GST and tax liabilities

Just wondering if there’s a way to create opening balance for tax liabilities account? Account is currently locked.

Also, My accountant is advising me to ensure software is set to cash basis not accural basis (especially in relation to inventory module). Is this a setting we can access?

For now, you will just need to make a journal entry to debit or credit Tax liabilities account. Perhaps in future it will be editable from Chart of Accounts screen too.

You don’t have to set Manager to be on cash or accrual-basis. Manager can generate reports using both calculation methods. When you are creating reports such as Profit & Loss Statement, there is an option to generate it on both cash basis or accrual basis.

Just going back to the accrual vs cash report for profit and loss and inventory topic. I’m new to using inventory and by no means an accountant either so please bear with me if my questions are non-sense.

I set up inventory items for various items I sell:

  • 1000 black mugs
  • 1000 red mugs
  • 1000 white mugs
  • 10 black ink
  • 10 cyan ink

Now I’ve purchased these items prior to using manager and in my previous accounting software these items were just put as an expense (and therefore been claimed in previous GST BAS etc) so when setting up the items in Manager as inventory stock I set them up using opening balances. All has been great and I’ve been much better able to keep an eye on stock levels.

My problem is now when I do cash profit and loss statement at the end each quarter/year the cost of inventory item is being deducted in my expense list. I sort of understand the double entry accounting system. I know that if the items are being sold from inventory (assets) they need to be deducted from the assets… but why in cash accounting reports do they pop up as an expense? My concern here now is that my reports are double charging/claiming for the purchase of these items as they sell?

Shouldn’t the initial purchase of the goods go into the expenses and then when they sell, the amount received for the goods should firstly deduct the initial cost of the item from the assets (and deduct the qty amount) and then put the difference (profit/loss) into the income from inventory sold account?

Your previous accounting system should not classify the inventory as an expense at the purchase stage if you used an inventory system. When the inventory is purchased it is an unsold asset until it is sold. After an inventory item is sold, it is transferred from the asset account to the expense account to be deducted from the sale value in arriving at the profit on sale of the inventory item. If your previous accounting system incorrectly accounted for the expense too early you will need to either adjust the previous reports from the old system or create a journal entry in Manager to reduce the expenses as a “prior period adjustment”.

Thank you Tony.

I didn’t have inventory on the previous software so entering the purchase of the stock was always an expense for me.

So I now need create a journal entry to adjust this incorrect earlier expense… I take the amount from the Purchase of inventory items?.. It doesn’t allow me to. I’m not sure how to do this.

First of all, let’s not worry about BAS because this should have no impact on your GST figures. Whether you use inventory system or not, GST figures will be the same. Period.

I think what you got really wrong are opening balances. Manager doesn’t allow to set opening balances for income/expense accounts because it creates confusion and mess. So how did you manage to set opening balances for your expense accounts?

I only ever setup opening balances in the inventory items and bank accounts. Like you said, it gets too messy otherwise.

I have noticed on P&L statement regardless to cash or accrual that the cost of inventory items seems to always be there but the numbers might be slightly different though.

OK, I get it now.

You should fix this issue in your previous accounting system by making journal entry so you reduce your expenses and increase balance of some custom asset account which you can create called Inventory on hand.

Don’t worry, this journal entry won’t affect your BAS figures. You just want previous accounting system to give you accurate P&L and balance sheet reports.

Then closing balance of Inventory on hand in your previous accounting system must equal to opening balance of Inventory on hand in Manager.

In other words, you need to fix your previous accounting system. There is nothing to fix in Manager since you are doing it in Manager the right way from day 1.

If you are using Sales invoices or Purchase invoices tab, then cash-basis report might give you different figures from accrual-basis. Cash-basis recognizes invoices when they are paid while accrual-basis recognizes invoices when they are issued. This can have affect on costing method of inventory too, that’s why figures are likely to be different.

Sorry I am new to, I set up most of my accounts but I am having an issue with Payroll Liability. The begining of the year is the 01/01/2015 for me. However when I started the year I didn’t pay £50.75. So I should start the year with +£50.75 in the payroll Liability. Looking at the thread, you mentioned to do a journal entry. I am doing so, but the problem is the entry is unbalanced. I have search the account that I should balance it with, but I cannot find it.
Should I just create a payslip without earnings? (therefore remove the journal entry)
Is there a ‘clean’ way to do this?
I look forward to hearing from you

You can create custom liability account in your Chart of Accounts and then go to ReportsOpening Balances to set opening balance for this account.

Don’t use journal entries to set opening balances, this was an old way before Manager did have proper support for opening balances. The new way is described here: Manager Cloud

Thank you very much for your answer.
When I try to do what you are saying I do not have the option for Payroll liabilities?