DESKTOP EDITION CLOUD EDITION SERVER EDITION GUIDES FORUM

Sales invoices, reflected income amount, and opening balances issues


#1

Start date in settings is earlier than all transaction dates. The three payments are each from a different customer, all of whose opening balances should be zero.

Payment amount > breakdown of what goes where:

  • 50 > 35 sales & 15 sales bonus
  • 150 > 100 sales & 50 sales bonus
  • 75 > 72.52 sales bonus & 2.48 fees

Respective steps taken to enter each transaction:

  • Created sales invoice #1 for 35 to sales, then cash account > receive money and applied 35 to A/R > #1, then add line and applied 15 to sales bonus.
  • Created sales invoice #2 for 100 to sales, then cash account > receive money and applied 100 to A/R > #2, then add line and applied 50 to sales bonus.
  • Cash account > receive money and applied 75 to sales bonus, then add line and applied -2.48 to fees.

The figure I would’ve expected to see at the end is 272.52 but I’ve taken a wrong turn somewhere because income summary shows a total amount of 240 (broken down as: sales > 100 & sales bonus > 140) and there’s a sales invoice entry for 35 under opening balances. What steps can I take to correct this?

Big thank you to @Lubos too. I’d been searching for the right software solution for nearly a month before finding Manager a few days ago and I’m completely blown away by it. Truly cannot thank you enough.


#2

I am trying to understand what you did. I have some questions:

  1. I presume Sales is an income account. Is that correct?
  2. What type of account is Sales Bonus and why are you allocating cash received to it?
  3. Your first bullet list says you allocated 72.52 to Sales. But your second list says allocated 75 to Sales Bonus and nothing to Sales. What did you actually do?
  4. What type of account is Fees?
  5. Why did you make the 2.48 negative?
  6. When you say you expected to see 272.52, where did you expect to see that figure and why?
  7. When you click on the blue account balances for Sales and Sales Bonus in the Summary, what transactions are shown?
  8. Does anything show in your Suspense account? If so, what?

#3

Hi Tut,

  1. Yes, Sales is an income account.
  2. Sales Bonus is an income account for deliberate overpayments. I followed a procedure similar to what’s outlined for recording Customer advance payments and made it a separate account to keep the amounts distinct from the invoiced figures.
  3. Mistake on my part, sorry; I’ll go back and edit the post. The 72.52 went to sales bonus.
  4. Fees is an expense account.
  5. PayPal fees and transaction charges
  6. Where: summary > income total. Why: 50 + 150 + 75 - 2.48
  7. Sales shows Sales Invoice #2. Sales bonus shows the three Receive money transactions.
  8. Nothing in suspense, far as I can tell.

Bit of an update: The link above in 2. is something I’d not seen until just a few hours ago (thank you by the way; I believe the post that led me to it was one of yours) and another of those pages seems to have answered why the fees don’t show as having been deducted in the income summary. I’d like them to but if standard practice says otherwise I’m certainly not about to argue.

I’m still not sure what’s going on with that first invoice transaction though. Running a trial balance shows 272.52 for Cash on hand.

Thanks for the help, and please let me know if anything else remains unclear. It’s been a few years since I last did bookkeeping.


#4

Your first problem is that you should not have created a new Sales Bonus account. You cannot do a procedure “similar” to what was described about customer advance payments, because the handling of overpayments is hard-coded into the application, using a pre-existing account. If customers paid more than you invoiced, you should have allocated the difference to Customer credits, which would have brought up a dropdown menu for the specific customer’s subaccount. If you want, you can rename the Customer credits account under Settings > Chart of Accounts. I would not recommend doing so, however, since your terminology of “sales bonus” is not as descriptive.

The second problem is that you are expecting your Sales Bonus entries to behave as income. But the entries in such an account are liabilities, because you actually owe that amount to the customers. If you use the Customer credits account as described above, that is where they will show up. Remember, you are doing accrual accounting, so in the situation you have described (as edited), you have only 135 in actual income. You have 137.52 in customer credits.

Going back to your original post, where you said 35 appears as a customer opening balance, and combining that with your statement that only Sales Invoice #2 appears under Sales, all that indicates you made a mistake when entering the first sales invoice. But I don’t have enough information to determine what the mistake was.

It is good that you have nothing in Suspense. If you did, that would mean you have entered transactions where debits do not balance with credits.

In summary, go back and edit these transactions:

  • Allocate the overpayments to Customer credits and appropriate customer subaccounts. Be sure to do the same thing with the receipt for 75, even though you don’t need a sales invoice. Otherwise, you cannot assign the payment to the proper customer.
  • When finished with that, delete your Sales Bonus account, because it is not linked to the customer liabilities that should be created.
  • Track down your mistake in entering the first receipt and/or invoice so the 35 goes into the Sales account rather than opening balances.

That may not solve all your problems, since I can’t see all your records, but it will get you started. If there are still problems, tell us about them and someone may be able to help.

Incidentally, the documentation links you included are obsolete, but still available if you know where to look. Some details are no longer accurate or complete, though the information is still useful for figuring out some problems. All Manager documentation is being revised to be under the Guides, but that job is not finished yet.


#5

I’m not sure I follow. Allocating the overpayment amount to Customer credits would classify it as a liability as well as apply it to any future invoices from the same customer. I’m expecting the Sales bonus entries to behave as income because that’s what they are, and the behavior does seem to be following my expectation as the amounts allocated to the account and the account itself are both showing up under Income on the Summary page where I’d wanted them. What’s the appropriate name for such an account? I’m not attached to “Sales bonus”, I just didn’t know what else to call it.

