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Adjustment Documents

This guide explains how to use Adjustment Documents to make manual corrections to your General Ledger. Whether you need to fix a mistake, reclassify an expense, or record opening balances, this tool gives you direct control over your accounting records.

What are Adjustment Documents?

Think of an Adjustment Document as a manual override for your accounting records. Most entries in the system are created automatically (like when you post an invoice), but sometimes you need to make corrections by hand.

Common reasons to use this:

  1. Corrections: You booked an expense to "Office Supplies" but it should have been "Computer Equipment".
  2. Accruals: Recording expenses that happened but haven't been billed yet.
  3. Opening Balances: Setting up your initial account balances when starting with the system.
  4. Depreciation: Manually recording asset depreciation (if not automated).

Where to Find It

Navigate to: Accounting → Adjustment Documents

You'll see a list of all manual adjustments, showing their status (Draft, Posted, or Cancelled).

How to Create an Adjustment

Step 1: Start a New Adjustment

  1. Go to Accounting → Adjustment Documents.
  2. Click Create Adjustment Document.

Step 2: Document Details

Fill in the header information:

Field Description Example
Currency The currency for this transaction USD
Type The kind of adjustment Standard, Opening Balance
Reference A unique identifier for tracking ADJ-2024-JAN-05
Date The accounting date for the entry 2024-01-31
Reason Why are you making this change? "Reclassifying printer purchase"

Step 3: Add Line Items

This is where you define the debits and credits.

[!IMPORTANT] A valid journal entry must balance: Total Debits = Total Credits.

  1. Click Add Line Item.
  2. Product (Optional): If this relates to a specific product.
  3. Description: Describe this specific line (e.g., "Correcting wrong category").
  4. Quantity & Price: Used to calculate the amount.
  5. Account: The General Ledger account to hit.
  6. Tax (Optional): If tax needs to be adjusted.

Example: Reclassifying $500 from Office Supplies to Equipment

Description Account Debit Credit
Move to Equipment Computer Equipment $500.00 $0.00
Remove from Supplies Office Supplies $0.00 $500.00

Step 4: Review and Post

  1. Check that your totals balance.
  2. Review the Reason to ensure it's clear for future audits.
  3. Click Create (to save as Draft) or Create & Post (to finalize).

Understanding Statuses

┌─────────┐ ┌─────────┐ ┌─────────┐ │ Draft │ ──▶ │ Posted │ ──▶ │Cancelled│ └─────────┘ └─────────┘ └─────────┘ 📝 ✅ ❌

  • 📝 Draft: You can edit everything. No impact on the General Ledger yet.
  • ✅ Posted: The entry is locked and recorded in the General Ledger. Affects reports.
  • ❌ Cancelled: The entry is voided and has no effect.

Common Scenarios

Scenario 1: Reclassifying an Expense

The Situation: You noticed a vendor bill for $200 was recorded under "Meals & Entertainment" but it was actually for "Office Supplies". The bill is already paid and closed.

What to do:

  1. Create a new Adjustment Document.
  2. Debit: Office Supplies ($200) -> Increases the correct expense account.
  3. Credit: Meals & Entertainment ($200) -> Decreases the wrong expense account.
  4. Post the document.

Scenario 2: Recording Opening Balances

The Situation: You are moving to this system from Excel. You have $10,000 in the bank and $5,000 in Capital.

What to do:

  1. Create an Adjustment Document with Type "Opening Balance".
  2. Debit: Bank Account ($10,000).
  3. Credit: Owners Capital ($5,000).
  4. Credit: Retained Earnings ($5,000) (Assumed difference).
  5. Post the document.

Best Practices

✅ Be Descriptive

Always write a clear Reason. Six months from now, you won't remember why you moved that $50. "ADJ-001" tells you nothing; "Correction for Inv-2023-005 misnamed category" tells you everything.

🔒 Post with Caution

Once posted, an adjustment affects your financial statements immediately. Double-check your accounts and amounts before clicking Post.

📅 Watch the Date

The Date field determines which fiscal period the specific entry falls into. Be careful not to post adjustments into a closed period if your company policy forbids it.

Troubleshooting

"Unbalanced Entry" Error

The system will not let you post if Debits do not equal Credits. Check your line items and ensure the totals match exactly.

Cannot Edit a Posted Document

This is by design to maintain audit trails. If a posted adjustment is wrong:

  1. Cancel it (if allowed).
  2. Or create a new adjustment that reverses the mistake (Swap the Debits and Credits).