What is a journal?
Definition of a journal
A journal is an accounting mechanism that moves an amount from one nominal account to another.
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How journals work:
You will always post journal entries in pairs to show the amount moving between the accounts. For example:
Let's say you prepare your accounts to the end of March each year, and your accountant sends you a bill for £1,000 in June 2014 that covers your accounts to 31st March 2014. You need to include that bill in your accounts to 31st March 2014, rather than the following year, so you would post two sets of journal entries:
- On 31st March 2014, debit the 'Accountancy Fees' category and credit the 'Accruals' category to include the fees in your costs
- On the date of the bill, in June 2014, debit the 'Accruals' category and credit the 'Accountancy Fees' category so that the bill doesn't create a double charge in your accounts.
Frequently Asked Questions
Should I post journals or should my accountant post them?
If you have an accountant, they will normally post journal entries for you. Journals are an exception rather than a rule in accounting, so it's best to speak to your accountant if you think that you might need them.
Got questions? Ask Emily!
FreeAgent's Chief Accountant Emily Coltman is available to answer your questions in the comments.