1101 PR.03 Journal Entries

Revision Date: March 28, 2025

1. Overview

2. Use of Journal Entries

3. Types of Journal Entries

4. Preparing Journal Entries

5. Journal Sources

6. Entries Involving Sponsored Awards

7. Approving Journal Entries

8. Supporting Documentation

9. Record Retention

1. Overview

Journal entries are the foundation for recording business transactions in the general ledger. This procedure describes business circumstances for using journal entries, explains the available types of journal entries, discusses the preparation (including the type of journal sources available) and approval of entries, cites the importance of including appropriate support, and addresses record retention.

This procedure assumes familiarity with the University’s Chart of Accounts (“COA”) and its terminology. For detailed information, refer to the COA website.

It is recommended that individuals who identify, process, or approve journal entries take trainings offered in Workday Learning such as Finance Foundations, Finance Internal Controls, and Internal Controls Approval Authority. There may be other relevant trainings and individuals are encouraged to review offerings on a regular basis.

2. Use of Journal Entries

A journal entry may be needed in certain business circumstances such as:

To initiate a transaction that will not flow through an operational journal but is necessary for complete and accurate financial reporting (i.e., record an accrual or prepaid expense).
To record a transaction or series of transactions that originates in a subsystem or integrated application (i.e., University service provider (“USP”) internal billing, student financial account activity, gift receipts from the Office of Development).
To perform an internal cost allocation such as the University services charge, internal interest and amortization for capital project funding, space charges, and medical malpractice insurance premiums.
To record an internal fund transfer or reclassification of funds to properly manage funding sources against budget and ensure proper stewardship of University resources [refer to (a) Reclassification and Transfer of Funds and (b) Reclassification and Transfer of Funds – Central Process Owners].
To adjust a balance sheet account (asset or liability) if an actionable reconciling item is identified through a monthly account reconciliation.
To correct or change ledger accounting or COA combinations in limited circumstances where the correction cannot be made from the original source system or transaction.

For additional guidance, see Form 1101 FR.01 Financial Review Checklist and Balance Sheet Ledger Account Reconciliation.

Journal entries may NOT be used in the following circumstances:

To record or correct Payroll transactions (also known as labor).
When an Accounting Adjustment is the proper means to correct a task in Workday.

For additional guidance, see:

Procedure 1101 PR.07 Accounting Corrections and Adjustments
Form 1101 FR.03 Non-Sponsored Accounting Correction and Adjustment Documentation Matrix
Form 1101 FR.04 Non-Sponsored Change Reason and Code Usage
Policy 1305 Cost Transfers Involving Sponsored Projects
Procedure 1305 PR.02 Cost Transfers Involving Sponsored Projects
Form 1305 FR.03 Cost Transfer Documentation Matrix
Form 1305 FR.04 Cost Transfer Change Reason and Code Usage

3. Types of Journal Entries

A journal entry gives a complete record of each financial transaction, showing all accounting debits and credits. Workday offers two distinct types of journal entries to create accounting:

Operational Journals are created automatically based on Workday’s native accounting flow and associated posting rules. These are preset by Workday. The majority of transaction types in Workday create operational journals, including, but not limited to:

Payroll Actuals, Forward Accruals, and Payroll Accounting Adjustments;
Expense Reports;
Customer and Supplier Invoices;
Accounting Adjustments;
Cash Sales; and
Allocations

Accounting Journals (referred to as Manual Journal Entries or Manual Journals) are created manually by individual users who are assigned the Cost Center Finance and Accounting Specialists role in Workday. Accounting journals can also be created using a spreadsheet template loaded through integrations via the managed file transfer process (referred to as Journal Uploads).

Manual Journal Entries:

Input is accomplished by selecting the Create Journal task in Workday.
Journal Uploads:

This type of entry is intended to be a more efficient way for a preparer to create a journal entry and is typically used when the number of journal lines exceeds a reasonable amount or when a subsystem is sending journal entry transactions to the accounting system. This entry type involves a formal system integration, and a properly formatted journal file created from the Journal Import Layout template. Managed File Transfer (“MFT”) uploads require users to have a custom Workday Journal Source and access to the MFT journal directory. The formatted journal file is uploaded via the MFT tool using the specific MFT journal directory associated with the custom journal source. Refer to the Journal Import File Layout Template for additional information regarding this system interface process. For questions or help with journal uploads, contact the Financial Service Center (“FSC”) at askfinance@yale.edu.

4. Preparing Journal Entries

The individual who prepares the journal entry initiates the transaction in Workday and is responsible for its reasonableness and completeness.

Training on how to initiate a new journal entry, find, copy, cancel a journal entry, the additional documentation needed for cost transfers, and steps for attaching documentation can be found at Create Manual Journal Entries. In each journal entry, the preparer defines and enters the accounting, and both preparers and approvers must apply a high level of scrutiny to ensure it is correct.

When creating the journal memo, it is important to be clear and provide a full description of the transaction’s purpose. Addressing the 5 W’s – who, what, where, when, and why in the description is essential so that someone unfamiliar with the transaction can understand the entry. This understanding extends to anyone who comes across the transaction after it has posted, not just the individuals who will be approving the entry.

Additionally, the preparer must ensure the journal entry is balanced (debit equals credits) and agrees to the control total in the journal header.

Note that the budget date located on the journal entry line should reflect the date of the original transaction. If a grant is involved, the date must be within the award period.

University Service Providers (“USPs”) are encouraged to refer to Accounting by and for University Service Providers as well as Policy 1410 University Service Providers and Procedure 1410 PR.03 University Service Providers: Accounting and Billing for additional information. For questions, contact the University Service Provider team at isp@yale.edu.

