ensures your books remain accurate. If a Journal Entry is missing information, or you need to correct or clear out an error, use the below steps:
- Create a Journal Entry to reverse the error/incomplete entry (as in, the opposite of what’s been inputted in for debits and credits)
- Then create your new Journal Entry where you re-enter in the correct entry (to fix the error or add more detail).
If you corrected one entry, this results in three Journal Entries, with the final one being the updated and corrected version. The ending balance will reflect the correct amount as usual.
Journal Entries for Specific Account Types
Manual Journal Entries can be created for these scenarios:
- Current Assets - Used in daily operations of your business and can be converted into cash easily
- Long-Term Assets - Typically last longer than a year compared to Current Assets, are usually depreciated
- Depreciation - Accounting process that ensures the cost of a Long-Term Asset is allocated correctly over its useful life, due to different methods of calculating this, Depreciation must be recorded manually
- Loans - Amount that is borrowed and is meant to be paid back to the lender, including principal repayments and interest costs
- Lines of Credit - Preset amount that is borrowed as needed, repaid and borrowed again on a revolving basis, including principal repayments and interest costs
- Equity - An owner’s investment into their business as well as any withdrawals from the business. This includes withdrawing funds for personal use or depositing funds from a personal account to a business account to help with cash flow