A sole proprietor of a team of three, I am a newbie to both Manager and bookkeeping. I don’t see steps in the Guides that tell me in the most simple and basic way how properly to record credit card transactions so that I can understand. Would someone please clarify the procedure so that I don’t make a mess of things from the get-go?
Here’s what I’ve done so far.
I created a Bank Account for the credit card.
Under Bank Transactions, I’m unsure whether to record the charges as “Receive” or “Spend” Money. This is where I’m stuck. I’m guessing that the credit card account will “Receive” and that I “Spend” the money from my company checking account to pay the credit card statement. But maybe I have that backwards. I know somehow the two have to cancel each other out. How do I connect the two accounts? What is the proper way to set this up so that I can reconcile my credit card statement?
Let’s go a little further, @Inkwell. First, read the Guide @Joe91 linked to. Specifically, decide whether you want to set the credit card up as a contra asset account or liability account. The trade-offs are explained in the Guide.
Regardless of which you choose, think of the credit card as a source of money. When you buy something with a credit card, enter a Bank Transaction => Spend Money. Because you have no actual money in the credit card account, the resulting accounting credit will drive a contra asset credit card account to be negative, showing you owe money. If you have set the card up as a liability account, the same transaction will drive the account more positive. Negative assets are the same as positive liabilities. Both show you owe money.
When you receive the credit card statement and pay it, you are really transferring money from one bank account to another (like moving money from one pocket to another). So again, you Spend Money from the bank account from which you paying off the credit card and Receive Money in the credit card account. Doing this explicitly requires two separate transactions, so it is a little complex.
The Inter Account Transfer combines the spending and receiving into a single transaction. There is no requirement that the two accounts be with the same institution. That is the simplest way to pay off the credit card.
Using a transaction clearing account with imported transactions is the most complex to set up, but will be automated for future transactions. However, you can also clone one month’s Inter Account Transfer for the next month to simplify things if you don’t want to go through importing bank statements and creating bank rules.
Thank you, @Joe91. I saw that. I just didn’t understand it completely. I am used to Quickbooks, which has a credit card account and everything was done in the background for me. Entering data put figures into the right pockets. This is more complicated, especially for someone who has no background in accounting fundamentals.
I don’t know what a contra account is, but I am familiar with the term liability. Yesterday I undid the entries I’d entered in my credit card account as Receive Money and reentered them as Spend Money after I’d enabled the Inter Account Transfers. I recorded my payment as a transfer from my checking account to the credit card account and then tried to reconcile my credit card statement. I must have done something wrong at that point because when I clicked Never in the Last Reconciliation column, viewed the charges, marked the bank transactions one by one as cleared, and entered the closing balance, the numbers for Closing and Net Balance matched. I didn’t see any “reconcile now” button, but I thought that the account was reconciled. When I returned later to view the account it still registered Never under Reconciliation. What am I doing wrong?
It’s almost impossible to help someone with reconciliation problems remotely, because you can’t see any of the transactions. So all I can do is offer some general advice:
A contra account is one that normally has an opposite balance than other accounts in its category. For example, a contra asset account normally has a negative balance, while regular asset accounts are positive. Your normal bank account is a regular asset account. Your credit card account, being negative until you pay the statement, is a contra asset account. (This is why you can shift it to a liability, where it becomes positive.
Is this what a reconciliation statement looks like? It doesn’t say “reconciled,” but the Closing Balance and Net Movement figures match. Back in Bank Accounts, however, the column under Last Reconciliation still registers “Never.” Would an accountant or bookkeeper be the best person to help me, even if she is not familiar with Manager?
Your closing balance says a balance of 807.03 yet your transactions section only shows a single starting balance transaction of 102.38, where are the other transactions ? Also the dates match, one wouldn’t expect the closing balance date to equal the starting balance date. Is the closing balance date actually 12/16/2017 or is that the Manager Starting Date ?
In addition, it appears that your starting balance is positive, the credit card has been overpaid, is this correct ?
Besides, if you owe the closing balance on your credit card then the closing balance should be entered as -807.03 (negative).
Perhaps you could post a screenshot of the Bank Account tab > Credit Card transactions listing - click on the blue balance.
In the BS > Equity section do you have an account called Starting Balance Equity showing ?
Hi @Brucanna, I certainly never saw anything like the screen you posted. Here is the screen shot you requested. I set 12/16/18 as my starting date with Manager because that is the date of the charges presenting on the credit card statement paid in January. I want to start fresh with 2018. I am trying to set everything up properly. What does BS stand for? I never created an account called Starting Balance Equity. Thank you for your help.
Ok lets takes this slowly as there appears to be a number of issues.
1 - BS stands for Balance Sheet
2 - I asked if you had an account called Starting Balance Equity “showing” under BS > Equity (on the Summary tab), I didn’t ask if you had “created” such an account.
3 - What Start Date are you wanting to actually start using Manager ? Ignoring credit card transaction dates.
That’s not making sense
Your Starting Balance is dated 12/16/2017, yet on the 12/10/2017 (6 days earlier) there was a auto pay for the same amount, besides which, note how both figures are in black. The Starting Balance should be in Red so that the payment on the 10th cancels it out.
So it appears in the absence of knowing your actual Manager Starting Date, that the Starting Balance should be dated 11/16/2017 and be entered as a credit value.
