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Articles:

Credit Card Transactions

Entering Fixed Assets as Journal Entries

Estimating

Estimating-At-A-Glance

Estimating, Project Management Overview

Paying Liabilities and Transfers Between Accounts

Payroll Overview

Profitability

Proposals

Profits - Strategies to Improve

Responsibility As A Motivator

Risk Management

Schedule Variance

Take Your Business to the Next Level

Teamwork As A Motivator

Time Management

Time Management Matrix

Timetable of Procedures

The Balance Sheet, Part 1

The Balance Sheet, Part 2

The Balance Sheet, Part 3

The Balance Sheet, Part 4

Training Saves Money

Value As A Motivator

Year-end Close

Paying Liabilities and Transfers Between Accounts

Paying Liabilities

Liabilities are created in various ways. Your company might take out a loan, use a revolving credit line or overdraft protection, buy an item based on credit (such as a computer using Dell Credit), accrue a payroll liability to be paid in a deposit to the Federal or state government, or use a credit card to buy something.

Liabilities do not include using a debit card (which is like writing a check), or transferring funds between asset accounts (such as a transfer from a checking account to a savings account, transferring between checking accounts, or a transfer from a checking account to petty cash). I will cover those topics later below.

Making a payment against a liability account is almost always the same procedure. Using a check writing screen, such as 1-1 or 4-3, or making a journal entry in 1-3, the payment is a credit to a checking account and a debit to the liability account you are paying against.

If the payment was a deposit of Federal Payroll taxes, the ledger side of the entry would look like this:

Account Debit Credit

23000 – Federal Payroll Tax Payable 2,500.00
10000 – Checking 2,500.00

If it was to pay a credit card, it would look like that also:

Account Debit Credit

24050 – Bank of America Visa 2,500.00
10000 – Checking 2,500.00

The same would apply for a line of credit payment (whether you initiated it or it was an automatic deduction by the bank), a payment against a loan or other credit account.

Transfer of Funds Between Accounts

Because of the way Master Builder’s bank reconciliation works, it is best to use a clearing account as an intermediate step between two accounts when transferring funds. If you were transferring $10,000 from Savings to Checking, the transactions would look like this.

Account Debit Credit

10300 – Savings 10,000.00
10500 – Cash Clearing Account 10,000.00

Then,

Account Debit Credit

10500 – Cash Clearing Account 10,000.00
10000 – Checking 10,000.00

The reason for this is that if you transfer directly from one cash account to another, the transaction only appears on one Bank Reconciliation. If you use the above method, you can use the Bank Reconciliation screen 1-5 in Master Builder normally for each cash account.

A Word About Debit Cards

Although a debit card might look like a credit card, we know it’s like using cash. The best way to think about a debit card it that it’s like writing a check each time you use it. It credits the checking account, and often debits an expense account. If you purchased lumber at Home Depot with a debit card, the transaction would look like the one below. You can use screen 1-1 or 1-3 to produce the transaction.

Account Debit Credit

50001 – Materials 2,500.00
10000 – Checking 2,500.00

Mission Development can provide a solution: service@missiondevelopment.com

or 805-771-8400.

Please also check the Reports page.