Demystifying Journals: And Why You Probably Shouldn’t Use Them

If you’ve ever been in your accounting software and spotted a button labelled “Journal Entry”, you might have had one of two reactions:

1. “That looks important, I’ll leave that alone.”

2. “How hard can it be?”

If you’ve leaned towards option two… you’re not alone.

Journals are one of those accounting features that sound mysterious, slightly intimidating, and just tempting enough to click when something doesn’t quite balance, but before you go anywhere near that button, let’s break down what journals actually are, how they work, and why they’re usually best left to your bookkeeper or accountant.

What is a journal?

In simple terms:

👉 A journal is a way of moving values between accounts without involving a bank transaction. It’s used to record adjustments in your accounts that don’t come from money going in or out of the bank. So while most of your bookkeeping is based on:

• Sales

• Purchases

• Bank transactions

Journals are used for the behind-the-scenes adjustments that make everything accurate.

An introduction to debits and credits

Now, we can’t talk about journals without briefly mentioning debits and credits. Don’t panic, this isn’t a test. Every journal has:

• A debit (what’s going in)

• A credit (what’s coming out)

The total must always balance. Think of it like moving money between pockets. If £100 leaves one pocket, it has to go somewhere else. That’s all a journal is doing within your accounts.

What are journals used for?

This is where journals start to make sense. They’re used for things like:

• Wages journals

Recording payroll in the accounts (instead of entering each payslip manually).

• Depreciation

Spreading the cost of assets (like equipment) over time.

• Accruals and prepayments

Making sure income and expenses are recorded in the correct period.

• Director’s loan adjustments

Tracking money taken in or out of a company that isn’t salary or dividends.

• Corrections

Fixing mistakes or reallocating transactions properly.

Example: Prepayment

You pay £1,200 for insurance covering 12 months. If you record it all in one month, your costs look too high. A journal can move part of that cost into future months so your accounts reflect reality more accurately

Why journals exist

Journals are there to make your accounts:

• More accurate

• More meaningful

• Aligned with accounting rules

They’re especially important at year-end, when accountants make adjustments to ensure your profit figure is correct. In short: Journals are about accuracy, not day-to-day bookkeeping.

So… why shouldn’t you use them?

Here’s the honest answer.... They’re very easy to get wrong and the mistakes aren’t always obvious. Unlike normal transactions, journals don’t have a bank entry to anchor them so if something goes wrong, it can quietly distort your accounts.

What can go wrong?

❌ Posting to the wrong accounts

It’s easy to move numbers into the wrong place and suddenly your reports stop making sense.

❌ Breaking your VAT records

Journals can bypass VAT logic in software, leading to incorrect VAT returns.

❌ Duplicating entries

Trying to “fix” something with a journal can result in counting the same income or expense twice.

❌ Making reports meaningless

A few incorrect journals can throw off:

• Your profit

• Your balance sheet

• Your tax position

And it’s not always obvious where the issue started.

❌ The “quick fix” trap

Journals are often used as a shortcut when something doesn’t balance. Instead of fixing the root cause, they can create a bigger problem underneath.

A real-world example

A business owner notices their expenses look too low. They add a journal to “top them up”.

The original issue was that some transactions hadn’t been categorised properly so now:

• The original transactions are still there

• The journal adds extra costs

• Expenses are overstated

• Profit is understated

And untangling it later becomes… a job.

When journals are appropriate

Journals absolutely have their place just not usually in day-to-day bookkeeping. This is where we typically use them:

• Year-end adjustments

• Accruals and prepayments

• Depreciation

• Payroll summaries

• Corrections where needed

In other words, structured, intentional adjustments. Not quick fixes.

What should you do instead?

If something doesn’t look right in your accounts:

• Check the original transaction

• Check the category

• Check whether something has been missed

If it still doesn’t make sense, ask your bookkeeper or accountant. It’s almost always better to fix the source than patch it with a journal.

Final thoughts

Just because the button exists… doesn’t mean it should be pressed! Journals aren’t something to be afraid of but they are something to respect. They’re a powerful tool used to make your accounts accurate and compliant but used incorrectly, they can quietly create confusion, errors and extra work later on.

For most business owners, the best approach is simple:

👉 Focus on getting your day-to-day bookkeeping right

👉 Leave the journals to the professionals

When journals are done properly, you probably won’t even notice them and that’s exactly how it should be.