Create journal entries
This article explains how to create journal entries in FreeAgent.
Journal entries are a way of moving an amount from one account category to another.
Please note that you can move certain figures between categories without creating journal entries. For example:
- you can change the category of a bill by editing the bill.
- you can adjust what your customers owe you by creating invoices and credit notes.
- you can adjust what you owe your suppliers by creating bills and bill credit notes.
- you can change the amount in a bank account in FreeAgent by entering bank transactions manually. It’s not possible to create journals for a bank account category in FreeAgent.
However, there are occasions where you would have to create journal entries, for example if you need to make an adjustment in a VAT-locked period, record weekly payroll or adjust your Corporation Tax liability in FreeAgent. You’ll need full (level 8) access to your FreeAgent account to create journal entries.
We recommend that you speak to your accountant about whether you need to create journal entries and which journals are required before following the steps below.
Read about how to create recurring journal entries that are automatically created at a set interval, how to edit or delete existing journals and how to copy or reverse journal entries.
How to create journal entries
Navigate to the ‘Accounting’ tab at top of the screen and select ‘Journal Entries’ from the drop-down menu.
Select ‘Add new’ and choose ‘Journal Entries’ from the drop-down menu.
Next, enter the details of the journal entries as advised by your accountant.
Enter a description and choose a date
Enter a description to identify what the journal entries relate to and choose the relevant date to create them in your accounts.
Choose the relevant codes
When moving an amount from one category to another there needs to be equal debit and credit entries.
Select the relevant categories using the ‘Code’ drop-down menus and enter the amounts that are debits and credits into the appropriate fields. You can also enter ‘Additional information’ for each entry in the fields provided if you wish.
If you need to create additional lines in the journal, for example if you're moving an amount from one category into two separate categories, select ‘Add Another’ and enter the relevant information.
The total debit and credit balances of the journals must be equal for you to be able to create the journal entries. If these balances don’t match, the value of the difference will be displayed in red below the journals.
Once the debit and credit balances are equal, the ‘Difference’ will be zero and displayed in green.
Add an attachment
If you have any paperwork that relates to the journal (e.g. a receipt), you can attach a scanned copy by choosing ‘Select a file’ from the 'Attachments' area and following the instructions.
If you used the FreeAgent mobile app to upload a file to the Files area of your account, select 'Choose from saved files' instead. Attaching an image file to a journal entry will remove it from the Files area of your FreeAgent account.
Once you’re happy with the journals, select ‘Create Journal Entries’ to complete the process, or 'Create and add another' to create more journal entries.
You can view these new journal entries in the 'Posted Journals' tab on the Journal Entries screen.
Making Tax Digital (MTD) for Income Tax adjustments
If you've connected FreeAgent to HMRC for MTD for Income Tax, the journal adjustments will be included ‘With quarterly income and expenses’ by default and sent to HMRC as part of a quarterly update. The date of the journal entry will determine which quarterly update the adjustments are included on.
However, if for any reason the journal entry needs to be included under accounting adjustments instead of with quarterly income and expenses, you can choose to report them ‘As accounting adjustments’.
They’ll then be included on a Business Source Adjustable Summary (BSAS) and sent to HMRC after the end of tax year as part of your end-of-year update.
If you’re unsure how the journal adjustments should be reported for MTD for Income Tax, please speak to your accountant. If you’re not currently working with an accountant, you may wish to find one through FreeAgent CoPilot.