Manual Journals allow you to transfer funds between accounts and ensure that your financial records are balanced according to specific requirements. They should be considered as a final option for recording transactions.
It's advisable to use Manual Journals only if you have a solid understanding of accounting principles, or when advised by a professional accountant.
Why create a Manual Journal?
Here are few reasons for creating a Manual Journal:
To enter debits and credits manually, like in traditional accounting systems
To transfer money between income and expense accounts
To transfer money from an asset, liability or equity account to an income or expense account
How does it work?
In ApprovalMax, you can set up multi-step approval workflows for Xero Manual Journals. Users of Organisations connected to Xero then create Manual Journal requests directly in ApprovalMax.
This is how the approval of Manual Journals works:
Manual Journal requests are created and submitted for approval in ApprovalMax
The multi-step approval workflow starts as predefined in ApprovalMax
The respective managers get notified that their approval is required, and make their decision
When all approvals are in place, the authorised Manual Journal and the automatically generated audit report get pushed to Xero
How to create a Manual Journal
Before creating a Manual Journal, you first need to set up and activate a Manual Journal workflow in ApprovalMax:
Specify all users who will be allowed to create Manual Journals in the creation step. By adding Requesters to this step, they get access to Manual Journal creation via the button.
In your Organisation, select Manual Journal and click on CREATE A REQUEST:
You can now create a Manual Journal approval request:
Fill in the mandatory data such as Narration (a description of the Manual Journal) and Journal date.
If you want to show Journals On Cash Basis reports, activate the respective checkbox.
You can default the Narration to the Journal Line Description by ticking the checkbox.
In the first line, select an account from the Account field. Depending on whether you want to debit or credit that account, enter the amount in the correct column.
In the next line, select the respective other account - the one you're moving money to or from. Depending on whether you entered a Debit or Credit in the first line, enter the same amount in the opposite column.
Check the amounts - you should have the same amount in both the Credit column in one line and the Debit column in the other. This means the accounts are in balance.
When done, click on the SUBMIT FOR APPROVAL button.
Once submitted, the Manual Journal will run through the predefined approval workflow. When all approvals are in place, the Manual Journal will be pushed to Xero along with a detailed audit trail of the entire workflow.
Please note: Xero doesn’t allow the use of some systems (including payables and receivables) and bank accounts in Manual Journals.
Please note: As part of accrual accounting, Manual Journals can be generated from the Line Item accrual report.