Dr  Cost of Goods Sold                   100,000.00
    Cr  Retained Earnings                             100,000.00

Narration: "Prior period COGS brought forward"
DR = CR: 100,000.00 − 100,000.00 = 0.00 ✓

5.1 Import LC Adjustments

When a Journal Entry is marked with Is LC Adjustment = Yes and a Letter of Credit is selected, the entry becomes linked to the LC workflow. This is used for:

• LC Interest Accrual — recording period-end interest expense on financed LCs
• LC Payment adjustments — recording payments against LC payable that are not processed through the standard Payment form
• Balance corrections — adjusting LC-related balances

How LC interest accrual works:

1. From the LC view, click the Accrue Interest button
2. The system creates a Journal Entry with:
   • Is LC Adjustment = Yes
   • Letter of Credit = the selected LC
   • Reference prefix "ACCRUAL-"
   • Line 1: Dr Interest Expense (for the accrued amount)
   • Line 2: Cr LC Accrual Interest Payable (for the accrued amount)
3. The entry is linked to the LC and visible in the LC View's payment history
4. An LC Accrual History record is created for audit trail

Behavior of LC-marked JEs:

• Excluded from automatic purchase invoice matching (LC payments are bank-financed, not direct trade)
• Included in LC Exposure Report calculations
• Included in LC View outstanding balance calculations
• A warning appears if you try to edit a JE that has been referenced in LC Accrual History
• The LC view shows a warning before allowing status changes if linked JEs exist

5.2 Export LC Adjustments

When a Journal Entry is marked with Is Export LC Adjustment = Yes and an Export Letter of Credit is selected, the entry becomes linked to the Export LC workflow. This mirrors the Import LC behavior, used for:

• Export LC Interest Accrual — recording period-end interest on Export LCs
• Export LC Receipt adjustments — recording receipts that are not processed through the Export LC Receipt form
• Clearing stale Export LC AR Clearing balances — when the Export LC AR Clearing account has a residual balance after the Export LC Receipt has been processed

Stale Export LC Clearing balance: When an Export LC has fees, the Export LC AR Clearing account may retain a residual balance after the receipt. A Journal Entry with Is Export LC Adjustment can be used to clear this balance by creating a reversing entry between Export LC Receivable and Export LC AR Clearing.

6. Recurring Journal Entries

Navigate to Settings > Recurring Transactions > Recurring Journal Entries to configure periodic JE templates.

Recurring Journal Entries are useful for:

• Monthly depreciation — if not using the Fixed Asset module's automatic depreciation
• Prepaid expense amortization — monthly amortization of prepaid insurance, rent, etc.
• Accrued salaries — month-end salary accrual reversing the following month
• Standard cost adjustments — recurring inventory revaluation entries

When the Next Issue Date arrives, the system generates a Journal Entry from the template. The pending count on the Journal Entries tab badge shows how many recurring entries are due.

7. Settings Configuration

7.1 Journal Entry Footers

Navigate to Settings > Journal Entry Footers to create reusable footer content:

7.2 Custom Fields

Navigate to Settings > Custom Fields. Journal Entries support custom fields. Create custom fields with Placement = Journal Entries to add header-level fields, or Journal Entry Lines for line-level fields.

8. Accounting Impact

8.1 GL Posting

Journal Entries post full monetary amounts to the General Ledger. Each line creates a GL transaction with the specified debit or credit amount.

For each line with a Debit amount:
    Dr  Selected Account            Debit Amount (in transaction currency)
        Cr  (balancing entries from other lines)

For each line with a Credit amount:
    Dr  (balancing entries from other lines)
        Cr  Selected Account                     Credit Amount (in transaction currency)

If Tax Code is set on a line:
    Additional Dr/Cr entries are created for the tax amount
    Posted to Tax Receivable / Tax Payable accounts

If Currency Amount is set (different from Transaction Currency):
    Amount in account currency = Currency Amount (in account's currency)
    Amount in base currency = converted using exchange rate

Balancing mechanism:

• If the sum of transaction amounts across all lines is non-zero → a balancing entry is created to Suspense Account
• If transaction amounts are balanced but base amounts are not (due to FX rounding) → a balancing entry is created to Retained Earnings

8.2 Cash Flow Statement Treatment

The Cash Transaction for CFS Purposes flag determines whether the JE appears in the Cash Flow Statement:

• Checked: The JE is treated as a cash transaction and appears in the Direct Method CFS
• Unchecked (default): The JE is treated as a non-cash adjustment. In the Indirect Method, it may appear as an adjustment item depending on the accounts used. In the Direct Method, it is excluded.

