Most entries in a modern ledger come from documents: invoices, bills, bank lines, payroll reports. Manual journals are different. Someone types the debit and the credit directly, and nothing outside the journal proves it is right. That makes them the main route for errors at month end, and the first place an accountant, auditor or HMRC officer looks when a figure is questioned.
A small business does not need a heavy approval system. It needs a clear answer to three questions for every manual journal: why was it posted, what supports it, and who made and checked it.
Which journals need approval
| Journal type | Risk | Approval |
|---|---|---|
| Recurring journals set up from an approved schedule (depreciation, prepayment release) | Low once the schedule is right | Approve the schedule once; review monthly totals |
| Accruals and prepayments at month end | Medium: based on estimates | Reviewed with the month-end pack |
| Reclassifications between expense codes | Low to medium | Approve above a value threshold |
| Corrections to balance sheet accounts (bank, VAT, payroll, debtors, creditors) | High: can hide differences | Always approved |
| Journals to or from suspense | High | Always approved |
| Write-offs of debts or stock | High: affects profit and possibly VAT | Always approved, by the owner or a director |
| Anything posted to a closed period | High: changes reported figures | Always approved, before posting |
Set a value threshold for the middle categories, for example any journal over £1,000 or any journal touching a control account. Everything above it needs a second person.
Separating preparer and approver in a small team
In a business where one bookkeeper does everything, a full separation of duties is not realistic. Practical alternatives:
- The owner approves high-risk journals: a ten-minute look at a list each month is enough.
- The external accountant reviews journals quarterly or at the year end, with the evidence attached.
- Software permissions stop staff who enter invoices from posting manual journals at all.
- A journal listing report is reviewed monthly by someone other than the preparer, even if approval is after the event.
The aim is that no one person can both make a significant adjustment and be the only person who ever looks at it.
What every journal must carry
A narration a stranger could understand. “Adj” or “per accountant” is not a narration. Compare:
Accrue March electricity: supplier invoice not yet received, estimate based on February bill £410 + 5%.
Reclass £1,240 from repairs to computer equipment: laptop purchase INV-8812 coded in error.
Evidence attached to the journal in the software, or a reference to where it is filed: the calculation spreadsheet, the supplier’s email, the board minute for a dividend, the bank letter for a loan interest charge.
The right date. The journal date decides the period and, for some adjustments, the VAT return. Post accruals at the period end date; post corrections in the period you discover them unless the error is material to a reported period.
No VAT through journals where avoidable. VAT adjustments by manual journal are hard to trace into the VAT return. Use credit notes and invoices for VAT, and handle VAT errors through the proper correction route; see VAT corrections after filing.
Lock periods and watch what comes in late
Once the month is reviewed, lock the period in your software so that nothing can be posted to it without unlocking. Unlocking should be rare, approved and logged. Each month, run a report of all journals posted with a date in an earlier period: these are the adjustments that changed figures someone already saw.
For corrections and reclassifications themselves, correcting journals and reclassifications explains how to post them so the original and the fix are both visible. Journals that reverse automatically in the next period are covered in reversing journals after month end.
The audit trail
Cloud accounting software records who created, edited and deleted each transaction and when. That audit trail only helps if people have their own logins (never a shared “accounts” user) and if deleted items are reversed with a journal rather than erased where the software allows a choice.