About
If you're coming from a traditional accounting system like QuickBooks or Xero, you're probably used to seeing detailed journal entries (JEs) for everything—from bank transactions to expense categorization.
Finaloop operates on a double-entry accounting system, meaning every accounting event – whether a transaction, adjustment, or accrual – is backed by a corresponding debit and credit JE in the background. These JEs update your General Ledger, Balance Sheet, Profit & Loss statement, and Cash Flow statement.
But, Finaloop works differently in order to create and maintain the most accurate books with the least amount of manual work needed from you or your accountants. We’re built for ecommerce brands that want real-time, accurate books without the complexity, delays, and inaccuracies of manual accounting. We designed our platform to do much of the heavy lifting behind the scenes.
Sometimes you or your accountant may want to add a JE to report an external transaction, adjustment, or accrual, or to reconcile with an external source. In Finaloop, JEs are created in one of 3 ways:
Automatically synced from your connected sources of truth (“Automated Journal Entries”),
Adjusted directly through our platform (“Customized Journal Entries”), or
Manually added by our accounting team (“Manual Journal Entries”).
Let's walk through exactly each type of JE and how they work in Finaloop.
1. Types of Journal Entries in Finaloop
Finaloop has all the JE capabilities of traditional accounting software like QuickBooks or Xero, but with a streamlined approach designed for ecommerce.
Our mission is to provide fully reconciled and accurate books that require less manual work for you. Books closed by our accounting team have successfully passed many due diligence reviews and IRS audits with flying colors so you can breathe easy and know you are in good hands!
Automated Journal Entries
✅ These JEs are IRS-aligned and fully automated. No need to add or edit them.
JEs are automatically imported in real time from your connected data sources using secure API connections. Every transaction is matched to the original source, categorized based on ecommerce best practices, and validated for accuracy.
Because they reflect the official data that goes to the IRS, these entries are locked and can’t be edited manually.
These include:
Sales, merchant fees, and undeposited funds
Bank & credit card transactions
Payroll data from Gusto
Bills from Settle or Bill.com
Ecommerce loans through PayPal Working Capital, Stripe Capital, and Shopify Capital
Customized Journal Entries
🧠 You or your accountant can use Finaloop's built-in tools to enter the adjustment needed and our system will automatically generate the necessary JE accurately in your books.
These entries are for things that require some input from your side. Instead of asking you to write formal JEs, we’ve built user-friendly tools that take care of it in just a few clicks.
These include:
Shopify order adjustments (marking orders as void, product giveaways, uncollectible, etc.)
Wholesale invoices
COGS and inventory
Prepaid expenses and accruals
Recording transactions from an external bank account or credit card
Bills
Payroll (except for Gusto)
Equity adjustments
Manual Journal Entries
🧮 When it doesn’t fit into the first two buckets, our team will take care of the JE manually. These may be initiated and recorded by us or requested by you or your accountant and reviewed by our team.
Examples of Manual Journal Entries that are initiated and recorded by our team include:
Loans that are not automated
Fixed asset depreciation
Intangible amortization
Year-end adjustments
We take full responsibility for their accuracy and ensure they are properly recorded in your books.
But, we also know there may be additional adjustments you want to make or that are requested by your accountant. For these additional adjustments that don't fall under any of the previous categories, send the details to our accounting team and we'll push to get this done with only a 24 hour turnaround time.
Because we take full responsibility for the accuracy of your books, we review and validate all JEs before they’re recorded. This helps prevent duplicate entries and ensures compliance with accounting best practices and alignment with our system's validations.
2. First, A Note To Fellow CPAs & Bookkeepers
If you’re used to manually recording JEs in traditional accounting software, Finaloop’s process may feel different. However, rest assured that our system has all the JE functionalities you need—just with an extra layer of quality control.
We work with many CPAs and bookkeepers and work to save you time while improving accuracy, so you can focus on higher-level work, such as filing taxes, providing financial analysis and controllership, and/or providing strategic advice instead of repetitive, manual data entry.
Our books have been used to file over 10,000 tax returns, hundreds of our brands have been through successful financial due diligence reviews, and we passed over 25 IRS audits with no comments. You and your client are in good hands and we are here to help you with anything you need to get your job done efficiently.
You can find all the details you need in this article but if you have any questions, we’re here to help!
3. Automated Journal Entries
Let’s dive into the type of JEs that are fully automated in Finaloop (no work needed from you!)
a. Sales & Merchant Fees from Connected Sales Channels & Payment Processors
a. Sales & Merchant Fees from Connected Sales Channels & Payment Processors
Any transactions or data from Shopify, Amazon, Walmart, Etsy, eBay, Shop Pay, Paypal, Stripe, Amazon Pay, Afterpay, or Klarna are fully automated.
