my clients business made an investment of 1 million with the bank how will I go about treating that because im in the processing of preparing the company’s annual financial statement and I will have to report those funds as well other topics that i saw were talking about individuals thus creating capital accounts for a business that made an investment how will i treat that on the Bank statement i saw money was being reinvested back they also acquired interest.
These questions are basic accounting. This forum is for questions about how to use the Manager accounting application. If you have specific questions about Manager after reading the relevant Guides, ask them. But you will have to provide more information than you have.
I just need guidance on how to treat it
I want to know will I create another account under fixed asset as an investment account or how anyone who has done these before where your business has an investment account kindly assist me. Thanks
You can treat them with different tools under Manager. I prefer to use inventory items and tracking codes. But I manage alternative investment funds, ie illiquid assets, and so I don’t have so many investments/disinvestmenta during a year.
Can you please guide me as to how you did yours
In a very short way:
- Activate inventory items
- Create an inventory item for each investment
- Register a payment (units * buying price) whenever you make an investment
- If you need to make adjustments on the valuation at the closing of the accounting period, make them with journal entries
- Register a receipt (units * selling price) whenever you disinvestments
- Inactivate the inventory item whenever you close definitely the position (just not to have an infinite list)
In this way you can use all the reporting of inventory for the investments… and if you think it properly, for an investment company investments are inventory items that it trades for profit.
Hi can you please show me a sample im struggling with that
That doesn’t seem correct.
An inventory item is usually something that is purchased by the business, held in stock and then sold to customers.
That doesn’t seem to fit your description of what it happening although I am a bit confused by your initial post.
What do you mean by “my clients business made an investment of 1 million with the bank”
Did the bank invest 1 million in the business?
Did the business deposit 1 million with the bank?
Was it a loan from the business or to the business?
Did the business buy an investment from the bank?
Or something else all together
they made an investment with the bank as the bank is also a broker I hope you get me I have attached a copy of the bank statement they got from the bank. The business received a large amount of 2mil and made took one mil to invest with the bank in the forex market I presume as the bank also trade
If it is an investment company, investment goes into inventory by law in many countries.
Independently from them I think that the inventory item module can fit very well this kind of accounting.
Can you show me cause im confused
That is because you are using the wrong terminology or descriptions.
Your client did NOT make an investment in the bank, if they had done, then they would now be part owner of the bank but that is not the case. What your client has done is transferred a lump of money from their bank account to their forex trading account, which maybe operated by the bank.
Depending on who’s name the forex trading account is in depends on the accounting steps.
If its in the business’s name, then you could set up that account with the broker as a “bank” account as the forex positions taken would be purchased and settled via that account.
This is no different to a business having two accounts with one bank or different banks.
The purchased forex positions could be recorded as Inventory, so that when they are settled, the profit or loss would transfer the P&L. If you need assistance with setting this up then you need to talk to a local professional as you will have to take into account local law and taxation requirements.
Okay I understand I did open a bank account in manager how do I enter the transactions and which account do I use
Read the relevant Guides. They illustrate how to enter all transaction forms.
Before you get to this stage you need to determine the following previous put point:
“Depending on who’s name the forex trading account is in depends on the accounting steps”
a) If the forex account is in the business name, then open a bank account within the business.
b) If the forex account is not in the business name, then don’t open a bank account as the client/owner has withdrawn the funds from the business for their own private forex account.
If (a), then enter the transactions (receipts and payments) as per any other bank account.
Where those transactions get allocated to, depends on the forex instrument purchased, 1) physical funds or are they 2) “put” and “call” options or warrants. If the later (2), then you need to get local professional advice.
If (b), then the transactions are occurring outside the business, so probably needs a new Manager business set-up.
Okay is there a specific account i allocate it too in the payment and receipts ?
Yes, but that depends on the nature of the transaction, but as no one on the forum has the details of the transaction involved so they can’t specifically answer your question. Forex transactions are a specialised area of accounting and as you have been advised several times you need to get local professional advise.
I could answer your question based on my own usage but I don’t live in your country.so I don’t know your local laws.