A journal entry is a record of a financial transaction in the accounting system. It includes the date, accounts affected, amounts and a description of the transaction.
Journal entries are the building blocks of double-entry bookkeeping. Every financial transaction is recorded as a journal entry with at least one debit and one credit that must balance. While most transactions in modern accounting software are created automatically (from invoices, bills, bank feeds), some transactions require manual journal entries. Common manual journal entries include depreciation charges, accrued expenses, prepayment adjustments, bad debt write-offs, month-end adjustments and corrections. Each journal entry should include: the date of the transaction, the accounts to be debited and credited, the amounts, a clear narration explaining the entry and any supporting documentation references. Journal entries provide the audit trail for all financial transactions and are essential for month-end and year-end closing processes. In Xero, manual journal entries are created through the Manual Journal feature. SortBooks minimises the need for manual journals by automating routine transactions, but works alongside manual entries when needed for adjustments.
SortBooks helps with the bookkeeping behind journal entry by connecting to your Xero account and using AI to suggest the right account for transactions sitting in catch-all accounts, learning from your own past coding. Instead of fixing journal entry by hand, you review each suggestion, approve it, and SortBooks updates Xero, GST code included. Then ask the AI CFO about your numbers, using live Xero data.
Double-entry bookkeeping is a system where every transaction is recorded in at least two accounts - a debit and a credit - ensuring the accounting equation always balances.
The general ledger is the master record of all financial transactions in a business, organised by account. It forms the basis for preparing financial statements.
In double-entry bookkeeping, a debit is an entry on the left side of an account. Debits increase assets and expenses but decrease liabilities, equity and revenue.
In double-entry bookkeeping, a credit is an entry on the right side of an account. Credits increase liabilities, equity and revenue but decrease assets and expenses.
The month-end close is the process of finalising all accounting activities for a month, including reconciliation, adjustments and report preparation.
Connect Xero, check the AI's suggestions and approve the changes. SortBooks updates Xero for you.