5. Journal Sources

Journal Sources are descriptive worktags in the Workday accounting system that help users, system processes, and reports understand the origin of a transaction. Workday defines the journal sources associated with operational journals. These are preset by Workday and cannot be changed.

For accounting journals, there is one preset by Workday called “Manual Journal” which is the most common one to use. Yale has configured and defined additional, specialized journal sources. Selecting the proper journal source when preparing or loading a journal entry is extremely important.

Distributed users (typically Cost Center Finance and Accounting Specialist roles) are expected to use only two Accounting Journal Sources during accounting journal creation:
- Manual Journal as described above in Section 3.
- ISP Adjustment for changes to “Internal Expense” charges that were not the result of a service provider error. Departments may not use the original service provider’s journal source.
Other Accounting Journal Sources are “owned” by service providers or central units and are not for general use. Service providers’ assigned journal sources are for billing customers only and may not be used for any other journal entries.
Users that have been assigned a journal source by University central finance may use only their assigned journal source. Do not use a journal source that has not been assigned to you.

Use of the correct journal source is important because these journal sources are used for compliance, reporting, and internal control activities including:

To understand and track how information comes into the general ledger;
To apply system controls and validations;
To route for a business process;
To filter large data sets to better understand from where the transaction originated; and
To limit transactions when drilling into reports or trying to identify certain types of transactions.

6. Entries Involving Sponsored Awards

Certain restrictions apply to transactions involving sponsored awards. Refer to Procedure 1305 PR.02 Cost Transfers Involving Sponsored Projects before preparing such transfers.

If a journal entry is deemed appropriate based on the guidance in Procedure 1305 PR.02, Form 1305 FR.02 Manual Journal – Cost Transfer Justification is required to be included as supporting documentation.

Sponsored Projects Financial Administration (“SPFA”) monitors entries made against sponsored awards and reviews them for compliance. Thorough explanation and retention of backup documentation is required in every case.

7. Approving Journal Entries

Once a journal entry is submitted by the preparer, it will route through a business process that contains preset approvers and approval conditions. This may include more than one individual and involve individuals both inside and outside of the department initiating the transaction. Entries may also route to various central finance units, including approvers within the Controller’s Office, after departmental approval is complete.

Before approving a journal entry, reviewers should verify the following:

The journal entry is being used for the correct purpose.
The amounts and COA segment values are substantiated and tie back to documentation, and that the accounting date and journal source are appropriate.
Revenue and expense corrections are made using the original ledger account and spend/revenue category unless the original transaction had an error in those codes, in which case, the correct codes should be debited/credited to correct the original transaction.
Reclassifications and transfers have the correct ledger account and corresponding spend/revenue categories for gifts, endowments, operating, and non-operating. Refer to Section 2 above for links to reclassification and transfer documents for guidance. It is important to ensure that the journal lines net to zero at the ledger account and corresponding spend/revenue categories level.
Corrections are being made in the fiscal year in which they occur. It is best to avoid corrections that cross fiscal years. Corrections across fiscal years should follow the guidance within the Reclassification and Transfer of Funds document. It is important to monitor transactional activity on a regular basis for timely identification of any corrections that may be needed.
Documentation supporting the need for this transaction is attached to the journal entry when feasible and appropriate. Amounts within the journal are substantiated and tie back to documentation (i.e., financial reports, reconciliations, invoices, email correspondence, etc.).

If the entry is incorrect and/or documentation is missing, the observations should be noted in the comment field and the transaction sent back to the initiator/preparer for correction.

Entries that are not approved by all required individuals by the month end close deadlines and year-end closing calendar as published are cancelled and must be reentered in the new month if they are still needed. It is recommended that both manual and MFT upload entry preparers monitor that their journal entries have been fully approved and posted in Workday before the month end deadlines. If the entry does not post before the month end deadline, it should be copied into the new period if it is still necessary.

8. Supporting Documentation

The current best practice for journal entry support is to attach documentation, when feasible and appropriate. Every journal entry must include a summary memo that describes the reason for the entry. Line descriptions should support the entry and any details specific to that transaction line. Supporting documentation is anything that provides evidence for a transaction and may include the person(s) who performed an action related to a transaction or who may have authorized an activity to take place. It can consist of source documents, supportive calculations, and/or other items necessary to substantiate the accuracy and appropriateness of a journal entry.

Examples of support include:
- Approval from appropriate department personnel and/or principal investigator if the transaction is moving activity to a COA over which the initiator is not responsible.
- Financial reports and/or detail transactions that show the balance or activity in its current COA.
- Invoices or contracts.
- For corrections or adjustments, specific reference to original transaction numbers (supplier invoices, cash sales, expense reports, ad hoc bank transactions, etc.) where the correction could not be performed from the original operational transaction.
Support should not include:
- Confidential information, such as sensitive personal or legal documents, although it should be noted in the journal memo where this information is kept so that it may be readily available to provide as requested.

9. Record Retention

Support for journal entries should be attached to transactions being processed. In this instance, the relevant documentation would be retained as part of the journal entry in Workday. Any documentation not attached to the journal entry in the accounting system, but necessary to explain and support the transaction, must be retained locally by the preparing department in accordance with Policy 1105 Retention of University Financial Records. This includes, but is not limited to, legal settlements and other confidential transactions, detail containing personal identifiers such as social security numbers, and evidence of preparation and approval signoffs.

Please note that retention periods may be extended if there is a related pending litigation or audit matter.