This article explains what a journal entry is, how to post them, and what happens in FreeAgent when you do.
What are journals?
Sometimes your accountant might ask you to "post journal entries" or "post journals" in FreeAgent. Journal entries are a means of moving an amount from one account category to another. In FreeAgent, we call a group of journal entries a journal set.
In FreeAgent, you can move certain figures between categories without having to post journal entries. For example, if you wanted to change the category of a bill from Advertising to Consultancy, you could do that by simply editing the bill. However, there are some occasions where you would have to post journal entries, for example if you need to adjust income in a VAT-locked period or post weekly payroll.
You’ll always need to post at least two journal entries - one 'credit' and one 'debit' - for each of the accounts that the amount is moving from and to. If you’re taking an amount from one category and posting that amount into more than one other account, however, you’ll need to post multiple lines in your journal set. For example, if you’re taking £50 from Consultancy, and putting £20 of that into Advertising and £30 into Accountancy, you would need to post a journal set with three lines.
When you shouldn't use journal entries
If you're making changes to any of your bank accounts, you shouldn’t post journal entries. Instead, you should post these changes as manual bank transactions.
Similarly, if you're making adjustments to what your customers owe you (debtors), or what you owe your suppliers (creditors), you shouldn’t post these as journal entries. Instead, post invoices or credit notes for customer accounts, or bills or bill credit notes for supplier accounts.
How to post journal entries in FreeAgent
Before you start posting journal entries, you should speak to your accountant, who will explain what you need to post and where in FreeAgent. Once you’ve spoken to your accountant, simply follow these steps:
If you can’t see this button, you will need to ask your accountant (or the person who set up your FreeAgent account) to give you access to posting journal entries.
Enter the details of the journal entries as advised by your accountant. They should have told you which code and date to use, and whether to post particular amounts as either a debit or credit.
Enter an overarching description for for the entries (e.g. ‘Year end journals’ or ‘Correct VAT figures’) in the description box at the top of the form.
If you wish, you can also enter an individual description for a particular line of the journal entry in the corresponding ‘Additional information’ box.
If your journal set requires more than two lines, select ‘Add Another’ to add each additional line.
The debit and credit sides of the journal set must balance. That means there must be the same amount on each side of the journal set.
FreeAgent will show if your journal set does not balance, because there will be a red figure labelled ‘Difference’ under the debit and credit columns.
You won’t be able to create the journal entries until the debit and credit columns balance.
When you’ve finished posting the journal entries and they balance, the difference will show as 0 in green.
Once you’ve balanced the journal set, select ‘Create Journals’ and FreeAgent will post the journal entries into your accounts.