When you separated Bank and Cash account tabs, you also added transaction tabs. This turned out to be really nice for finding transactions.
If I know which account has the transaction, I go to the Bank or Cash Accounts tab, click on the balance amount of the account I want to search. Then I do the search.
But I don’t have to know which account. I can click on a Bank or Cash Transactions tab and search all accounts at once.
So, the changes are very good in my eyes.
When you pay a credit card (a cash or bank account), I think generally you would pay from a cash or bank account. The way it is now, I think you have to do a transfer transaction. I’m wondering what the pros and cons are for taking away the transfer transactions. You could instead spend from one bank or cash account and receive from the other bank or cash account. Or you could leave transfers as an alternative way to view a spend from one account into another account. The result of this change is you would have three ways to view the same transaction:
If you are going to combine a spend and receive, you need a clearing account on your balance sheet as an intermediate home for the money. And you need two transactions. An inter account transfer does away with the need for the clearing account and reduces the process to one transaction.
So if you have a credit card set up as a bank account, you need the Inter Account Transfers tab enabled. The process is really no different than it used to be. The buttons are just in different tabs. And you’ve already seen some of the benefits.
Very clear explanation. So, I see that to spend and receive instead of transfer would work perfectly by just setting up a non-cash, non-bank account to be an intermediary account.
So, now I want to check my understanding:
Trying to stay simple, I have not been using accounts accounts payable. But having an intermediary account seems to me to be a little like accounts payable. I think with accounts payable, I would also make two entries, one for the bill, and another to pay the bill.
Mechanically, seems would not matter whether the intermediary account was an asset, liability, or capital account. But probably would be an asset account if the thinking is first the money is deducted from the bank/cash account and then received in the credit card account. The intermediary account could be a liability account if the thinking is that the liability amount is first transferred from the credit card account, then satisfied by spending from a bank/cash account. The account would never appear on the balance sheet because it would always have a zero balance. I wonder what an accountant would call such an intermediary account: “Intermediary”, “Transfer”, “Payment”, or what?
I am also thinking that if I start using accounts payable, maybe I don’t need to have a separate bank/cash account for my credit card(s). I’m thinking the credit cards can be handled as accounts payable.
Anyone have thoughts about using accounts payable to handle credit card accounts instead of bank/cash accounts? Is it analogous to using a knife to drive screws instead of using a screwdriver? (I.E. a knife sort of works, but a screwdriver is the proper tool.) Or would accounts receivable be an appropriate alternative way to handle credit cards?
The similarity extends only to having to make two transactions. The reason to use Accounts payable is because you have purchased on credit from a supplier, then later you pay the amount you owe. But the expense is recorded when the purchase invoice is entered. The reason to use the clearing account is simply because you need an account to balance the spend and receive entries. But why do it when you have Inter Account Transfers available?
Mathematically that is true, since the intent is always to immediately zero out the account. But if both the origin and destination accounts are asset accounts, the clearing account should be, too.
A credit card can be thought of as a contra asset account (because its balance is normally opposite of other asset accounts) or a liability account.
Usually something mundane like Clearing account or Inter account transfers…oh, there we have it again.
No. Accounts payable is a control account made up of suppliers. You can’t enter anything there unless you first enter a supplier. And the credit card (or the processor) is not a supplier. The credit card just acts as a source of money temporarily advanced to you by the processor. Think about it: you pay a supplier by credit card. The supplier must be the supplier on the purchase invoice, not the credit card or its processor.
Yes, most definitely. Use the program as it was intended. You already have the Bank Accounts tab enabled. Create the credit card there. See this Guide: https://www.manager.io/guides/7035. If you are not buying from suppliers on credit, why enable the Purchase Invoices and Suppliers tabs (which you need to do to use Accounts payable)?
All these questions seem like you are willing to go to a lot of work to avoid using Inter Account Transfers. I’m not sure why. It’s by far the easiest way to transfer money from one account to another, whether cash, bank, or credit card.
I see that if I would set up a credit card as an accounts payable, I would immediately run into contortions trying to pay a supplier with the credit card (as an accounts payable).
So, I am doing well with the way I have my accounts set up. The credit cards are in the Bank Accounts tab. And the simplest way to pay a credit card is to use the Inter Account Transfers tab, which I already have set up.
I appreciate your help in re-thinking my setup. The result is I have increased confidence to continue the way I am set up. Manager Accounting has been very intuitive for me.
