> For the complete documentation index, see [llms.txt](https://docs.xorosoft.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.xorosoft.com/xoroerp-1/accounting/xoro-accounting-deep-dive/how-to-create-a-journal-entry-je-in-ar-and-ap.md).

# How to Create a Journal Entry (JE) in AR and AP

### Overview

In certain accounting scenarios, you may need to create a **Journal Entry (JE)** involving **Accounts Receivable (AR)** or **Accounts Payable (AP)** to adjust balances or resolve variances.

When AR or AP is used in a Journal Entry in XoroERP, the system automatically generates a related transactional document such as an **Invoice, Credit Memo, Bill, or Vendor Credit**. These documents are system-generated and remain linked to the original Journal Entry.

This article explains how to correctly create a Journal Entry in **AR** and **AP**, and how the related documents are created automatically.

***

### Creating a Journal Entry in Accounts Receivable (AR)

Follow the steps below to create a Journal Entry using **Accounts Receivable**.

#### Step 1: Navigate to the Journal Entry Module

1. Go to the **JE (Journal Entry) module**.
2. Click **Create New Journal Entry**.

***

#### Step 2: Select AR Account

1. In the **Account** field, select **Accounts Receivable (AR)**.
2. Enter the **Amount**.
3. Select the **Entity (Customer)**.
4. Choose the **Store** associated with the transaction.

{% hint style="info" %}

* When **AR is used in a Journal Entry**, selecting the **Customer (Entity)** is mandatory.
* The **Customer Currency must match the Account Currency**.
* If applicable, select the **Tax Code**.
  {% endhint %}

***

#### Step 3: Balance the Journal Entry

Add a **credit or debit entry** to balance the Journal Entry variance.

A Journal Entry can only be saved once the **total debit and credit amounts are equal**.

#### Currency Rule

The **Journal Entry currency must match both:**

* The **Account currency**
* The **Entity (Customer) currency**

***

### System Behaviour After Creating AR Journal Entry

Once the Journal Entry is created, the system automatically generates a related document.

You can view this document in the **Credit Memo Centre**.

#### Important Rule

{% hint style="warning" %}
The **Accounts Receivable account should not have a tax code assigned**.
{% endhint %}

***

#### Case 1: AR Used as Credit with Customer Entity

If **AR is credited in the Journal Entry** with a **Customer selected as the Entity**:

The system automatically creates a **Credit Memo**.

#### Important Notes

* This **Credit Memo is system-generated**.
* It **cannot be edited or voided directly**.
* To void the Credit Memo, you must **void the linked Journal Entry**.
* When the **Journal Entry is voided**, the **associated Credit Memo is automatically voided**.

***

#### Case 2: AR Used as Debit with Customer Entity

If **AR is debited in the Journal Entry** with a **Customer selected as the Entity**:

The system automatically creates an **Invoice**.

#### Important Notes

* This **Invoice is system-generated**.
* It **cannot be edited or voided directly**.
* To void the Invoice, you must **void the linked Journal Entry**.
* When the **Journal Entry is voided**, the **associated Invoice is automatically voided**.

***

### Creating a Journal Entry in Accounts Payable (AP)

The process for **Accounts Payable (AP)** is largely the same as AR, with the main difference being the **Entity type**.

Instead of selecting a **Customer**, you must select a **Vendor**.

***

#### Step 1: Navigate to the Journal Entry Module

1. Go to the **JE module**.
2. Create a new Journal Entry.

***

#### Step 2: Select AP Account

1. In the **Account field**, select **Accounts Payable (AP)**.
2. Enter the **Amount**.
3. Select the **Entity (Vendor)**.
4. Select the **Store**.

***

#### Step 3: Balance the Journal Entry

Create the necessary **debit or credit line** to balance the Journal Entry.

The same rules apply:

* **Account currency must match the Vendor currency**
* Debit and Credit totals must balance.

***

### System Behavior After Creating AP Journal Entry

When AP is used in a Journal Entry, XoroERP automatically creates related vendor documents.

***

#### Case 1: AP Used as Credit with Vendor Entity

If **AP is credited in the Journal Entry** with a **Vendor selected as the Entity**:

The system automatically creates a **Bill**.

#### Important Notes

* The **Bill is system-generated**.
* It **cannot be edited or voided directly**.
* To void the Bill, the **linked Journal Entry must be voided**.
* When the **Journal Entry is voided**, the **associated Bill is automatically voided**.

***

#### Case 2: AP Used as Debit with Vendor Entity

If **AP is debited in the Journal Entry** with a **Vendor selected as the Entity**:

The system automatically creates a **Vendor Credit**.

#### Important Notes

* The **Vendor Credit is system-generated**.
* It **cannot be edited or voided directly**.
* To void the Vendor Credit, the **linked Journal Entry must be voided**.
* When the **Journal Entry is voided**, the **associated Vendor Credit is automatically voided**.

***

### Summary

When AR or AP accounts are used in a Journal Entry in XoroERP:

* The **Customer or Vendor must be selected as the Entity**.
* The **currency must match between Account, Entity, and Journal Entry**.
* The system **automatically generates related documents** such as:
  * Invoice
  * Credit Memo
  * Bill
  * Vendor Credit
* These documents **cannot be edited or voided independently**.
* To remove them, you must **void the linked Journal Entry**.


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