When a transaction does not fall into an Income or Expense category it most likely needs to be recorded to a balance sheet account, which will be one of three types: assets, liabilities, or equities. On Ambrook there are two ways that balance sheet accounts are managed, which determine how you will record activity on them.
Connected - Meaning transactions on the account are pulled in automatically, or
Manual - Meaning means all account activity needs to be manually recorded in Ambrook.
Connected accounts are either checking, savings, or credit card accounts. This article will first review how to tag the most common transactions between two connected accounts which are:
Other balance sheet transactions involving manual accounts. In Ambrook these transactions will be called asset, liability, or equity adjustments depending on the type of account you are recording to:
Matching Transactions on Connected Accounts
Transactions between two connected accounts are unique because there are two relevant entries posted to the ledger e.g. a withdrawal and a deposit, or in the credit card example pictured below a withdrawal and a credit card payment payment. On Ambrook you associate these transactions by selecting one of the options in the Match Existing section of the tagger.
Account Transfers
If you have multiple bank accounts, such as an operating account and a savings account, you may transfer funds between them to manage your cash flow. In cases where both the accounts are connected to Ambrook, you will see two transactions in the Ledger - a withdrawal on one account and a deposit on another - for equal but opposite amounts e.g. +$1,000 and -$1,000.
In these cases you should:
Click “Category” on one transaction to open the tagger
Select the “Account Transfer” option, found in the “Match Existing” section of the tagger
Match the transaction to its counterpart, the equal but opposite amount.
Doing this automatically tags the matched transaction and there is no further action required. If the account you transferred money to is not a connected account on Ambrook you will need to follow one of the instructions for asset or equity adjustments described below.
Credit Card Payment
If you are paying down a credit card that is connected to Ambrook, from a bank account that is also connected to Ambrook, you will likely see three types of transactions:
The individual credit card expense (negative number)
The larger credit card payment transaction (positive number)
The larger bank withdrawal transaction that pays off the credit card (negative number)
You can treat the individual credit card expenses as you would a normal expense, and tag it with an expense category.
For the latter two transactions (credit card payment and the bank withdrawal), you will want to match up all the pairs to properly net out those amounts so they don't show up on your P&L. You would do this by taking the following actions:
Click “Category” on one transaction, the bank withdrawal or the credit card payment, to open the tagger
Select the “Credit Card Payment” option under “Match Existing”
Match the transaction to its counterpart, the equal but opposite amount
Doing this automatically tags matched transaction and there is no further action required. If the account you transferred money to is not a connected account on Ambrook you will need to follow one of the instructions for liability or equity adjustements described below.
Note - If you cannot find the transaction you are trying to match to it may not be on your ledger yet. Transactions may take up to 3 days to show up on Ambrook. If the transaction still doesn't appear, check your connections or reconcile your account. |
Asset, Liability, and Equity Adjustments
If a transaction should be applied to a manual balance sheet account you will select asset, liability, or equity adjustment. This is determined by what type of account you are trying to record activity on, e.g. if you’re trying to apply a transaction to an asset account you would select Asset Adjustment.
Recording Asset Adjustments
Common scenarios in which you would record an asset adjustment include:
Purchasing a new asset or inventory
Selling an existing asset or inventory
Capitalizing repairs and maintenance on an existing asset
When you purchase an asset with cash or a credit card, the transaction will appear as a negative amount on your Ledger. If you sold an asset there will be a positive transaction on the Ledger. To record the adjustment you will:
Identify the transaction in your Ledger
Click the “Category” button then select “Asset Adjustment” under “Record on Balance Sheet”
Search for your asset account in the “To” field of the menu. If you haven’t created a balance sheet account for the asset yet you can do so by selecting “New Balance Sheet Account”.
Note: Set the opening balance to be zero if you are creating an account this way.
Enter a description for your purchase then click “Done” in the top-right corner.
Tip - When purchasing an asset you can often include costs in addition to the purchase price towards the total cost basis, such as the sales tax on a vehicle purchase. |
Recording Liability Adjustments
Common scenarios in which you would record a liability adjustment include:
Drawing down an operating note or line of credit
Making a payment on an operating note or line of credit
Taking out a vehicle loan as part of a purchase
Loan disbursements deposited in your bank account or loan payments made from your bank account will appear in your Ledger and can be tagged by:
Identifying the transaction in your Ledger
For a loan payback, determine if it is a combination of principal and interest. If so, create two line items on the transaction. If it’s a drawdown there will be no interest.
Tag the portion of the transaction that is principal as a “Liability Adjustment” under “Record to Balance Sheet”
Search for your loan account in the “To” field of the menu. If you haven’t created a balance sheet account for the asset yet you can do so by selecting “New Balance Sheet Account”.
Note: Set the opening balance to be zero if you are creating an account this way, but it should only be done for an initial drawdown on a loan. If the loan was pre-existing it likely has an existing balance
Enter a description for your purchase then click “Done” in the top-right corner.
Some liability transactions, such as taking out a vehicle lease, will not show up in your Ledger automatically because there was no cash that went through your connected account. In cases like this you should:
Create the liability account with an opening balance of zero.
Note: In the vehicle lease example you would also create a corresponding asset account, to represent what the lease actually purchased.
Create a journal entry from the Ledger
Select your liability account as one line in the journal entry and enter the amount in as a credit. Select the relevant other account in the transaction and enter the same amount as a debit.
Recording Equity Adjustments
Common scenarios in which you would record an equity adjustment include:
Owner’s draws when you take money out of your business for personal use
Owner’s contributions when you deposit money for business use
Equity investments from partners in your business.
Equity adjustments typically have corresponding activity - either withdrawals or deposits - in your Ledger which you should tag by:
Identifying the transaction in your Ledger
Click the “Category” button then select “Equity Adjustment” under “Record to Balance Sheet”
Search for your equity account in the “To” field of the menu. If you haven’t created a balance sheet account for the asset yet you can do so by selecting “New Balance Sheet Account”.
Note: If this is the first time you are tagging a transaction to the equity account, you should check your historical records to see what the opening balance might be.
Enter a description for your purchase then click “Done” in the top-right corner.
Other Balance Sheet Activity
In addition to the above scenarios, you may have more complex balance sheet activity such as:
Recording owner’s contribution on non-connected accounts
Booking depreciation for the year
Recording inventory usage on an accrual basis
For more in-depth guides you can refer to the Managing the Balance Sheet part of the help center.