[Article] Pastel Accounting Tip: Journal Contras

[Neville Bailey]

Contras in journals are very handy, in that they serve to create the other side of a journal automatically, thus saving time on data capture.

For example, in a general journal, you might want to debit Printing & Stationery and credit a Loan Account.

The conventional way of capturing this entry would be to capture two line items in the journal, the first line for the debit entry to P & S, and the second line for the credit entry to the Loan Account.

Using the contra feature, you simply capture the debit entry on the first line as usual but, instead of capturing a second line for the credit entry, you enter the ledger account (that has to be credited) in the Contra column on the extreme right of the first line. Whatever has been debited (or credited) in the first part of the line will be credited (or debited) to the account number in the Contra column.

This becomes even more useful when you need to debit a whole batch of expenses to various accounts, but they must all be credited to the same account. If you set the Contra account to a default account number, you don't even need to capture the Contra account number for all the lines! Simply click on Settings at the bottom of the journal screen, and capture the default Contra account code in the top left corner of the Settings screen.

[StuMurless]

Hi Neville

If you are entering a GL Journal with VAT implications can you disable the contra function and just have each line item as an entry.

The entry is
Dr - Cash Control
Dr - Credit Control
Dr - Complimentaries
Cr - Sales (VAT inclusive)

As you can see there are a few different contras to the sales line item and I don't want to have to do each entry seperately

The entry balances but when I try update the batch it tells me the contra account for the batch is not set up.

[Neville Bailey]

In the above example, you must set up the Sales account as the default contra account, and then create a separate line item for each of the debits, with VAT code 01.

[StuMurless]

Would I use a VAT code of 01 for all the debits even though they do not include VAT.
I would have thought it would just be the credit which would have a code of 01?

[Neville Bailey]

You only need to use a VAT code of 01 on the debit lines where VAT is applicable.

It is important to process the general journal in the way I have described, otherwise the system will not apply the VAT correctly.

In order to satisfy yourself, I suggest that you make a quick backup of your company, test the journal for a few line items, and then run the relevant detailed ledger reports, as well as your VAT report. Then restore the backup and do the journal in full.

[Mike C]

It is important to process the general journal in the way I have described, otherwise the system will not apply the VAT correctly.

Hi Neville - I have noticed this with journal entries.

Our Accountants have always told us to make a separate entry for the VAT using 00 on each tansaction as Pastel does not process VAT transactions correctly using 01 when doing journal entries.

You have now spoken about it being set up correctly. How does one set it up "correctly" so that one can confidently use the 01 for VAT? (I am talking about journal entries only)

[Neville Bailey]

Hi Mike,

With "specialised" entry types, such as cashbook journals, customer journals and supplier journals, the system knows how to process VAT transactions correctly.

For example, in the case of a supplier journal, the system "knows" that the expense (debit) line will reflect the VAT exclusive amount and that the VAT will reflect under input tax in the VAT report, by virtue of the fact that supplier transactions generate input tax transactions.

However, in the case of General Journals, the system has no way of knowing whether output or input tax is involved, as there is no flag (such as supplier, customer or cashbook payment) to guide it. In addition, the system cannot deduce which of the line items must be debited/credited as VAT inclusive or VAT exclusive.

I have found a trick that always seems to work, and that is to allocate the journal item to the balance sheet leg of the transaction (such as a loan account to be credited), with the appropriate VAT code, and to use the contra account field for the income statement leg of the transaction (such as an expense item to be debited). The trick will not work if you create the income statement leg of the transaction as a separate line item in the journal.

Hope this helps.

[StuMurless]

Hi Neville. Is there a way to manually enter the VAT amount ie when you are journalising a purchase and not all items include VAT and so the automatic system calculation of VAT will not be correct.

[Neville Bailey]

Hi Neville. Is there a way to manually enter the VAT amount ie when you are journalising a purchase and not all items include VAT and so the automatic system calculation of VAT will not be correct.

If you manually enter the VAT amount (without using the VAT code), the VAT reports will not reflect correctly. The VAT control account will be correct, but you won't have the analysis of input and output tax which the VAT reports provide.

[StuMurless]

Is there no way to disable the contra function for general journal entries and just use a line item for each line of the journal. I am trying to an allocation of a suspense account.
Dr Expense 1 incl VAT
Dr Expense 2 incl VAT
Cr Suspense no VAT

I enter each line of the entry on a seperate line and enter the expenses with tax code 1 and the credit to the suspense with tax code 0.
The entry balances but I get an error message saying the contra account for this batch is not set up. I don't want to use contra accounts but there doesn't seem to be any way to disable the function. I am a CA and yet I am finding Pastel extremely difficult to do even the most simple entries. I feel sorry for non accountants who try use it!

[R.'Nyane]

Thanx for the article Neville,

I want to disable this contra function in my pastel as it appears sometimes as 000/000 in my general ledger when posting some general journals. How do I do that?

[Abigailmagee]

Hi, my problem is that I am receiving the contra account for this batch is not set up, I am using multiple contra account numbers, how do i fix this?

[Kevin Smith]

Check that you haven't missed a line's contra account - there should be no 0000/000 entries as contra accounts if you are using any form of tax type in the journal. If you aren't processing with tax, you can leave all contras as 0000/000 and then raise a debit and credit as separate lines. If you do it that way, the batch total in the bottom right will read in balance.