Journal Entries marked with Is LC Adjustment or Is Export LC Adjustment are:

• Excluded from automatic sales/purchase invoice matching
• Included in LC-specific reports (LC Exposure Report, Export LC Exposure Report)
• Treated as non-cash adjustments in the CFS (unless Cash Transaction for CFS Purposes is also checked)

9. Reports

Journal Entries appear in the following reports:

10. Sample Data and Report Output

Scenario A — Correcting Entry (Reclassify Expense)

GL Transactions Created

Line 1 — Dr Office Supplies                    5,000.00
Line 2 — Cr Advertising                        5,000.00

Verification:
    Total Debits:  5,000.00
    Total Credits: 5,000.00
    DR = CR: 5,000.00 − 5,000.00 = 0.00 ✓
    Net P&L impact: +5,000 (Office Supplies) − 5,000 (Advertising) = 0 ✓

Scenario B — LC Interest Accrual

GL Transactions Created

Line 1 — Dr Interest Expense                   26,864.45
Line 2 — Cr LC Accrual Interest Payable         26,864.45

Verification:
    Total Debits:  26,864.45
    Total Credits: 26,864.45
    DR = CR: 26,864.45 − 26,864.45 = 0.00 ✓

Impact on LC Exposure Report

This JE appears in the LC Exposure Report as part of the Accrued Interest column for LC-001. The linked LC view shows this entry in its payment/accrual history.

Scenario C — Multi-Currency JE

GL Transactions Created

Line 1 — Dr Accounts Receivable (Global Imports Inc)
    Transaction Amount: 0.00 (balanced by other lines in transaction currency)
    Account Amount: 1,000.00 USD (in customer's currency)
    Base Amount: 110,000.00 BDT (1,000 × 110)

Line 2 — Cr Service Revenue
    Transaction Amount: 0.00
    Account Amount: 1,000.00 USD
    Base Amount: 110,000.00 BDT (1,000 × 110)

Verification (in USD):
    Total Debits:  1,000.00 USD
    Total Credits: 1,000.00 USD
    DR = CR: 1,000.00 − 1,000.00 = 0.00 ✓

Verification (in BDT):
    Total Debits:  110,000.00 BDT
    Total Credits: 110,000.00 BDT
    DR = CR: 110,000.00 − 110,000.00 = 0.00 ✓

Scenario D — Accrued Expense (Month-End Salary Accrual)

GL Transactions Created

Line 1 — Dr Salary Expense                      250,000.00
Line 2 — Cr Accrued Salaries Payable             250,000.00

Verification:
    Total Debits:  250,000.00
    Total Credits: 250,000.00
    DR = CR: 250,000.00 − 250,000.00 = 0.00 ✓

Impact: Records June expense even though cash is paid in July.
On 01-Jul when salary is paid, reverse this JE and post the actual payment.

Scenario E — Prepaid Expense Amortization (Monthly Rent)

GL Transactions Created

Line 1 — Dr Prepaid Rent                        120,000.00
Line 2 — Cr Cash at Bank                         120,000.00

Verification:
    Total Debits:  120,000.00
    Total Credits: 120,000.00
    DR = CR: 120,000.00 − 120,000.00 = 0.00 ✓

Monthly amortization JE (recurring, on 1st of each month for 12 months):
    Dr  Rent Expense                               10,000.00
        Cr  Prepaid Rent                             10,000.00

This can be set up as a Recurring Journal Entry (see Section 6).

