How to Record Journal Entries in QuickBooks Online
QuickBooks Online automates most transactions through invoices, bills, and payments. But for adjustments, corrections, or specialized transactions, you’ll need to create journal entries manually. Here’s how:
1. Create a Journal Entry
- Go to + New → Journal Entry.
- Enter the Journal Date and Journal No. (optional).
- Select the Accounts involved from your chart of accounts.
- Enter debit and credit amounts (they must balance).
- Add a Description to explain the entry.
- Click Save and Close or Save and New.
2. Example: Accrued Expense
To record $2,000 in salaries earned but not yet paid:
- Debit Salaries Expense $2,000
- Credit Salaries Payable $2,000
3. Example: Prepaid Expense Adjustment
To recognize $500 of insurance expense from prepaid insurance:
- Debit Insurance Expense $500
- Credit Prepaid Insurance $500
4. Example: Closing Entries
At year-end, transfer net income to retained earnings:
- Debit Revenue $10,000
- Credit Income Summary $10,000
- Debit Income Summary $7,000
- Credit Expenses $7,000
- Debit Income Summary $3,000
- Credit Retained Earnings $3,000
5. Review and Edit Entries
- Go to Reports → Journal to view all entries.
- Click into a transaction to review or edit if necessary.
- Lock prior periods under Settings → Account and Settings → Advanced to prevent backdated changes.
QuickBooks Online Journal Entry Checklist
- ✅ Debits equal credits
- ✅ Correct accounts selected
- ✅ Clear description for audit trail
- ✅ Supporting documents attached
- ✅ Reviewed via Journal Report
For detailed tutorials, visit our QuickBooks Online guides at excelinaccounting.com/category/quickbooks-tutorial.
Journal Entries: The Complete Beginner’s Handbook (With Examples)
What Is a Journal Entry?
A journal entry is the formal recording of a financial transaction in the accounting system. Each entry typically includes the date, accounts affected, amounts debited and credited, and a brief description. Journal entries follow the double-entry accounting system, where every debit has a corresponding credit.
Basic Rules of Debits and Credits
- Assets: Increase with debits, decrease with credits.
- Liabilities: Increase with credits, decrease with debits.
- Equity: Increase with credits, decrease with debits.
- Revenue: Increase with credits, decrease with debits.
- Expenses: Increase with debits, decrease with credits.
Parts of a Journal Entry
- Date of transaction
- Accounts affected
- Debit and credit amounts
- Description or reference number
Examples of Basic Journal Entries
1) Recording a Sale:
Debit Accounts Receivable $1,000; Credit Sales Revenue $1,000.
2) Recording a Payment to Vendor:
Debit Accounts Payable $500; Credit Cash $500.
3) Recording Office Supplies Purchase:
Debit Office Supplies Expense $200; Credit Cash $200.
Adjusting Entries
Adjusting entries are made at the end of an accounting period to update account balances before preparing financial statements. They ensure revenues and expenses are recognized in the proper period.
Common Adjustments
- Accruals: Recording expenses or revenues earned but not yet paid/received.
- Deferrals: Shifting recognition of cash received/paid to future periods (prepaid expenses, unearned revenue).
- Estimates: Depreciation, allowance for doubtful accounts.
Example (Accrued Expense): Debit Salaries Expense $2,000; Credit Salaries Payable $2,000.
Example (Prepaid Insurance): Debit Insurance Expense $500; Credit Prepaid Insurance $500.
Closing Entries
Closing entries zero out temporary accounts (revenues, expenses, dividends) at the end of a period to prepare for the next. They transfer net income to retained earnings.
Example:
Debit Revenue $10,000; Credit Income Summary $10,000.
Debit Income Summary $7,000; Credit Expenses $7,000.
Debit Income Summary $3,000; Credit Retained Earnings $3,000.
Reversing Entries
Reversing entries are optional entries made at the beginning of a period to cancel certain adjusting entries. They simplify recording of recurring transactions like accrued payroll.
Journal Entries and Financial Statements
- Income Statement: Built from revenue and expense journal entries.
- Balance Sheet: Reflects assets, liabilities, and equity from journal entries.
- Cash Flow Statement: Reconciles cash-based transactions recorded through journal entries.
Common Mistakes to Avoid
- Forgetting that debits must equal credits.
- Misclassifying expenses as assets or vice versa.
- Failing to make adjusting entries at period-end.
- Using vague descriptions that hinder audits.
Frequently Asked Questions
Do I need journal entries if I use accounting software? Yes—software automates many entries, but understanding them ensures accuracy and troubleshooting.
How often are journal entries recorded? Daily for regular transactions, plus adjustments at period-end.
What is the difference between adjusting and closing entries? Adjusting entries update balances; closing entries reset temporary accounts for a new period.
Best Practices for Beginners
- Use consistent account names from your chart of accounts.
- Document every entry with supporting evidence (invoices, receipts).
- Review entries regularly to ensure accuracy.
- Learn common adjusting entries to prepare clean financial statements.
Putting It All Together
Journal entries are at the heart of accounting. Mastering them means understanding how every transaction flows into financial statements. By learning basic entries, adjustments, and closing processes, you’ll build a strong foundation for accurate bookkeeping and confident financial management.