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
Go to the JE (Journal Entry) module.
Click Create New Journal Entry.
Step 2: Select AR Account
In the Account field, select Accounts Receivable (AR).
Enter the Amount.
Select the Entity (Customer).
Choose the Store associated with the transaction.
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
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
Go to the JE module.
Create a new Journal Entry.
Step 2: Select AP Account
In the Account field, select Accounts Payable (AP).
Enter the Amount.
Select the Entity (Vendor).
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.
FAQs
Why doesn't my Accounts Receivable (A/R) Aging balance match the Balance Sheet?
Answer
A common reason for a difference between the Accounts Receivable (A/R) Aging report and the Balance Sheet is that a Journal Entry (JE) has been posted directly to an Accounts Receivable GL Account without specifying an associated Customer Entity.
When an A/R account is used in a Journal Entry without a Customer, the transaction updates the General Ledger and is reflected on the Balance Sheet. However, because no customer is associated with the transaction, it is not recorded in the Accounts Receivable subledger and therefore does not appear in the A/R Aging report.
As a result, the Balance Sheet and the A/R Aging report may show different balances.
Best Practice
Whenever posting directly to an Accounts Receivable account through a Journal Entry, ensure that the appropriate Customer Entity is specified. This keeps the General Ledger and the Accounts Receivable subledger synchronized and helps prevent reconciliation differences.
Can I view Accounts Receivable Aging by General Ledger account?
No. The standard Accounts Receivable Aging reports in XoroERP are designed to display outstanding receivable balances by customer, rather than by General Ledger account.
The A/R Aging reports organize receivables using information such as:
Customer
Payment Terms
Currency
Aging Buckets
Outstanding Amount
Home Currency Amount
How can I reconcile A/R Aging with the General Ledger?
If you need to compare customer receivable balances with the General Ledger, the recommended approach is to use both the Accounts Receivable Aging report and the Account Register (or Trial Balance) together.
Recommended reconciliation process:
Run the Accounts Receivable Aging Detail (By Due Date) report to review customer-level outstanding balances.
Open the Account Register (or Trial Balance) for the Accounts Receivable control account.
Compare the totals between the A/R Aging report and the General Ledger.
If the totals do not match, review whether any Journal Entries have been posted directly to the Accounts Receivable account without an associated Customer Entity, as these entries appear in the General Ledger but not in the A/R Aging report.
Summary
A/R Aging provides receivable balances by customer.
Account Register and Trial Balance provide balances by General Ledger account.
Use both reports together to reconcile customer receivables with the General Ledger and identify any discrepancies.
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