JEs for gross sales, refunds, discounts, merchant fees, selling fees, shipping income, fulfillment fees, advertising, service fees, disputes, sales tax collected, and undeposited funds are automatically recorded, giving you a clear, real-time financial breakdown that aligns seamlessly with your sources of truth.
Our reconciliation process is built to cover all the complexities that arise in various use cases but we’ll outline some examples of how these JEs work or you can read more about how all this works here.
When a Shopify order comes in:
Debit “Accounts receivables (A/R) - Shopify,”
Credit “Sales - Shopify” or “Deferred revenue - Shopify”, depending on the specifics of your business setup.
When a customer pays via connected payment processor, e.g., Stripe:
We sync data from your sales channel, payment processor, and bank payouts using a robust three-way reconciliation process to match the order data to the payment data to the payout data.
Debit “Undeposited funds - Stripe”.
Credit “Accounts receivables (A/R) - Shopify,”
When Stripe deposits cash into your bank account:
Debit “Money in transit” (until it hits your actual bank account)
Credit “Undeposited funds - Stripe”
When a customer pays via cash payment, e.g., check, ACH, or cash:
Debit “Accounts receivable (A/R) - cash orders - Shopify”
Credit “Accounts receivables (A/R) - Shopify,”
When the payment is received in your bank account, mark it as “Cash payment received for store orders”:
Debit your Bank account
Credit “Cash payments received for store orders”
The “Cash payments received for store orders” is a Balance Sheet account with a negative balance, effectively reducing the net impact of the Accounts receivable (A/R) - cash orders - Shopify account in your books.
Alternatively, link the cash payment to the specific order(s) to credit “Accounts receivable (A/R) - cash orders- Shopify.”
b. Sales & Fees for Non-Integrated Sales Channels & Payment Processors
b. Sales & Fees for Non-Integrated Sales Channels & Payment Processors
If a sales channel isn’t integrated, we pull sales data through the payment processor. If both the sales channel and payment processor aren’t integrated, we pull the sales data on a net basis based on bank deposits.
At year-end, we’ll request a breakdown of sales and fees to ensure accurate reporting through a year-end journal entry.
This JE is initiated and taken care of by our team.
c. Bank & Credit Card Transactions
c. Bank & Credit Card Transactions
Your bank and credit card transactions are automatically synced through our banking integration.
Over 95% of your transactions are automatically categorized (i.e., a JE is recorded) based on our ecommerce-specific chart of accounts and based on our expansive vendor database from working with thousands of brands.
For specific transactions, you can easily recategorize the transaction by clicking on the category in the Transactions screen and typing in the new category. Note: This option will not be possible for any categories in yellow, since those are Automated Journal Entries related to your integrated apps.
Learn more.
d. Payroll with Gusto
d. Payroll with Gusto
If you are using Gusto as your payroll provider, we automatically record all JEs related to salary, employer taxes, fees, and benefits directly from the data we import from Gusto.
e. Bills/ Payables from Settle or Bill.com
e. Bills/ Payables from Settle or Bill.com
We’ll automatically sync the data on your vendor bills from Settle or Bill.com and map them to the correct category in your P&L or Balance Sheet.
4. Customized Journal Entries
There are also various JEs that can be easily created or adjusted right in Finaloop.
a. Adjusting the Treatment of Specific Shopify orders (Void, Uncollected, Product Giveaway, etc.)
a. Adjusting the Treatment of Specific Shopify orders (Void, Uncollected, Product Giveaway, etc.)
On the Branded store orders page in Finaloop, you can easily adjust the treatment of specific orders in Finaloop. For one or multiple orders, you can:
Add deductions
Link them to one or multiple payments
Void orders
Close uncollected or overcollected balances
Mark an order as a product giveaway
Mark an order as COGS only with no corresponding sales (e.g., replacement orders, exchanges)
Select the relevant orders and click Actions to select the action you want to apply.
b. Wholesale/ B2B Invoices (Accounts Receivable)
b. Wholesale/ B2B Invoices (Accounts Receivable)
When creating invoices in Finaloop, a JE will automatically be recorded debiting your Accounts receivable and crediting sales for the specific sales category you selected in your invoice (e.g., Sales - Wholesale).
You can also add discounts to the invoices, shipping, and tax charges to adjust the JE accordingly.
When linking invoices to payments in your bank account , we will debit your bank account and credit Accounts receivable.
