Ways to achieve a journal to a bank account in Xero

Although you can't post a manual journal directly to a bank account in Xero, there are three ways to achieve the same effect. If you have the Advisor user role, use this page to learn about the alternatives to posting a manual journal directly to a bank account.

Bank account balances in Xero are based on the conversion balance, transactions entered into the account (payments entered on invoices and bills, spend and receive money, bank transfers) and reconciled statement lines. Xero doesn't let you directly code a manual journal entry to a bank account so that auditing and reporting on your bank account is as accurate as possible.

Use spend or receive money

Xero automates journals to the bank account when you add spend or receive money transactions.

You can use a spend or receive money transaction to create the journal side of the entry, then mark it as reconciled for the bank side.

  1. Use the Manage Account menu from any of the bank account screens and select Spend Money or Receive Money.

    Manage Account menu showing columns of options under the main headings Find, New and Reconcile.

  2. Mark the transaction as reconciled if you can't import its bank statement line.

Example: sales deposited into bank account

To account for sales of 100.00 deposited into your bank account, enter a receive money transaction for 100.00. This will create a debit to the bank account and a credit to the sales account.

Run the Journal Report to see this (and other ledger entries).

DrBank Account100 
CrSales 100

Use a suspense account

You can use a suspense account to:

  • Journal a large number of entries at once, rather than just one or 2 lines of coding.
  • Show only the movement over a longer period (for example monthly), instead of daily.

Example: many lines of coding

You withdraw 20,000.00 from your bank account on September 5, 2011 for payroll. You want to code it across 200 separate expense accounts (to itemize by employee).

  1. Set up a suspense account in your chart of accounts.
  2. Create a spend money transaction and code it to the suspense account. This will create a debit to the suspense account and a credit to the bank account:

    CrBank 20,000
  3. Add a manual journal, coded to the suspense account, to give you the required details for the payroll transaction, like this:

    DrEmployee Wages Expense 1180 
    DrEmployee Wages Expense 2220 
    DrEmployee Wages Expense 3195 
    DrEmployee Wages Expense 4…195 
    CrSuspense 20,000

    Alternatively you can import up to 300 lines of manual journals using a CSV file.

  4. Reconcile a transaction without a bank statement by marking it as reconciled if you can't import the bank statement line.

Example: movement over time

For clients who send you spreadsheets summarizing all their transactions once a month, it may be easier to set up their bank accounts as current assets. This will save you the step of having to create spend or receive money transactions, outlined in this example.
  1. You have received this spreadsheet summarizing transactions over the month from a client who has one bank account:

    September 2011 
    Sales received+1,600
    Office expenses -90

    You know their bank account balance has increased by 788.

  2. Enter a receive money transaction for 788 and code it to your suspense account. It will create this entry:

    DrBank Account788 
    CrSuspense 788
  3. Add a manual journal like this:

    DrOffice expenses90 
    CrSales 1600

    This clears the suspense account and shows the relevant account movements over the period.

Set up bank account as current asset

For a bank account with fewer transactions or to show movement in an organization for a period, consider setting up a current asset in your chart of accounts instead of a bank account. You can post manual journals to current asset accounts.

This may work for bank accounts such as term deposits where interest and tax transactions happen once a month or quarter.

If you're using Partner Edition and have clients on a Ledger plan, you may prefer to set up all bank accounts as current assets to reflect movements in account balances over a wider period of time rather than just day-to-day transactions. This also saves having to create spend and receive money transactions.

Image showing chart of accounts with term deposit bank account as current asset type.

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