Recently (I first noticed at v20.10.70), the automatic Rounding expense account began showing up on the profit and loss statement, even though no sales invoice has ever been rounded off and the rounding method for all sales invoices is None.
The account appears as soon as the first sales invoice is created.
This account is used on cash-basis when matching partial payments against multi-line invoices which can result in rounding discrepancy. This discrepancy was previously posted directly to Retained Earnings but that was messing up Statement of Changes in Equity report. Newer versions are posting discrepancy to Rounding expense account.
I will demonstrate on an example…
Let’s say we have multi-line invoice with 2 lines items:
Customer pays half of the invoice $3.33.
Now we need to apply $3.33 proportionally across both line items because on cash-basis, it’s those paid line items which make it onto financial statements.
In this example, $3.33 cannot be divided proportionally (equally) without ending up with cent fractions. So we can’t allocate $1.665 to each line item. And I do not really want to allocate $1.67 to one line item and $1.66 to another line item because that would be completely arbitrary which one will get larger amount.
So instead, I simply round $1.665 which will end up $1.67 and allocate $1.67 to both line items equally. The discrepancy 1 cent is posted to Rounding expense account.
This applies to cash-basis only. On acrual-basis there is no matching of payments against individual invoice lines thus no rounding discrepancies.
Then why is this account showing when accrual-basis accounting is selected? It isn’t needed, but it cannot be suppressed without excluding all zero-balance accounts.
The principle here is that the account needs to be shown on chart of accounts so users can recategorize it.
You are correct, this account would never be used on accrual-basis so it could be safely supressed but it shouldn’t be supressed in chart of accounts. Currently, accrual-basis reports will take all accounts from chart of accounts without supressing any particular account.
This account strikes me as being like some others that are always “present,” but do not need to be displayed unless they have a balance. You cannot select Rounding expense in any transaction, so why should it be on your financial statements if you have never rounded a sales invoice? Consider some other automatic accounts:
When the remaining half of the invoice is paid, is the one cent allocated to the invoice or does it remain in the rounding account?
Edit
All methods of allocating partial payment to line items within an invoice are arbitrary.
However in my opinion the funds should all be allocated to the invoice, not somewhere else.
A way of eliminating rounding problems is allocate payment in invoice line item order, and when the first line item is paid allocate funds to the second line item etc.
Any news about this anoying account that appears even if not used?
I just read in the guides https://www.manager.io/guides/9181 that this account is created when the Sales Invoices tab is enabled. Said tab is not enabled in my books, yet the account appears. Any way to get rid of it?
Windows7, Desktop 21.1.35
Actually, the Guide says, “Several tabs and some settings activate accounts necessary to their functionality when they are enabled (or as soon as the first entry is made using them).” In this case, the account is activated when the first sales invoice is created. It will, in fact, disappear if all sales invoices are deleted. I just verified that.
I cannot test with your version number, because I’m already on v21.2.4. But I have not noticed any difference in behavior since I first noticed this annoying account in v20.10.70.
Can you post a screen shot of your left navigation pane with the tab listing?
Hi Tut. Screenshot is here with side tabs and basic summary setting. Let me know if there are any other Settings that you would wish to see. Thanks
Can you please post a screen shot of your chart of accounts from Settings? You should not be able to choose accounting method until your first sales or purchase invoice has been created. Yet you can.
I also wonder why you have so many journal entries. Journal entries should be rare in Manager. Together, these two factors from your screen shot cause me to wonder if you are doing something I cannot imagine and, therefore, cannot duplicate.
Accept if you already had that selection available prior to the introduction - until your first sales / purchase invoice. That is, only business created after the change are affected.
Do I understand correctly you are referring to introduction of the restriction on choosing accrual versus cash basis until after an invoice is created? If so, I had not considered that possibility as an explanation for @Scott.E’s case. The Accounting method field showed up only because @Scott.E happened to have the Edit pane of the Summary open when the screen shot was taken. It seems to have been a false clue.
Unfortunately, I don’t see how that helps explain the situation. @Scott.E has cash basis selected (possibly from earlier days), but has apparently never created a sales invoice. So the Rounding expenses account should never have appeared.
Hi @Tut and @Brucanna. Sorry for the delay in posting to your request. I have abbreviated the expense category list of the Chart of Accounts screen shots for brevity. I am suspecting that the rounding account (as well as the accounts receivable account) showed up when I enabled the “Customers” tab when the ability to track customers on Cash Receipts was added, wanting to track these receipts via a custom report that only selects customers and not other sources. There are no accounts receivable tracked as the business is recorded via cash receipts (no sales orders or invoices). In response to your question regarding the number of Journal Entries, these are used exclusively for the investment account asset to track fund purchases, sales and changes in valuation for the account. This worked out better for my purposes than using the inventory module for the account. Thank you for your help. Scott
@Scott.E, I see that you have an account, Accounts receivable, in Settings, which is what I wanted to find out when I asked for screen shots of your chart of accounts. This is the result of enabling the Customers tab and creating customers, even though you do not use them for sales invoices. Customers are subsidiary ledgers under the Accounts receivable control account.
No matter what I try, though, I cannot trick the program into allowing me to select between accrual and cash basis accounting without creating either a sales or purchase invoice. @Brucanna speculated that you might have made this selection long ago, when that choice was available during initial setup. That could be correct, but in my test businesses, if I get rid of all sales invoices, the dropdown selection field disappears from the Summary Edit screen, even though the choice was previously made and remains in effect. Because your selection was cash basis, you should not see the Accounts receivable account on the Summary page, despite its existence in Settings. Is that what you see (or rather, don’t see)?
Again, no matter what I try, I cannot trick the program into displaying the Rounding expense account unless there is at least one sales invoice present. Creating sales invoices with the option checked, then deleting them, does not work. The account goes away. More importantly, under cash basis accounting, the account will persist if there is at least one sales invoice, whether the feature has been used or not, but show as blank.
The end result of all my experimentation is that, for you, the program is behaving as though you have a hidden sales invoice somewhere. But I cannot determine how that could be or how you might fix it.
Thanks @Tut. I can confirm both of your suspicions regarding the setup. The Cash Accounting method (Summary) was selected some time ago when business was set up. Also, the Accounts Receivable Account does not show on the Summary page. I have no recollection of ever using Sales Invoices, so this will probably remain a mystery. Guess I will live with the condition. Thanks again to you and @Brucanna for your assistance. Scott.
How can we delete this rounding expense account please?
Have you read the thread?
Yes - thats why I asked the question, Having read it again, there does not appear to be any way to stop this account appearing
By convincing NG Software that there is a better way of addressing the underlying issue, how to allocate partial payment of an invoice. The current allocation involves using an arbitrary formula which creates fractions below the minimum legal tender. These “rounding errors” are currently allocated to an account which does not appear on the invoice.
Other formulas / allocation strategies can be devised which always allocate funds only to accounts listed on the invoice. An approach I would also support.
Edit
A possible alternate allocation strategy is to allocate partial payment based on the current residual outstanding balance and any rounding error is allocated to a line item with the highest outstanding balance prior to allocation of the rounding error.
With this approach an invoice with 3 line items all of amount $1 (total $3) paid in three instalments all of amount $1 would result in all line items being allocated $1 (and no rounding account used) rather than all line items being allocated $0.99 and rounding account $0.03
