Journal Entry

Journal Entries

Beyond basic sales and purchase invoices, businesses must process various other financial transactions. These include processing employee salaries, reimbursing expenses, receiving interest on bank deposits, or recording asset depreciation. To record these diverse financial activities accurately and maintain proper financial statements, ERPNext utilizes Journal Entries and Payment Entries.

Understanding Journal Entries

A Journal Entry is a fundamental accounting record of a transaction conducted by the company. It directly impacts the general ledger and ensures your books remain balanced.

Every Journal Entry will impact at least two accounts, and the total debit amount must always match the total credit amount. A standard entry contains:

1. Date of the transaction.
2. Accounts and amounts to be debited.
3. Accounts and amounts to be credited.
4. A brief description of the transaction.

How to Create a Journal Entry:

1. Navigate to Accounting > Journal Entry (under the General Ledger section) or search for it using the Awesome Bar.
2. Click Add Journal Entry.
3. Select the Entry Type, Company and the Posting Date.
4. In the Accounting Entries table, select the first account and enter the amount in either the debit or credit column.
5. Click Add Row to select the offsetting account and enter the corresponding amount to balance the entry.

1. Optional: Enter Accounting Dimensions and reference details.
2. Click Save and Submit.

Helpful Features within Journal Entries:

1. Journal Entry Templates: If a specific journal entry is posted periodically (like monthly rent or salary runs), you can save the Company, Entry Type, and standard accounts into a Journal Entry Template. These details can then be easily imported to save time on future entries.

1. Make Difference Entry: If you are drafting a complex entry and the total debit does not match the total credit, ERPNext displays a "Make Difference Entry" button. Clicking this adds a new row with the exact difference amount, allowing you to quickly select the balancing account.
2. Multi-Currency: If the accounts selected involve different currencies, simply check the "Multi Currency" checkbox to manage the exchange rates and entries properly.

Understanding Payment Entries

While Journal Entries handle a broad range of adjustments, Payment Entries are specifically designed for cash flow movements. A Payment Entry is created to record:

1. The receipt of money from a customer.
2. The payment of money to a supplier.
3. The internal transfer of money from one bank account to another.

How to Create a Payment Entry (Manually):

1. Navigate to Accounting > Payment Entry (found under Accounts Payable or Accounts Receivable).
2. Click Add Payment Entry.
3. Set the Posting Date, Payment Type (Receive, Pay, or Internal Transfer), and Payment Mode (Cash, Bank Draft, Wire).

1. Select the Party Type (Customer or Supplier), the specific Party, and enter the Paid Amount.
2. Referencing Transactions: If this payment relates to a specific invoice or order, you can select it in the Reference section to allocate the payment.
3. Enter the Check/Reference Number and Date under the Transaction ID section.

1. Click Save and Submit.

Creating Payment Entries Directly from Transactions: Instead of creating a Payment Entry from scratch, a much faster alternative is to open the specific Sales Invoice or Purchase Invoice and click the "Create" button at the top right, then select Payment. This automatically pulls all the relevant party details, outstanding amounts, and references into a new Payment Entry draft.