Are you wondering how to make a journal entry in QuickBooks Online? Understanding the journal entry process can be tricky, especially when you have multiple accounts involved. Here’s everything you need to know about how to make a journal entry in QuickBooks Online.
Get the step-by-step instructions
Here is the general process you can expect when making a journal entry in QuickBooks Online.
Step #1: Click “+ New”
First, you want to find the “+ New” button on the right-hand toolbar.
Step #2: Click “Journal Entry” Under “Other”
Then, click “Journal Entry’ which is under the “Other” column.
Step #3: Enter Relevant Information
This should bring you to the below screen.
Now, it’s time to enter all the relevant information about the journal entry. This includes the journal entry date, the accounts you are adjusting, a description, and the amounts of the adjustment.
You can also add a more in-depth memo description and attach documents, such as a copy of a purchase invoice or customer payment.
Step #4: Select “Save and Close”
Finally, you will either select “Save and Close” or “Save and New” if you plan on entering more entries. You can also select “Make Recurring” if the same entry needs to be made on a regular basis.
When are Journal Entries Needed?
Journal entries are needed for various reasons and are primarily made by accountants and bookkeepers. For example, if you purchase a new property, you will most likely have a journal entry to record the asset and any mortgage. The same is true if you dispose of a property.
Commercial real estate businesses also will use journal entries around month-end and year-end to adjust payable accounts, prepaids, loan balances, depreciation, and more.
Journal entries generally shouldn’t be made to record payments from customers or vendors. Instead, you should use the “Bank Deposit” or “Expense” functions.
Journal Entry Tips
Here are a few tips on how to make a journal entry in QuickBooks Online.
Know Your Debits and Credits
Journal entries work based on debits and credits. Debits to asset and expense accounts increase the balance, while debits to liability and income accounts lower the balance. The opposite is true for credits. Credits decrease asset and expense accounts while increasing liability and income accounts. Being able to properly differentiate between debits and credits can help you make the right adjustments to your accounts. Your debits must equal your credits to record the entry.
Make Sure Entries are Reconciled
When you are making journal entries that adjust cash or credit card accounts, it’s important that these adjustments are reconciled when doing monthly work. Commonly, entries that are made to cash and credit card accounts are to clear out old items.
Plan Journal Entry Before Entering
It can be helpful to write your journal entry down on paper before you enter it into QuickBooks Online. If you are on the journal entry screen, it can be hard to find the right accounts and know the amounts of the adjustment.
Be Cautious with Entries That Modify AP and AR
Journal entries that adjust accounts payable and accounts receivable could impact your aging schedules, especially if you don’t enter the customer or vendor account properly. When making entries to AP or AR, you generally need to specify a customer or vendor, but not always. Reviewing your aging schedules on a regular basis ensures that you are making proper entries.
How Can You Adjust a Prior Journal Entry?
QuickBooks Online has a report that outlines all past journal entries. If you need to alter a past journal entry, click “Reports” from the left-hand toolbar. Then, under “For my accountant,” there will be a report called “Adjusting Journal Entries.” Now find the entry you need to adjust and make the necessary adjustments.
Keep in mind that you shouldn’t be altering journal entries that have already been reconciled or relate to a prior period. Instead, consider making a new entry to record the change. For example, if you sold one of your commercial real estate properties, you shouldn’t go back and delete the entry recording the property. If you are still unsure about whether or not you should adjust the entry, reach out to an accounting professional.
We hope you now understand how to make a journal entry in QuickBooks Online! Oftentimes, your accountant will make adjusting entries at year-end to true-up account balances. However, if you find yourself needing to make an entry, be sure you follow these steps and ensure you are hitting the proper accounts. For more information on making journal entries in your commercial real estate business, reach out to STRATAFOLIO today.