Journals allow you to create one off or recurring balance sheet movements (exchange of values). Journal entries are a fundamental building block of accountancy and must have a balancing debit and credit.
They are designed to facilitate Purchasing Events, like a large asset purchase, and Business Events like dividends or directors drawings and business loans
A journal may touch any balance sheet account, however in the P&L it may only reference Balance Sheet Derived P&L Accounts. A custom journal cannot modify the value of a Value Source P&L account. The value of these accounts is determined by a value rule within the P&L. To change the value, you must edit the value rule or replace it with a direct entry with the desired value. However journals can impact Balance Sheet Derived P&L Accounts.
To set up a journal:
- Navigate to the balance sheet accounts or to the P&L account that requires your journal entry in the main grid
- Click on the cell to open up the preferences side panel
- Select the baseline
- Select ‘Add a custom journal’.
You’ll then be asked to fill in the relevant information (Name, Date, Debit Value, Credit Value, recurring nature). Once saved Fathom will populate this across the forecast.
❗Note: Fathom will not allow you to proceed with a journal entry unless the entry is in balance. A red ‘not in balance’ indicator will appear to prompt you to add additional entries, or make changes to the current entries.
Schedules in Fathom Forecasting
For some P&L accounts, values are actually driven from the balance sheet and, in some cases, the values are sourced from multiple balance sheet accounts. Examples of this may be interest expense or loan repayments or the depreciation and amortisation of different asset classes. Schedules allow you to account for these recurring movements between the Balance Sheet and P&L or between two Balance Sheet accounts in your forecast.
For example, your Interest Expense may be generated from multiple Balance Sheet loan accounts into a single ‘Interest Expenses’ account in the P&L. In another example, Depreciation may be generated from multiple Balance Sheet asset accounts, and recognised in a single ‘Depreciation’ account in the P&L.
For these examples, we need a place to hold these values and their calculation over time. It also becomes difficult to add journal entries for some P&L fields like depreciation, dividends, or adjustments - there is no mechanism to alter that value as it is determined by a value rule. This is why Fathom enables you to create a schedule.
Multiple schedule lines can be added to an account (e.g. a loan may have a schedule line for collection of repayments, and a schedule line for posting interest expenses to an account in the P&L).
Schedule lines can also be created from Balance Sheet Derived P&L Accounts. In this case, you are creating the schedule line from the P&L Account (e.g. Depreciation) and will instead need to select the Balance Sheet account from which it will receive posted values by this schedule (e.g. Computer Equipment - an Asset account). Likewise, the Depreciation account in the P&L can receive values from multiple Balance Sheet accounts via schedules from those accounts. More on this will be described below.
Each schedule line has at least 2 accounts associated with it. It creates movements in both of these accounts, according to the value shown in the grid.
E.g. Plant & Equipment Asset account may drop by $500, and Depreciation Expense Account goes up by $500. The schedule line should always be visible in both accounts.
E.g. a schedule line to make a loan repayment may reduce a loan account by $500, and reduce a cash account by $500. Again, this will always be in balance, and will be visible in both the BS Layer Detail View for both the cash account and the loan account.
To create a schedule:
- Navigate to the Balance sheet account or the Balance Sheet Derived P&L account that requires the schedule to be set up.
- Click the value cell to open the preferences side panel.
- Click on the Baseline
- Select ‘Add schedule’
- Here you will be asked to select the account to which you need to apply the schedule and the method for calculating the adjustments needed. Depending on the chosen method, you will be asked to input more information. You can choose from the following methods:
- Constant/Growing: A repeating value that may be increased or decreased each period
- Straight Line Depreciation: Calculated as (purchase price of an asset - residual value of the asset) / the asset’s useful life
- % of Opening Balance: Increase or decrease the baseline value of the account by a percentage each month
- Direct Entry: Input a value