Hi, I need to make an entry for Earnest Money Deposit(EMD) received from a customer. Please help.
Scenario: We are suppliers, that had to make a EMD to bid for a govt project. We had paid an EMD in previous financial year, that was returned to us, this financial year. Since we started using Manager only this year. How’d I be making entries?
I have currently marked it as a receipt from a customer received into the bank account and account as security deposit. Seems good to me except that Security deposit under assets is showing the value as negative. Hope i was clear enough.
Thanks for all the help.
This is money you owe your customer, so it is not an asset but a liability
So it is completely normal that it shows negative is it in the Asset section of your balance sheet
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Hi, Thank you for the response.
Let me clarify. This is not something we owe to the customer. Once the bid is complete, they return the money to us.
Assuming, its a liability, How should I show it once i recieve the deposit back? (it turns from a liability to an asset/ a receivable?) Am not a per say finance guy, so pls overlook my ignorance.
Had it been in the same year, the books would have balanced as I have two entries one for payment and another for receipt.
My challenge is we paid in last FY and they returned us in this FY.
In this case we are the ones who made a deposit and got the money back one year later.
Have I got this right - it is a bit difficult to understand what is going on
Last year, you paid money to a customer but you expect to get it back
This would have been recorded as a payment and as an asset on your balance sheet, perhaps in Accounts Receivable, I don’t know as you haven’t specified how it was recorded. In any case it is money the customer owes you.
This year, the money was repaid in discharge of the debt, so you record a Receipt transaction using the same account you used last year when you recorded the payment
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Yes Sir, you got it right.
It is shown as an account receivables in last year balance sheet. We weren’t using Manager then, it was recorded in excel sheet.
This year, since the customer paid back, I recorded a payment this year into security deposit. It shows up in negative. So wondering how to bring forward the Security deposit paid last year so it balances out? Does this make sense?
Thanks for all the help.
You will have to correct the starting balances in Manager
Where was the amount recorded when you entered the starting balances?
Presumably the closing balance for 2023 in your Excel spreadsheet matches your opening balances in Manager
It would have been easier if you had furnished this information much earlier in the conversation instead of introducing it now
A lot of time, your own and other people’s, would have been saved
Thank you, I apologize. Not much of a finance person, my bad.
In the excel spreadsheet its recorded under Other Current assets - Security deposit.
I have not recorded this anywhere in manager yet. I tried adding a journal to bring the amount into above with journal entry. Debit Security Deposit and credit our bank account. I guess its not correct.
So, please guide me on how to bring that forward and record into Manager starting balances. Thanks a lot.
@Novice6 when you commence using Manager you should ask an accountant or bookkeeper to set up your opening balances. The opening balance would show the EMD you paid as an asset and when it is returned the receipt is allocated to the same asset account to minus the balance. Your accountant can take care of this very easily.
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Thank you @tony, is there a guide in Manager help some where to help me setup opening balances? I am unable to reach out our person hence, have to do it self.
PS: Okay, I got one link on Manager to setup opening balances. Will try it out. Thank you.
It is a matter of learning basic accounting principles. The Manager Guides help you understand the software not teach you about accounting principles. You can try and study through - https://www.accountingcoach.com/bookkeeping/outline or employ a bookkeeper.
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@Novice6 you may have timed your post very well. You can use the new feature for entering starting balances that was added today - https://www.manager.io/guides/starting-balances. Even though this feature will solve your problem of avoiding the negative balance, ideally you should have an understanding of accounting to avoid creating messy opening balances without achieving the correct double entry accounting result.
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@tony, Can’t thank you enough, you have made my day. I have struggled most of yesterday trying to make a double-entry for opening balances. Yes, am going to strictly adhere to your advice and try make it work today. Worst scenario, will leverage starting balances feature added today. Am very relieved with options here. Thanks a lot for all the help. Great day!