You will note that if you add the totals at the bottom 102.38 + 704.65 it will equal 807.03, the bank reconciliation closing balance, albeit it being entered as a positive whereas it should be entered as a negative.
So from here.
1 - Changed the Starting Date to 11/16/2017
2 - Changed the Starting Balance to be 102.38 (credit)
3 - Change the Bank Reconciliation Closing Balance to -807.03 (negative)
Fingers crossed, that that has worked, then we need to review any BS > Equity > Starting Balance Equity account if it shows.
Why do you have transactions entered from before your Start Date? Start Dates are only set when migrating from another accounting system to Manager. If you did not have a previous accounting system, delete your Start Date.
If you delete the Start Date / Starting Balance, then the payment on the 12/10/2017 has nothing to contra against as the transactions making up that payment 102.38 aren’t in the system. That payment (assumingly) would / should also be part of the checking account Starting Balance, so there would be other account reconciliation ramifications.
Determining the correct Start Date / Starting Balances is the issue.
No, Start Dates are used when ever you are creating accounts which require balances.
EG: you maybe starting a brand new business, no previous accounting system, but using an existing bank account / proprietor asset contributions - etc.
Thanks for your insights, @Brucanna and @Tut. Just to clarify, mine is an existing company, and I was using Quickbooks previously as my accounting system–I knew only enough about QB to enter data. Not knowing how to import data to Manager from QB, I originally picked Jan. 1, 2018 as the start date with Manager and tried to start from scratch; however, I see that date was a problem because the credit card statement that I paid in January includes charges that were incurred going back to Nov. 20, 2017. Should I record that as the start date then or Nov. 16, 2017?
The Starting Balance Equity showing on the Summary tab is +$8,222.95. I am unsure how to enter the bank reconciliation as a negative. When I originally started setting up my business, I recorded Jan. 1, 2018 as the start date and entered the beginning checking balance of +$8838.89 on Jan. 1, 2018 and beginning credit card balance of +$102.38 (money owed–should that have been a negative instead?) on Nov. 11, 2017 from my bank statements.
I hope this is clear and that someone can steer me in the right direction. As I said, I know nothing about accounting. I just enter data and hope it is going into the right place in the right way. I want to learn how to use this program effectively. Once it’s set up properly and I know how and where to enter the data, everything should go smoothly.
Then your Start Date should be the date you began using Manager. Starting balances of accounts in Manager should be entered to match the closing balances on the last day using QB.
You cannot import data into Manager from QB. This is why you set a Start Date and starting balances. Your old transactions will remain in QB. Your new ones will be in Manager. Companies switch accounting systems all the time.
This is not a problem. When you set up your credit card account in Manager, enter as the starting balance the balance of your credit card on your Start Date. This will be a negative number. You do not enter individual charges made before your Start Date.
This shows that something is wrong with your equity accounting. The accounting equation, Assets = Liabilities + Equity must balance. When it does not, Manager forces it to balance by putting the difference into Starting balance equity, which is an automatic account. When you have the rest of your accounting sorted out, this account will vanish.
Just put a minus sign (hyphen) in front of the number.
Yes, it should be negative, but the number should be as of your Start Date, which has nothing to do with charge dates on your credit card statement.
Then you are unlikely to be able to use Manager effectively. Manager is a tool, and you need to understand what the tool is supposed to accomplish before it will make any sense. I suggest spending some time self-educating. Start at this web site: https://www.accountingcoach.com. Create a test company. (See this Guide: https://guides.manager.io/7067.)
I disagree. If an existing bank balance is being transferred to a new business, that should not be entered as a starting balance, but as a contribution of capital, being recorded in a manner consistent with the equity structure of the company.
No one mentioned anything about " being transferred" - but did mention “using an existing bank account”
If the existing bank account has a balance of 500, and that account becomes the business bank account then you have Starting Balances for the both the Bank Account as well as the Equity “capital” account.
For it to be a contribution of capital, there would have to a deposit, but no deposit is occurring.
So @Inkwell based on your additional information we can now get things back on track.
Your Start Date for Manager will be Jan 1, 2018, and the Starting Balances will be your account balances as at that date, not the “statement” balances. To get those Starting Balances, print off a Balance Sheet report from your QB system as at Dec 31, 2017. The figures on that report are now entered into Manager as Starting Balances as at Jan 1. EG: based on my calculations the credit card Starting Balance would be 718.32 (credit).
If you have Accounts Receivable or Accounts Payable Starting Balances then these to be created by entering the Invoices which make up those balances. When entering those invoices use their original dates, not the Jan 1 start date. Similarly if you have Inventory, these need to be entered per Inventory Item. There are Guides which describe these.
Once those Starting Balances have been entered you can create in Manager the Report > Starting Balances and the data there should be a replica of the QB report, noting that if everything has been entered correctly, then there “shouldn’t” be that Starting Balance Equity account existing.
Also noting that any transaction that you have entered dated 2017, should be deleted.
Yes, you did. While you may not have used the actual word transferred, you gave an example of “starting a brand new business, no previous account system, but using an existing bank account….” A brand new business cannot begin with assets from some other source. Those assets must be recorded in some fashion as a contribution. If some pre-existing bank account balance is taken over by a brand new business, assets are being transferred to the business from the previous owner of the bank account. Contributions can come in many forms: straightforward deposits of checks from investors, expense claims by partners for startup expenses paid from personal funds, conversion of a bank account from some prior use to use by the new business, or pennies in a jar.