You can also flag invoices as uncollectible to recognize a loss in your books, or mark invoices as void to remove the impact of the invoice on your books entirely.
In addition, you can add general adjustments (such as deductions) for one or multiple invoices, and link them to one or multiple payments, automatically creating the corresponding JEs.
You can read more about managing B2B invoices here.
c. COGS and Inventory
c. COGS and Inventory
Finaloop makes it easy to manage inventory and COGS journal entries no matter which inventory method you use in your books.
Purchase-based COGS
Purchase-based COGS
Inventory transactions are automatically recorded as COGS.
At year-end, we’ll request your year end inventory balance and record the adjusting JE based on reported values.
This JE is initiated and taken care of by Finaloop.
Learn more.
Sales-based COGS
Sales-based COGS
Inventory-related purchases are recorded as inventory. COGS are recorded automatically for Shopify or Amazon sales.
You can create an adjusting JE for other sales channels, or to record other inventory or COGS adjustments, including dead inventory, product giveaways, or product donations, here’s how to easily create JEs in Finaloop:
Go to Inventory>COGS.
Click on Report per channel in the top right corner.
Type: Select the type of JE you want to add (COGS, dead inventory, product giveaways, or product donations).
Period: Enter the period the JE should apply to. You can select a specific day, or choose a month or range of dates to spread the JE over multiple days.
Amount: Enter the amount of the JE. Here’s how it works:
COGS: Add a positive number to increase (debit) product COGS and decrease (credit) inventory, or a negative number to do the opposite.
Dead inventory: Add a positive number to increase (debit) dead inventory and decrease (credit) inventory.
Product giveaways: Add a positive number to increase (debit) product giveaways, a marketing expense, and decrease (credit) inventory.
Product donations: Add a positive number to increase (debit) donations and decrease (credit) inventory.
You can also record a JE to adjust your inventory balance to better align with a physical inventory count.
Go to Inventory> Physical Count.
Click +Add new count to enter the amount of the adjusted inventory balance. A JE debiting or crediting inventory and COGS, as relevant, will be recorded automatically based on the updated inventory value you provide.
Learn more.
InventoryIQ
InventoryIQ
Inventory JEs are recorded automatically when a PO is created: increasing (debiting) inventory and increasing (crediting) vendor rolling balance, a payable account.
COGS JEs are recorded when inventory is sold: increasing (debiting) COGS and decreasing (crediting) inventory.
Adjustments (for giveaways, donations, dead inventory) can be recorded for each specific SKU manually or can be recorded by uploading a CSV with SKU details, triggering the necessary journal entries.
Learn more.
You can also record a JE to adjust your inventory balance to better align with a physical inventory count.
Go to Inventory> Physical Count.
Select the relevant warehouse from the dropdown.
Click +Add new count to enter the amount of the adjusted inventory balance for the relevant SKUs that need adjusting. A JE debiting or crediting inventory and COGS, as relevant, will be recorded automatically based on the updated inventory value you provide.
d. Prepaid Expenses and Accruals
d. Prepaid Expenses and Accruals
Need a JE to amortize a prepaid expense or record an accrued expense?
With Finaloop’s Spread feature, you can take full control of when expenses show up in your P&L or Balance Sheet by matching them to when you actually benefited from the expense you paid for. This allows you to manage ongoing transactions related to prepaid expenses or to accrue specific transactions to an earlier date.
It creates a JE in a much more intuitive way, while still giving you complete control over how and when your expenses will be shown in your P&L and Balance Sheet.
For example: In January, you pay a 6-month subscription fee for a software subscription that you want to amortize over the 6 month period. Here is a glimpse of how it would work in Finaloop versus a traditional accounting software, like Quickbooks:
Finaloop | Quickbooks |
Tasks required: One. Visibility: Daily. Action: Select the transaction, enter the start date and end date. JEs will automatically be created amortizing this prepaid expense equally over the 6 month period on a daily basis. | Tasks required: Six. Visibility: Monthly. Action: 6 different JEs would need to be created, giving you updated financials only after the month is over. The full month’s amortization is recorded on a monthly basis, giving you no daily visibility. |
Note: This feature is available and relevant only to our customers using the accrual method of accounting.
Here’s how to record this:
Go to Transactions.
Select the relevant transaction that needs to be spread or accrued to a different date.
Click More Actions > Spread Transaction.
Follow this guide for specifics on accrued and prepaid expenses.
