It is a Balance Sheet account under Assets. We take out some items from our stock (in this case glasses) and make it become an Asset. We normally use these items for demonstration with clients or in a showroom.
We use Journal Entries for depreciation, not for write-offs. The second picture is a write.offs through which we take some items out from our stock and allocate the cost to the Inventory for Demonstration account.
This is not inventory, this is inventory that has been allocated to a different account and based on local regulations we can depreciate 50% per year.
This account has always been positive because we debit the account with the value of the goods with an inventory write-off, and then depreciate 50% of it per year. So basically this account can only be positive or equal to zero. As you can see in the first picture from the initial post there are no debits in the list, only credits, even if the write-offs use the same account and should therefore appear and debit an amount to the same account.
Well, you did not provide the most important information: the screen shot of the Edit screen for the Inventory for demonstrations account. I was curious whether this is a custom control account. If not, it should be, because you have apparently assigned fixed assets to it, or at least think you have.
Your description of what you are doing raises another question. Did you create the inventory items you wrote off as fixed assets? You should if you intend to depreciate them.
Next, you should not be using journal entries for depreciation. You should use depreciation entries.
Based on what you have written so far, it looks like you tried to write off inventory items to an asset account, one that should be a custom control account for fixed assets but may not be. Understand that doing this will not transfer the inventory items to the asset account, regardless of whether you set it up correctly. Then you tried to depreciate assets with a journal entry, which may have affected the balance of your self-created asset account, but does not—based on what you have shown—depreciate the assets.
So let’s go back to the beginning. Describe this Inventory for demonstrations account completely. Show a screen shot of its Edit screen, including the bread crumbs at the top so I can tell how you got there. Describe what sort of items you think you have assigned to this account.
First of all, thanks for you help. Secondly, this is an issue I have never seen. The figure of this account has never been negative, and we have done audits for the last fours years. I wonder if it is something new that has been implemented in Manager.
This is the what I think you mean when you say Edit screen. But I do not understand what you refer to when you say Bread crumbs.
This account monitors the value of the stock of items that we take from our overall inventory and use them for promotional purposes. Basically it is stock with some value that we then depreciate. This account is a custom control account (I am not even sure what this is). And I didn’t create the inventory items as fixed assets (how would that be done? and why?).
I did not know that Depreciation Entries existed, they must have come in a (recent) update.
Yes, this is the Edit screen. Bread crumbs are the links at the top that tell you how you navigated there: Settings / Chart of Accounts / Balance Sheet Account—Edit.
What you are doing is incorrect. You created an ordinary balance sheet account that only records the value of something. In your case, you are recording the value of the inventory you transferred. And you arbitrarily assigned the account under the Fixed assets group. But that did not make it a fixed assets account. There are no fixed asset subaccounts associated with this account, so you cannot depreciate anything in it. It contains no asset ledgers.
You would have done that according to this Guide: Purchase fixed assets | Manager. You would have followed the procedures described for a journal entry since you had already made the actual purchases. As to why, that depends on their type, value, economic life, and local regulations. You would only do this if they qualify for depreciation. For example, if you carried an automobile in inventory and converted it to a demonstration unit, it might become a depreciable fixed asset. Or a piece of expensive furniture in inventory might be converted to a fixed asset for long-term display purposes. But ordinary inventory would not, because its write-off to demonstration use would be a current expense. You should consult a qualified local accountant to determine what qualifies in your jurisdiction.
They were added as a separate tab in October 2019. But that only changed the mechanism for entering depreciation. Previously, there was a separate form accessed through the Fixed Assets tab and used to modify a specific asset’s accumulated depreciation. See Depreciate fixed assets | Manager for the current procedures.
Sorry I meant “This account is NOT a custom control account”.
I will look at all the guides you have shared. Maybe there is s way to edit the way we have created these specific postings.
But the main point here for me is that this issue is new, at least to me. This account had never had a negative figure in the past, and I guess there must have been some updates to Manager that have overridden some of our previous account postings. Maybe @lubos can help here?
What you mention about the vehicle from inventory is exactly the same principle we have applied to our glasses, which in some cases are very expensive and become an asset.
Moreover, we used the same principle for other sub-accounts under Fixed Assets, e.g. appliances, furniture, etc. Yes this other sub-accounts are not related to inventory items, but the principle used to record debits and credits has always been the same.
Yes, there have been changes. The general ledger engine was replaced entirely. But your procedures were incorrect even under the older versions. The only changes you would have noticed, if you had been doing things correctly, are to the method for entering depreciation and the location for creating custom control accounts. You still would have had to create fixed assets for the transferred inventory, define a custom control account made of fixed assets, and assign the assets to that account.
It was working for us, and our auditor approved it, so it was totally fine. And it is disappointing that updates in Manager can create such problems related to past postings. We used the available functions, and those (at least the past postings) should have remained as they were.
Now, based on the links to the guides you shared, can we fix the problem?
Of course, you are free to do whatever you want. But, for example, was your auditor aware that the software believed to be tracking fixed assets was not doing so because you were not using it the way it was intended? Did the auditor just believe the numbers without knowing how they were generated?
New versions of Manager cannot anticipate misuse of older versions.
Yes, if you follow the Guides. But that will require correcting past mistakes. The unfortunate fact is that, when you have been using the program incorrectly for an extended period, you cannot assume it has produced the correct results.
Yes he should know, and will check this once more. The point is that if we sell expensive items and we want to convert them into fixed assets (which we can use over a period of two or more years) I do not see the problem of them being posted under fixed items like we did.
Anyway, we will go through the guides and find a solution.
And I’d like to know, if you know it, where Manager is posting the value of the inventory write offs that is not being posted to the Inventory for demonstration account under fixed assets. That value/figure must be somewhere, or is it simply ignored?
The problem is that you did not create the transferred inventory items as fixed assets. You only wrote off inventory to an account that you included in your Fixed assets group. You could have put any account into that group, but that does not mean the account is tracking fixed assets. Since the account is a not a control account for fixed assets, you cannot depreciate the non-existent fixed assets that you did not place into it.
Based on what you have posted, I do not know. Your inventory write-off posted the value to that account. But there could be issues with a start date, for example.
This also happen to me, In old version, write off can be allocated to under fixed asset with custom account name. now all of the allocation from custom fixed asset account was moved to inventory cost.
The only solving i find is, Edit write off, and allocate to Fixed asset’s subsidiary account again or you may use Journal entry to change account from inventory cost to custom account.
The start date is two years before these postings, way back, so that should not be the issue. Right?
I think things were easier before, and this is why I loved Manager. It seems now things are getting more complicated with these new functions.
What I have done now is to activate Fixed Assets under Customize. This has created two new accounts under Assets: Fixed assets, at cost and Fixed assets, accumulated depreciation. Now this seems to me something that will require a lot of work to fix, but also something redundant because we had already created subaccounts under Fixed Assets.
Does it mean that now I have to create Custom Control Accounts under both Fixed assets, at cost and Fixed assets, accumulated depreciation for all the subaccounts that are currently under Fixed assets (Appliances, Furniture, Vehicles, etc)? Will then Fixed asset disappear?