Apologies for such a simplistic question to all you hardened accountants. I think I need an account that is both income and expenditure. When we send out invoices to our customers for their annual maintenance I wish to record that somewhere. Then when work is done on a customer that is part of their maintenance contract I wish to deduct the cost of that from the maintenance pot. How do I achieve this?
This is not possible. An account is one or the other. Read this Guide: Design a chart of accounts | Manager. That said, adjustments are sometimes made to both types, For example, a sale to a customer is recorded in a sales income account. A refund subtracts from the same account.
But work done for a customer does not reduce the income account. The cost of doing work must be recorded in expense accounts, such as through payslips to workers.
The exact design of you chart of accounts is going to depend on your business organization and the nature of your operations. To track things to individual customers, you might explore using tracking codes.
You could structure your Chart of Accounts to get a global picture, and then for an individual picture you could either use tracking codes or export the account details and reorganise within a spreadsheet.
Thank you @Brucanna. I will try that. What I like about Manager is that you can bend the rules a bit. From what you say it sounds like I can put money into an expense account, or take money from an income account. I’ll give it a try.
If you record both payments and receipts to the same income or expense account, Manager understands from the transaction type what the context is and adds or subtracts correctly. So, for example, if you record a receipt against an income account (a normal thing to do), its balance goes up. But if you record a payment against the same income account (a somewhat unusual but not extraordinary thing to do), the balance goes down.
In both cases, be sure you enter the figures as positive numbers. Manager will change the sign as necessary based on whether the transaction is spend or receive and the account is income or expense.
Not sure where I said that, but why would you want to “put money into an expense account, or take money from an income account”.
Isn’t this the same thing?
Are you asking me? Or only quoting me in a question to someone else? If you are asking me, please clarify: isn’t what the same as what else?
No, refunds aren’t expenses.
Ok. Thanks @Brucanna. I accept it’s terminology (I’m not an accountant). I’ve tried it out and it works fine. I can create an income account called maintenance (which our customers pay us) and then put expenses due to maintenance (work we’ve had to to do for them) against that account and can see what maintenance funds I have left by running a P&L report.
Thanks for your help.
You should put the maintenance income and the expenses into separate accounts as demonstrated above.
It is not a good practice to net off income & expenses within the one account.
you have the choice also to create a non inventory item for the services you provide and activate it could be sold and purchased, which will help you to create for example for every customer or building an item. in the other hand you could trace all the expense related to same income account
please find this link Create non-inventory items | Manager
and also this link will help you to invoice the spare parts and labor charge as one item Create non-inventory items | Manager
Thank you @Brucanna. It gets better all the time!
Thank you also @aam88730. I will have a play with that option.
This would not be a good practise as you shouldn’t net off income and expenses to the one account as this suggestion would do. At no time would you be able to tell would your actual income is from this source as it would be constantly being reduced by expenses.
he has the choice to select the income and expense account and the defaulted in manager is inventory sales for income and inventory cost for expenses. using non inventory item will help him to track the related income and expense for the same building, service or others.
I agree with you 100% not to use the same account for income and expense.
I was thinking how I will answer you question. I come up with this answer because I tried to implement what I suggested but it doesn’t work correctly .
Ther should be a production order item used as sales invoice and a the actual cost related to the same month either in none inventory or inventory item
Please correct me If I miss something
Waiting for your review and advice
Unsure where you are heading with this - Production Orders in Manager are used to convert raw materials into finished goods so aren’t applicable / related to maintenance service contracts (income or expenses) as nothing is getting converted.
What is the best accounting treatment then For such kind of this service to be implemented
The annual charge for the service contract would be via a Sales Invoice.
Any direct expenses incurred in maintaining the service contract would arise from Purchase Invoices (materials or sub-contractors) and/or Payslips.