Purpose

To explain how Account Types are used in Magnifi, including special account designations such as Capacity Building, Inter-Entity, Inter-Group, Retained Earnings, GST, PAYGW, Income Tax Expense, and Dividends. Correctly specifying Account Types ensures your Profit & Loss, Balance Sheet, and Capacity Planning reports calculate and display accurately.

When to Use

• When setting up new accounts in the Chart of Accounts.

• When you want to enable Capacity Planning by linking income accounts to employee capacity.

• When managing multiple Divisions or Groups and need to exclude internal charges.

• When projecting Balance Sheet and Cashflow movements such as retained earnings, tax, GST, and PAYGW.

How To

What is a Capacity Building Account?

Capacity Building accounts are Profit & Loss accounts that represent income used to measure demand against employee capacity.

• These accounts allow you to compare Capacity (employees) with Demand (income).

• When marked as Capacity Building:

  • Capacity Summary Report compares projected annual employee capacity with projected income.
    

  • Capacity v Demand Report performs a detailed month-to-month calculation based on Capacity Drivers.
    

💡 Example: On the Capacity Summary report, if projected income from Capacity Building accounts is $1,200,000 and employees have capacity for $1,121,600, the organisation shows a capacity deficiency of $78,400.

What is an Inter-Entity Account?

• If you use Divisions within a file, you may need to exclude internal charges from consolidated reports.

• Example: Division A pays a service fee to Division B.

• In the Chart of Accounts, you will see an Inter-Entity option against each Profit & Loss account. Tick this to exclude the account from consolidated reporting.

What is an Inter-Group Account?

• If you use Groups for multi-file consolidated reporting, you may need to exclude internal charges between organisations.

• Example: Organisation A pays a service fee to Organisation B.

• In the Chart of Accounts, you will see an Inter-Group option against each Profit & Loss account. Tick this to exclude the account from consolidated reporting.

Why Specify Retained Earnings?

• If you are using the Balance Sheet, you must identify the Retained Earnings account.
  

• In the Chart of Accounts, you will see a Retained Earnings option against each Equity account. 

• Magnifi allocates projected profit to Retained Earnings to ensure your Balance Sheet projections balance correctly.

How to Allocate Income Tax Expense

• Income Tax Expense is set as an Account Category. This appears in the Chart of Accounts under the Profit and Loss tab.

• Allocate your Income Tax Expense account if you want it to appear separately in the Profit & Loss projection.

• See Account Categories for more detail on tax allocation.
  

How to Allocate Dividends

• Dividends are also set as an Account Category. This appears in the Chart of Accounts under the Profit and Loss tab.

• Allocate your Dividend account if you want dividends to appear in the Profit & Loss projection.

How to Specify GST & PAYGW Accounts

• Your accounting software will include liability accounts for GST and PAYGW.

• To project cashflow accurately, you must specify these in Magnifi in the Chart of Accounts under the Balance Sheet tab:

  • GST: Magnifi allocates GST on income and expenses to the GST liability account. Payments are then deducted based on your Payment Terms.
    

  • PAYGW: Magnifi deducts PAYGW from gross wages using the rate specified under the PAYGW hyperlink.

    • You can edit the PAYGW rate by clicking on the hyperlink.

    • The liability is recorded against PAYGW, with payments deducted based on Payment Terms.
      

Tips/FAQs

• You cannot tick multiple accounts for GST, PAYGW, or Retained Earnings. Magnifi will attempt to identify these on import, but you can adjust if required.

• Payment Terms determine the timing of GST & PAYGW outflows. You can add a sub-account against liability accounts if you need manual adjustments.
  

• Magnifi will display a warning message in the Profit & Loss if Inter-Entity accounts do not balance to $nil. When exporting the Profit and Loss, an Inter-Entity worksheet shows account balances for easy review.

• For Inter-Group reconciliation, export a Group Profit & Loss report to Excel and check the Inter-Group worksheet for discrepancies.