Journal posting from liability account to asset account problem

I tried to post a journal entry moving an amount of 40 from prepayments(liability) account into receivables account(assets).
I did the following posting in journal entries;

  1. Debited account receivable > customer A with an amount of 40
  2. Credited liability account > prepayments with the same amount of 40

The results:
the liability account was increased by 40 and the accounts receivable also increased by same amount.

I know I am doing something wrong here. Please help.

The transaction you described does not make accounting sense. Your debit to Customer A’s subaccount in Accounts receivable will increase the balance of that account because Accounts receivable is an asset account, so it is a debit account.

The credit to Prepayments also will increase its balance, because Prepayments (as you described it) is a liability account, which is a credit account.

So Manager’s behavior is correct based on the journal entry you say you made.

The question is, why did you make this journal entry? If Customer A made a deposit, that could have been recorded as described here: https://guides.manager.io/7093. The deposit would have automatically been applied to any subsequent sales invoice.

Now, it is also possible to create separate liability accounts for customer deposits. In that case, receipt of the deposit is credited to the Prepayments liability account by the bank receipt. (The bank account is debited.) Moving the deposit to Accounts receivable requires that you debit Prepayments and credit Accounts receivable. The result would be that both Prepayments and Accounts receivable decline. That is what you want, because you no longer owe Customer A the deposit and Customer A owes you less for the next sales invoice. So your journal entry reversed the debit and credit.

I guess the reverse should have been the case here. Thanks @Tut

This is an example of why Manager is designed so very few journal entries are required. It is very easy to scramble debits and credits.