Journal entries: record what is not an invoice, bill or bank line

What a journal entry is, how to add, view, edit, reverse and delete one on the Journal Entries screen, and how debits and credits work in plain words.

A journal entry is a line in the books that you type in by hand, for money that never passes through an invoice, a bill or a bank line: your opening balances, a van bought before you used Todah, a loan, depreciation, or the year-end adjustments your accountant gives you. Every journal entry has at least two lines, and they balance: the total of the Debit column equals the total of the Credit column.

Before you start

• Journal Entries is for owners and admins. It is in the menu on the left, under Accounting. Other team members do not see it, and the server refuses their changes.
• Journal entries change the Balance Sheet and the Trial Balance. Your Profit and Loss and Sales Tax reports come from your invoices, bills and credit notes.
• Starting out? Use Enter Opening Balances first; see Opening balances.
• Money that shows up as a bank line in Banking is not a journal entry. Owner contributions, owner draws, loans received and loan repayments are categorised on the line itself (Match → Categorise). A journal entry for the same money would count it twice in 1000 Business Bank Account.

Debits and credits in plain words

• A debit increases something the business has (Business Bank Account, Equipment and Vehicles) or spent, and decreases something it owes.
• A credit increases something the business owes (Loans Payable, Credit Card) or the owners' share (Owner's Contributions, Retained Earnings), and decreases something it has.
• Example: a $20,000 van bought with a loan is a debit of 20,000 to 1500 Equipment and Vehicles and a credit of 20,000 to 2500 Loans Payable.

Step by step: a new journal entry

1. In the menu on the left, choose Journal Entries.
2. Choose New Journal Entry. The form opens with two empty lines.
3. In Date, pick the day the entry belongs to. Reports as at that day or later include it.
4. In Memo, say what it is for, for example Van bought before we started using Todah.
5. On the first line, choose the Account and type the amount in Debit.
6. On the second line, choose the Account and type the amount in Credit.
7. Choose Add Line for more lines if you need them. The line under the lines shows Debits, Credits and Balanced, or Out by an amount.
8. Choose Save Entry. A message confirms Journal entry saved, and it appears in the list.

What each box means

The list

Changing your mind

• Edit: choose View, then Edit. Change the date, memo or lines and choose Save Changes. It must still balance.
• Reverse: choose View, then Reverse, and confirm. Todah posts a new entry dated today with every debit turned into a credit and every credit into a debit, named Reversal of entry followed by the entry's number. The two cancel out from today onward, and the original stays in the list so the history is kept. This is how accountants undo an entry in a period that is already closed.
• Delete: choose View, then Delete, and confirm. The entry is gone and every report changes straight away, including past dates. This cannot be undone, so prefer Reverse for anything your accountant has already seen.

Messages you might see

• This entry does not balance: debits followed by credits. Make the two columns add up to the same total.
• A line is either a debit or a credit, not both. Clear one of the two amounts on that line.
• Choose an account on every line with an amount.
• A journal entry needs at least two lines with amounts.
• Use the other column rather than a negative amount.