Understanding when you should and should not do journal entries in QuickBooks is important for the overall success of your QuickBooks file.
Journal entries and QuickBooks – are they friends or foes? It’s not a clear cut answer. There are times where it makes perfect sense to do a journal entry in Quickbooks and there are times where a journal entry simply is not the best solution for you in QuickBooks. QuickBooks is designed that you should have minimal need for journal entries as the average person using it doesn’t understand the debit and credit process. Having worked with QuickBooks for more than 2 decades, I find that journal entries are often done unnecessarily by those who don’t take the time to really understand the inner workings of Quickbooks and try to quick fix things.
Below I will highlight some of the times you will say yes to Journal Entries in Quickbooks and other times you want to say no and do use another function of QuickBooks!
Say Yes to Journal Entries:
- When you are accounting for depreciation amortization, then journal entries are the way to go.
- When you need to move amounts from one class to another and it involves multiple transactions or a lump sum amount.
- Year End Activities – there are just some times where you need to clean up various activities to have good year-end books and Journal Entries are an easy way to do that.
- If you need to transfer amounts from one income or expense account to another that involves more than one transaction or it is simply too difficult to change the original transaction then a journal entry may be your answer!
- When you need to make adjustments or move dollars from one asset, liability or equity account to an income or expense account.
- When you interface with certain 3rd party software, some of them import transactions as journal entries.
Just Say No…don’t do it!
- Journal entries don’t have access to items so any time you are needing to have a transaction impact the item list, you need to ensure you are using the functionality of invoices, bills, checks, etc.
- Do not do journal entries when it impacts your accounts receivable or accounts payable accounts as this creates a mess that never goes away until you correctly apply the credit/debit. Ever wonder why your AR and AP reports show those zero balance lines? Could very well be that there’s a Journal Entry that needs to be cleaned up. We’ll save that lengthy discussion for another blog and video!
How do you make a Journal Entry? Go to the QuickBooks Company menu and select Make General Journal Entries. Here’s a great reference for you!
Reach out to us if you have any questions or need help cleaning up previous journal entries that just won’t go away on your reports!