Note: For prepayments or balances that were paid before you joined Finaloop, we’ll request the data for this as part of our Balance Sheet creation process and manage the opening balance JEs.
e. Recording Transactions from an External Bank Account or Credit Card
e. Recording Transactions from an External Bank Account or Credit Card
On our Transactions screen, you can report business transactions paid from or deposited in accounts which are not connected to our banking integration. Here are the most common examples of when you should be recording business transactions:
Business expenses paid by the owner of the business, a related business, employee or contractor (even if the business will reimburse them)
Business income received by the owner (e.g., in a personal account) or by a related business
Expenses paid through a third party lender directly to supplier
Business transaction paid from, or received in, an account that isn't synced to Finaloop (either through an integration or through a CSV upload)
Shared services – for example, if an expense is paid by a related business but part of the expense is for your business and part is for the related business. In this case, you should report the part that relates to the business
Utilities / home office / car expenses paid directly by the owner, which is partly for business uses
Cash transactions that relate to the business
If any of the above cases apply, you can use our +Report transactions tool on the Transactions page to add the transaction to your books.
Click on +Report transactions and follow the questionnaire to ensure a JE gets properly recorded.
When you report expenses using the Report Transactions tool, the expenses generally create a liability, or a loan, for the business. For example, if the founder used his personal bank account to buy office supplies, adding this transaction would create the following JE:
Debit Office supplies in the P&L
Credit a new loan account, Due-to owner
When/ if the amount is reimbursed by the company, the loan will be debited accordingly.
Reporting income that was paid to a personal account using the Report Transactions tool, will create an asset, or a receivable, for the business.
To determine the accurate JE to record, our Smart Flow system will ask a series of questions and based on your responses, we’ll create the accurate JE for you.
Debit loan receivable to a related party, called Due-to-from owner.
When/ if the income is transferred to the business, the loan will be credited accordingly.
To learn more, check out this article.
f. Bills (Accounts payable)
f. Bills (Accounts payable)
When creating bills in Finaloop, a JE will automatically be recorded debiting the relevant expense account and crediting Accounts payable.
When linking bills to payments in your bank account , we will credit your bank account and debit Accounts payable.
Learn more about adding and managing bills here.
g. Payroll (For Non-Connected Payroll Providers)
g. Payroll (For Non-Connected Payroll Providers)
If you are using a payroll provider that is not Gusto:
If you process payroll with a provider that is not integrated with Finaloop, our system will ask you for specific inputs as part of our ‘smart’ tailored flow to ensure we get all the numbers we need from you to get everything completely accurate in your books. After the flow is completed for each payroll cycle, our system automatically 'translates' the answers into JEs.
This flow replaces the need to add manual journal entries by CPAs, and takes only a few minutes every month.
If you use Gusto, your JEs will be fully automated.
h. Equity Adjustments
h. Equity Adjustments
Need to adjust equity?
Go to More > Owners.
Provide the relevant details, and our team will ensure JEs are accurately recorded.
5. Manual Journal Entries
a. Loans
a. Loans
Ecommerce loans can be notoriously tricky and complex, especially when it comes to revenue-based loans or merchant cash advances instead of traditional loans.
At Finaloop, we have a team specializing in the accounting treatment of all different types of loans, cash advances, credit lines, interest, and financing fees and we handle all the loan JEs for you.
Loans are typically detected and categorized automatically, requiring minimal manual work from you.
Where relevant, our team will ask for the relevant loan details and will record the relevant JEs for principal payments, interest expense, and financing fees, ensuring the loans are accurately reported for accounting and tax purposes.
You can read more about how loans work in Finaloop here.
Note that ecommerce loans from PayPal Working Capital, Stripe Capital, and Shopify Capital are all done automatically by Finaloop.
b. Fixed Asset Depreciation & Intangible Amortization
b. Fixed Asset Depreciation & Intangible Amortization
For fixed asset or intangible balances that were paid before you joined Finaloop, we’ll request the data for this as part of our Balance Sheet creation process and manage the opening balance JEs.
For new fixed asset purchases, our accounting team requests the details and records the purchase JEs and depreciation schedule based on your input.
c. Year-End & Other Adjustments
c. Year-End & Other Adjustments
Do you have other JEs you want added that aren’t included in this list? For year-end adjustments or other JEs not included in this list, such as advances from customers, loan capitalizations, or business acquisitions:
Contact our bookkeeping team via chat or email.
Provide details about the adjustment.
We’ll review and process the entry to ensure it aligns with your financial reports.
Need Help?
Not sure if a journal entry is needed? Contact our support team via chat or email. Our bookkeeping experts are ready to assist you in keeping your books accurate, tax-ready, and hassle-free.