How journal entry works
Most journal entries are created automatically behind the scenes when a user records an invoice, bill or payment inside accounting software, with no manual entry required. Manual journal entries are used for things software cannot generate on its own, such as recording depreciation, accruing an expense not yet billed, or correcting a transaction that was originally miscoded.
Each journal entry needs a clear description and, ideally, supporting documentation attached, so anyone reviewing the books later understands exactly why it was made. Unexplained or unsupported journal entries are one of the first things a reviewer, lender or auditor checks, since they can potentially be used to manipulate reported results.
Example
At month end, a business records a manual journal entry to accrue $3,500 for a utility bill received after close but relating to services used that month: a $3,500 debit to utilities expense and a $3,500 credit to accrued liabilities. The entry includes a note explaining the estimate is based on the prior month's usage, so the reasoning is clear if reviewed later by anyone else.
Journal Entry in QuickBooks Online vs Xero
QuickBooks Online has a dedicated Journal Entry transaction type for manual entries, kept separate from the automatic entries created by invoices and bills. Xero calls the same function a Manual Journal, with fields for a description and optional attached documentation for support.
Common mistakes
- Posting a journal entry with no description or attached backup, which leaves a reviewer, lender or auditor unable to tell months later why the entry was made.
- Using a manual journal entry to fix something that software already handles automatically, such as reclassifying a bill, which creates a duplicate or offsetting balance instead of a clean correction.
- Letting an owner or untrained staff member post journal entries directly to cash or revenue accounts, which bypasses the normal transaction trail and makes fraud or error harder to spot.
Why it matters
Every number on a financial statement traces back to a journal entry, so an unexplained or unsupported one undermines the reliability of the whole report. Lenders, investors and auditors specifically review manual entries because they are the easiest place to hide a manipulated figure. A business that documents each entry clearly gets faster loan approvals, smoother audits and financial statements it can actually trust for decisions.
Related terms
How LedgerBPO handles journal entry
We post manual journal entries only where needed, accruals, corrections and depreciation, each with a clear description and supporting documentation attached, so your general ledger stays clean and easily reviewable at any time.