Some accounts such as Cash & Bank Accounts and Accumulated Depreciation Accounts cannot be selected when making a Journal Entry. For example I want to make a J.E for the below mentioned scenario:
A new Asset-2 has been purchased through exchange of an old Asset-1 and paying the remaining amount in cash. Particulars are
Value of Asset-2 = 74,000
Value of Asset-1 (at cost) = 18,000
Accumulated Depreciation of Asset-1 = 1800
Exchange value of Asset-1 = 10,000
In this case the J.E would be
Dr. Asset-2 74,000
Dr. Acc Dep (Asset-2) 1,800
Dr. Loss on disposal 6,200
Cr. Asset-1 18,000
Cr. Cash 64,000
Sometimes J.E are required because Manager does not tackle such Fixed Asset Disposal entries in one go. I have read the guide about Disposal of Fixed Assets
It would be convenient to make such entries if we can also select the Cash, Bank or Accumulated depreciation accounts while making manual Journal Entries.
It explains why you can not select bank and cash accounts as you need to use payments and receipts.
In Manager, most transactions are entered in other functional tabs, thereby automating many decisions about account posting and reducing errors. So journal entries are relatively few. Most record transfers between accounts. In fact, no transaction involving the actual receipt or payment of funds by a business can be recorded via a journal entry.
Yes I have read this guide. But if Manager allows to select such accounts in making J.Es as well then recording some complex transactions would be easier as in my case. I have recorded the entry as allowed by manager, but presentation of this J.E in Reports in not clearly understandable
If cash and Accumulated Depreciation accounts could be selected while making J.E, then this entry could have been made in a single step. And in reports it would be clearly understandable.
I think if we allow journal entries to debit/credit bank accounts, how does it impact cash flow statement or payment & receipt summaries?
The idea of “complex” journal entries is OK if you only ever look at balance sheet, profit & loss statement or trial balance.
But the moment you let journal entry to touch bank account, it will need to be included in Payments & Receipts Summary (or whatever we call it) so it balances. And if this journal entry is complex (trying to do too much), then you will see debits and credits on this report that are not really appropriate to show there.
The same goes for cash flow statement (even though we already allow journal entry to be included or excluded). If journal entry would debit or credit bank account, then the entire journal entry would have to be included.
I think it would be convenient if Manager would allow debit/credit any account in journal entry. But I will need to think it through.
The issue is what is the use case for using journal entries on bank accounts. If it is just because the user is in the habit of doing it that way in other software or it is using Manager in a manner which is counter productive for by far the majority of Manager users, then I’m not convinced investing resources to allow it in Manager is optimal use of resources.
I agree that Manager helps non accountants by hiding complexities of double entry accounting. But having all the options available in Manager will enable the accountants or book-keepers to record and present transactions accurately according to IAS and IFRS.
Selection of “Cash, Bank, Accumulated Depreciation, Profit/Loss on Disposal” accounts may also be enabled for passing manual Journal Entries as the purpose of “Journal Entries” tab is to manually record those transactions that cannot be automatically recorded by Manager using other tabs.
You can use journal entries for everything if you do not enable functional tabs such as bank & cash equivalents but set up all accounts in the Chart of Accounts. There are more disadvantages than advantages for most users as importing bank statements can no longer be done and need to be entered by hand.
Anyway, try it in a new test business. Only create a bank account in the chart of accounts under Assets. The do a “sales” journal entry as below and you can see it works (summary screen other screenshot).
I agree there would be a benefit for some if more complex entries could include all debit and credit accounts, but it is as @Patch stated easy to make mistakes because many users may not necessarily understand where debit and credit go, which I think Manager is great at preventing. For example many of my colleagues can not get their head around that getting money in the bank should be entered as debit.
@lubos I don’t think you need to think about this at all. If anyone wants to use journal entries in a cash transaction, they should create that cash/bank account as an ordinary account in the chart of accounts and then make the journal entry a cash-related entry.
I agree strongly with @Abeiku about monetary transactions with journal entries. I was also originally opposed to the restriction, but have come to see the wisdom of it. As additional features involving cash and bank accounts have been hard-coded into the program, the restriction makes more and more sense.
Unlike @Abeiku, I am also opposed to opening accumulated depreciation. That would merely duplicate functions of the Depreciation Entries tab.
