@Ealfardan
Referring your suggestion, how about if we have any transaction on the same date the opening balances were posted?
How would the balance show it? It wouldn’t show the opening balance & transaction balances separately, I’m almost certain, right?
The balance sheet will certainly show only the closing balance on that day not the opening balance
Why would you do that?
You enter your starting balances (which includes transactions like invoices) and lock the dates and this will lock in your opening balances like every other software.
Look at the bright side, since you can now post transactions as opening balances, you can setup your starting balances like this:
The process is now much shorter and faster than before.
I have noticed that the date on reports, invoices, etc is dropping the leading zero from the day(day only, not month). Is this a result of these changes and intentional?
Sounds great, but what do you do with the sales invoices and purchase invoices whose VAT has already been settled with the tax authorities, but has not been paid by the customer, or paid to the supplier?
(Accrual basis).
As far as I can see now, the VAT of these invoices is now included in the opening balance and must still be corrected somehow as you mentioned in your post already…
So, I do hope Lubos will come up with a solution soon.
This update would not make any impact on your P&L.
As for balance sheet, I agree - it is bad if you are affected.
Here is the solution where Manager will automatically re-calculate what your starting balances should have been if entered on cash-basis and then updates them.
Summary tabRetained Earnings balance.Fix Starting Balances button in bottom-right corner.
Update to accept and your balance sheet should be what it was before this update.@lubos please advise what basis of Cash accounting you intend to use in Manager. It appears that you are concerned with only AR and AP accruals. In terms of the definition of Cash Basis of Accounting you are using a Modified Cash Basis of Accounting. See definition here: Basis of accounting definition — AccountingTools
On this basis AR and AP should be zero on every cash basis balance sheet, but in fact credit balances(customers) and debit balances Suppliers report on the balance sheet, if either entered via invoices or by starting balance “Available Credit”.
@AJD when I say starting balances on cash-basis, it’s under assumption that you enter unpaid invoices only.
But you can really do anything before your start date as @Ealfardan has already said. You can enter paid invoices too. Receipts, payments… any transaction from the old accounting system.
Starting balances for each account are there to make up for the transactions you didn’t enter from the old accounting system.
Yeah, I understood that.
Yeah, understand that also.
Maybe I should report a bug.
If I enter a pre-start purchase invoice for Acme enterprises of $200, AP amount on cash basis balance sheet zero - all good. If I then enter a pre-start supplier Debit Note for Acme enterprises of $50 (AP balance is now $150) AP amount on cash basis balance sheet zero - still good. However if I change the supplier debit note from $50 to $250 (AP balance now negative $50 - i.e. debit) the cash basis balance sheet reports AP as negative $50.00 - not so good as it should still be zero.
If I then enter a pre-start debit note for a different supplier XYZ enterprises of 300 (or enter via starting balance Available Credit) the cash basis balance sheet reports AP as $350 - again not so good as it should still be zero.
Obviously it has the same effect if these entries were to be made post start date
Customer overpayments or supplier overpayments are showing on balance sheet as negative. Cash-basis is about elimination of unpaid invoices. Overpayments are to be shown on cash-basis. It works exactly the way I intended for it to work.
Perhaps if you have better idea, let me know how you would show customer overpayments on cash-basis balance sheet.
It all comes down to this question: How far do you want to go in terms of “Cash Basis of Accounting”? I would say that if you are only not reporting AP and AR Accruals then the cash basis balance sheet should display zero for AP and AR at all times.
Look at it this way: You have made these changes to eliminate the supplier credits (debits) relating to VAT amounts, but you have left the supplier credit balances relating to other sources. The same applies for customer credit balances (credits).
I guess the other option would be to have a switch when a business is first created asking the user to select the basis of accounting they wish to use. Once the business is created the accounting basis could not be changed.
If cash basis is selected then AP and AR functionality would not be available and users would have to create their invoices and credit notes in another program (or paper based) such as Excel or Word and only enter everything on a cash basis.
That is not a good idea. Sometimes there are mandatory reasons for changing.
Cash Basis Accounting: An Overview. The main difference between accrual and cash basis accounting lies in the timing of when revenue and expenses are recognized** . The cash method is a more immediate recognition of revenue and expenses, while the accrual method focuses on anticipated revenue and expenses.
Let’s go back to the basics, based on nature of each business rather than forcing to use certain methods only due to change in software. Most of the business likely to apply Accrual except those who are having valid reasons for Cash basis.
As a Chartered Accountant we are recommending the methodology based on the nature of business. Also it applies IFRS which is primarily of paramount importance about the acceptingly of acceptance.
Hope this great software will comply with the international regulations…
Yeah, I’m not advocating this.
Exactly, software needs to be consistent in the way it reports cash basis
Yes, that is a problem that needs to be solved. I believe the Cash and Accrual basis issue here is only concerned with the opening taxes – if I am not mistaken.
Therefore, for me at least, I wouldn’t charge tax to these invoices and I would record them at their full value. Then, I would enter the VAT liability separately in a Journal Entry.
My reasoning for this is this record isn’t the official invoice, the official invoice has already been issued somewhere else and VAT has already been there. The same goes for revenue/expense part. So really I would only be concerned with the receivables part.
I would also attach a copy of the official invoice to the transaction just in case.
But my way might not be to everyone’s liking though. There’s the auto-fix that the developer provided and using Journal Entries to fix discrepancy.
As far as my understanding of the situation goes, I don’t think the whole “Cash-vs-Accrual” debate is necessary here. I would simply change the instructions on entering starting balance transactions so they don’t involve taxes and let the taxes be entered manually.
Hi @lubos What you did is not just a minor update, this is have a huge impact in my accounting numbers. It created havoc in the office today which I cannot get explained well to the management. All the inventory and P&L from the past been changing as well. Please get the system back to the previous version. This is really2 a disaster.
Fortunately, after testing on my local PC instead of the server, this change didn’t effect at all our Businesses. I will wait to be back in the office to upgrade in order to check with calm the status of the backups.
Thank you Lubos.
I place a very high value in my accounting software accurately calculating accounting quantities. All non trivial software has bugs, eliminating them when found indicated NG software also value accuracy of accounting amounts. Management tools can give an approximate overview but not accounting reports.
Thank you also for providing the tools to Manage the transition.
All of my businesses were not affected except one and the utility have fixed that for me without any fuss.
Thanks Lubos for the quick fix.
@rully_p could you test this and tell us how it goes?