Regarding the first invoice entry, I double and triple checked that I’d entered both of the sales invoices in the same manner and that the details were correct before posting here. I’m not sure what else I can/should change there.


#6

Based on what you said, sales invoice #1 issue date is dated before your start date. If you do this, such an invoice will be entered as opening balance for A/R and will debit A/R only and will not touch any income accounts.

If sales invoice #1 was really issued before your start date, then on accrual-basis you really earned only $100 in sales (invoice #2) since start date.

If you generate profit & loss on cash-basis, you will see in sales $135.


#7

@mockingbird, allocating the overpayment to Customer credits is correct precisely because this does create a liability. The customer has paid you money for which you have delivered no goods or services. You technically have a liability to that customer. Accrual accounting recognizes that liability. The receipt is not classifiable as income because you have done nothing yet to earn it. If you’re not comfortable with accounting principles, I recommend http://www.accountingcoach.com/accounting-principles/explanation/1.

If you are keeping your records on a cash accounting basis, you would recognize the income. But if you typically have such transactions, you will be consistently misrepresenting your true financial position. That is why accountants strongly prefer accrual accounting and tax authorities usually require it except for very small companies.


#8

@lubos Hi, thank you. Profit & loss on cash-basis showed $135 in sales. Sales invoice #1 issue date is dated a week after my start date. Here, this is what’s showing:




@Tut That link clarified a number of things. Much appreciated. I’ve been researching what I can but I’m definitely nowhere near as familiar with accounting principles as I ought to be just yet. My prior experience with bookkeeping was all very straightforward and the company operates on a much larger scale in a completely different industry. This sort of thing never came up.

Your explanation makes sense. I’m either classifying this wrong or don’t understand how the concept itself makes sense. Increased liability for having delivered additional non-invoiced goods/services that account for the additional non-invoiced payment seems terribly messy and impractical. As far as the customers are concerned the money was earned, which I assume will be reflected in their own books as the full amount they chose to pay me for the job they hired me to do, right? I suppose it’s too early to tell whether these transactions are going to be typical but if they are…I mean, is there really no better way to handle it?


#9

Don’t despair, @mockingbird. The difficulty here is almost assuredly not with Manager, or there would not be any users left. :wink: The challenge is only in communicating with strangers who cannot see your books (and don’t want to) about exactly how you got where you are. We’ll sort it out.

First of all, one problem is that the invoice you show is dated 2000 years ago. No doubt you entered your date’s year as 15. Manager requires 4-digit years. Correct that and some of the problems will go away.

You said some things in your last post that seem to contradict what you said earlier. So, another question:

Did you or did you not deliver goods or services for which your customers paid you the amounts you categorized as Sales Bonus?

If you did, you should have included them on the sales invoices, which would have placed them into Accounts receivable. The amounts would then have been available when you received payment and Customer credits (or your original account, Sales Bonus) would never have been involved.

If you did not deliver goods/services yet, but plan to in the future, you have a liability as I described previously.

But, as a third alternative, if you invoiced for the value of the goods/services and the customers simply decided to pay more, I want their names and addresses! :grinning: Seriously, I have had that happen to me when a customer was grateful for my fixing a problem they didn’t even know they had and decided to round an invoice up, really no different from a gratuity. In that case, categorizing the overpayment as a sales bonus or miscellaneous income is appropriate, because the amount received is not related to your normal rates/prices and there is no expectation that it will be applied to future invoices. Allocating the overpayment to an income account puts it into the income summary, regardless of whether you are using cash or accrual accounting. And it won’t get mixed up with the sales invoices, showing them to be overpaid and resulting in an automatic allocation to Customer credits. Just be sure, if this is what happened, that you use a separate line on the payment receipt.

Let me know if any of this resolves the issues.


#10

There’s nothing quite like being happy while simultaneously feeling like an idiot, lol. :smiley:
What a relief. All fixed now. Thanks @Tut!

Did you or did you not deliver goods or services for which your customers paid you the amounts you categorized as Sales Bonus?

Technically I suppose that’s what it works out to, yes, however this still seems a more accurate description:

But, as a third alternative, if you invoiced for the value of the goods/services and the customers simply decided to pay more

because it was primarily in the form of revisions for which no additional costs were negotiated, nor even discussed really. Adding a separate line item to an invoice entry for something I elected to include as part and parcel of ensuring client satisfaction and pricing it at whatever amount the customer subsequently elected to include as a result wouldn’t have been keeping good records. Another income account seemed like the next best thing so I went with that and called it Sales bonus. It’s okay to keep it like this then??

Thank you guys so much again for all your help!!


#11

You are correct that modifying the sales invoice after the fact is bad practice. Depending on where you are, it might even be illegal, but regardless could lead to problems if there is ever a dispute. So leave the sales invoices as originally submitted.

Adding a line to a receipt, however, is another matter. The customer gets full credit for paying off the sales invoice. You properly record the receipt of money and allocate it to an income account.

Another way to handle this situation might be to issue a second sales invoice for the overpayment, detailing what you did. If you plan to take this approach, however, you should allocate the entire payment to the customer’s account receivable. Manager will automatically allocate the overpayment to Customer Credits, where it will offset the second invoice without human intervention. Or allocate directly to Customer Credits and let Manager find the first invoice. Whichever way you do it, the second invoice will show as Paid in Full immediately. Whether you go this way will depend, I think, on how you want to manage the relationship with the customer. If you want to emphasize how meticulous you are after the fact, use the second invoice approach. If you want to let the customer feel like they have given you a bonus, just allocate to a separate income account.