Scenario F — Inter-Account Transfer (Cash Between Bank Accounts)

GL Transactions Created

Line 1 — Cr Cash at Bank (Main Account)            50,000.00
Line 2 — Dr Cash at Bank (Reserve Account)          50,000.00

Verification:
    Total Debits:  50,000.00
    Total Credits: 50,000.00
    DR = CR: 50,000.00 − 50,000.00 = 0.00 ✓

Impact on Cash Flow Statement:
    Because Cash Transaction for CFS Purposes = Yes, this JE appears
    in the Direct Method Cash Flow Statement as an operating activity.
    Net cash impact: 50,000 outflow (Main) + 50,000 inflow (Reserve) = 0 ✓

Scenario A — Correction JE:
    Dr  Office Supplies        5,000.00
        Cr  Advertising                    5,000.00
    DR = CR: 5,000.00 − 5,000.00 = 0.00 ✓

Scenario B — LC Interest Accrual:
    Dr  Interest Expense       26,864.45
        Cr  LC Accrual Interest Payable     26,864.45
    DR = CR: 26,864.45 − 26,864.45 = 0.00 ✓

Scenario C — Multi-Currency JE:
    Dr  AR (Global Imports)      $1,000.00 (BDT 110,000.00)
        Cr  Service Revenue                    $1,000.00 (BDT 110,000.00)
    DR = CR: $1,000 − $1,000 = 0 ✓
    DR = CR: 110,000 − 110,000 = 0 ✓

11. Accounting Regulation Compliance

11.1 IAS 1 — Presentation of Financial Statements

Requirement (§54-55): Each material class of similar items must be presented separately. Current and non-current assets/liabilities must be classified separately.

How this system complies: Journal Entries allow precise postings to the correct accounts, ensuring each financial statement line item is accurately stated. The flexibility to post to any account supports proper classification of assets, liabilities, equity, income, and expenses.

11.2 IAS 8 — Accounting Policies, Changes in Accounting Estimates and Errors

Requirement (§14(a)): Changes in accounting estimates are applied prospectively. Prior period errors are corrected retrospectively by adjusting the opening balance of retained earnings.

How this system complies: Journal Entries can be used to correct prior period errors by posting directly to Retained Earnings (via the retained earnings account). The Narration field documents the nature and reason for the correction, supporting the audit trail required by IAS 8.

11.3 IAS 21 — The Effects of Changes in Foreign Exchange Rates

Requirement (§23): Monetary items denominated in a foreign currency are translated at the closing rate. Exchange differences are recognized in profit or loss.

How this system complies: JE line items with foreign currency amounts are recorded at the transaction date exchange rate. The Currency Amount field allows precise recording in the foreign currency while the system handles the base currency conversion. Period-end revaluation is handled by the automated FX revaluation process, but manual JEs can be used for adjustments.

11.4 IFRS 9 — Financial Instruments

Requirement (§5.1.1): Financial assets are classified and measured at amortized cost, fair value through other comprehensive income (FVTOCI), or fair value through profit or loss (FVTPL).

How this system complies: Journal Entries can reclassify financial assets between categories, adjust carrying values for impairment, and record fair value changes. The LC Adjustment flags (Is LC Adjustment, Is Export LC Adjustment) properly identify entries related to bank-financed trade transactions.

11.5 IAS 37 — Provisions, Contingent Liabilities and Contingent Assets

Requirement (§14): A provision is recognized when an entity has a present obligation as a result of a past event, it is probable that an outflow will be required, and the amount can be reliably estimated.

How this system complies: Journal Entries can be used to record provisions (e.g., warranty provisions, legal provisions) by debiting the relevant expense and crediting a provision liability account. The Narration field documents the basis for the provision estimate.

11.6 DR = CR Verification

Every Journal Entry MUST have equal total Debits and Credits:

    Total Debits = Total Credits

    If Total Debits > Total Credits:
        Auto-balance to Suspense Account (Dr the difference)
    If Total Credits > Total Debits:
        Auto-balance to Suspense Account (Cr the difference)
    If transaction amounts are balanced but base amounts differ:
        Auto-balance to Retained Earnings

    Always verify the Out of Balance field shows 0.00 ✓

11.7 Relevant but Not Applicable

• IFRS 15 (Revenue): While JEs can adjust revenue accounts, the initial revenue recognition is handled by Sales Invoices. JEs are used for corrections and adjustments, not for initial revenue recognition under the five-step model.
• IFRS 16 (Leases): Journal Entries are a general tool and not specific to lease accounting.
• IAS 2 (Inventories): Inventory adjustments via JE are possible but the recommended approach is through standard purchase and sale transactions for proper quantity tracking and cost layer management.

End of Journal Entries Guide