Equity Starting Balance query

Hi, I’ve set up a very simple account for our social club and thought everything was ok. I entered our Bank opening balance in the Equity retained earnings category which may/may not be right. I then subsequently created opening balances in Current assets for our two accounts and they agreed. I’m not sure what i did in the meantime but when I came back to the Equity category it had created a new account - ‘Existing starting balance’ with a sum of money in it which I don’t recognise and I have no idea where that came from. This amount has been deducted from the Retained Earnings account. I’ve tried reading through the threads but can’t work out what’s happened. Can anyone help please? Many thanks.

Balance Sheet
As at 27/07/2018

  • £ 5,504.75
    Assets
    Current Account Opening Balance - 3,919.06
    Investment Account Opening Balance - 1,585.69
    Regalia & Stock items Inventory -
    £ 0.00
    Less Liabilities
  • £ 5,504.75
    Equity
    Retained earnings - 5,341.24
    Starting balance equity - 163.51

Most likely, this was not correct, depending on exactly what you mean. Have you read and followed this Guide: Manager Cloud?

Also, it appears from the limited information you posted that you may have bank accounts that were not created as bank accounts. See Manager Cloud.

You also may not be using Manager’s inventory features correctly. Read the 3-part Guide series starting here: Manager Cloud.

Lastly, Starting balance equity is an account Manager uses automatically to store rather than reject incorrect entries. It comes from the requirement for balancing the accounting equation. If Assets - Liabilities does not equal Equity, Manager forces a balance using that account. There should never be anything there.

An opening balance sheet has to “Balance” hence the extra entry. Please read the guide Set Starting Balance

The sheet did balance – both the assets and the equity were the same. What I don’t get is why has it split into two entries please? And I did follow the set up guides …

No, your assets and liabilities were equal. Retained earnings is part of equity. The accounting equation that has to balance is:

Assets = Liabilities + Equity

In your case, 5,504.75 (Assets) does not equal 5,504.75 (Liabilities) - 5,341.24 (Equity). Therefore, Manager balances the equation by adding -163.51 as Starting balance equity.

Thanks Tut

But i didnt add £5341.24 equity - nor did i enter anything in liabilities. Sorry if I’m a bit stupid but I have only ever input £5504.75 in both equity and assets.

I was referring to the balance sheet information you listed in your first post. If that information is wrong, we need to see what you’ve actually done.

Can you post screen shots of your Summary page and the Starting Balances page from Settings?

Thanks Tut ive already done that.

No screen shots have been posted, @ObeOne.

Sorry, here they are. I am a newcomer to all of this and although I thought I read all the instructions I can’t work out what has happened in the Equity line, where the original total retained earnings has subdivided in a starting balance. Where did it get the figure of £163.51 from?

Thanks.

Everything is correct under my point of view. Assets = Liabilities + Equity

@ObeOne, let’s go back to the very beginning.

As I suggested previously, this was probably incorrect. The reason I originally said it was most likely incorrect is because you did not provide complete information. Now that you have provided more, I am almost positive it was incorrect. But you still haven’t furnished enough information.

Unless you were operating under another accounting system prior to using Manager and had a closing balance in a Retained earnings account, you should have no starting balance in Retained earnings in Manager. Please describe the circumstances under which you started using Manager.

You implied these were bank accounts, but did not say so explicitly. Are they? If they are, you have set them up incorrectly. Bank accounts need to be set up as described in the second link in my first response.

Where did the Regalia & Stock Items Inventory account come from? Did you create it? Or did you rename another account that was already there? If so, which one? Was it Inventory on hand?

I asked earlier for a screen shot of the Starting Balances register under Settings. Please post that.

Also, please post a screen shot of your chart of accounts from Settings (not the Summary).

These screen shots, along with answers to all my previous questions, will help explain what we are actually looking at.

Finally (for now), depending on your form of legal organization, you are going to need some type of equity account besides Retained earnings. How are you structured? Who owns the club?

Thank you. We are a social club which is really owned by the members. That said, we are not registered anywhere as a business. Our management comprises a President, Vice President and the Hon Secretary/Treasurer and the activities are steered by our Annual general meeting. Day to day running is my responsibility as Hon Secretary and Treasurer. Our accounts have always been managed manually using XL spreadsheets and we decided it would be good to have a free software package to do so. The AGM left the decision to me as to which one. I chose Gnucash and Manager to try as they work with my Mac. I have looked at Gnucash and tested it and it works for us. However, I prefer the look of Manager so would like to test it out with the view to using it for the future. I have tried to follow the set up instructions but clearly not well enough. On the specific questions:

  • The two accounts are bank accounts – unfortunately I cannot find your first email so if its not too much trouble could you send me the link again please.
  • The Regalia and Stock items account is just for record purposes – no monetary value involved. Yes, I renamed the Inventory on hand account.
    Here arte the screen shots, sorry I misunderstood what was needed:

Thanks for your patience.

If you are trying to do this through email, you should sign on to the Forum. All posts in the topic are there. Here is the link again: Manager Cloud.

Now that you have confirmed these are bank accounts, I can tell you that you have absolutely set them up incorrectly. Follow instructions in the Guide.

If you are not going to create inventory items and track them in and out via purchase and sales transactions, you should not be using this account. In fact, you should not be using the Inventory Items tab at all. There are many built-in processes that will totally ruin your records if you try to use this account for anything else.

The first shows that you entered opening credits for the two (incorrectly set up) bank accounts totaling 5,504.75. Unless you are overdrawn on both these accounts, starting balances should have been debits. Perhaps this Guide will help: Manager Cloud. It includes a primer on debits and credits.

At the same time, you entered a starting balance for Retained earnings of 5,342.24. That should have been a credit.

Either way, the accounting equation does not balance, and Manager intervened by creating the Starting balance equity account to hold the difference.

Since you say you are a newcomer to all this, you need to first educate yourself on double-entry accounting. I recommend spending some time here: https://www.accountingcoach.com/. It is free and has good examples.

Many thanks. I thought I had followed the guide but obviously not. I have now sorted the Bank Accounts etc and the equity which now balances. I have been looking for a way to remove the inventory on hand account but there doesn’t seem to be a facility to do that - is that correct? Do I just leave it in situ and not use it.

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Disable the Inventory Items tab under Customize. You will only be able to do that if any inventory items are deleted.