I have a credit card set up as a bank account, and a checking account as another bank account.
When I make a payment on the credit card I use the transfer funds function to try to show money coming out of the checking account and into the credit card account.
The problem is that the balances in the checking account and the balance owing on the credit card account go in the opposite direction than anticipated. It seems I have to make the transfer with negative numbers to get balances moving the right way.
This is extremely counterintuitive.
What’s the mistake I am making?
Tut, thanks for your input, but something seems not quite right. You suggested using a Payment transaction to pay the credit cad balance. However my Payment function does not provide a field for Received In I can enter the chequing account in Paid From but the next field is Payee with a drop down list but the credit card account isn’t there.
I also have to record a payment made with the credit card in negative numbers, or the outstanding credit card balance decreases instead of increasing. And then the sales tax is also calculated as a negative number. That can’t be right.
I use the transfer funds function to move funds from a Cash-Undeposited account (also set up as a bank account) to the chequing account and those transactions are happening as expected, with appropriate balance changes occurring.
I am using Manager desktop 24.10.14.1886 on Pop!_OS 22.04 LTS
First, update your software. You’re about 110 versions behind.
But that is irrelevant, because what you describe is exactly as it should be. While credit cards are properly set up as bank accounts in Manager, they are not standard asset accounts like regular bank accounts. They can be treated either as contra asset accounts, or they can be moved to the Liabilities group. The reason is that, while you can pay for goods or services using a credit card, the effect on your balance sheet is not to reduce your assets but to increase your liabilities. That is because you now owe money to the credit card issuer, but have not moved any actual money out of the business.
The correct way to pay off a credit card statement from your bank account is with a payment transaction. Enter your bank account in the Paid from field. Enter the Amount as a positive number. Enter the credit card in the Received in field. This will post a credit to the bank account. Since the bank account is an asset, its balance will be reduced by the amount of the credit. The transfer will post a debit to the credit card account. If the credit card is set up as a contra asset (and therefore has a negative balance), the transfer debit will move the balance in a positive direction. If the credit card is set up as a liability account, the transfer debit will move the balance in the negative direction. In either case, if the transfer amount matches the credit card statement, the credit card account will be zeroed.
Don’t do this! Enter all payments as positive numbers. Manager will determine whether to add or subtract the payment, which is a credit, regardless of which way you have the credit card set up—as a contra asset or liability. In Manager’s arithmetic world, credits are negative numbers and are subtracted from any asset account (whether standard or contra) and added to liability accounts. (Since liability accounts are credit accounts, their balances are typically negative anyway, but by long convention they are shown as positive on the balance sheet to reduce clutter.)
That is because both accounts are both standard asset accounts.
