Ambivo Books User Guide
DocsUG-004
Bookkeeping Concepts
Double-entry, debits and credits, ledger, periods, accrual vs. cash
You do not need to be an accountant to use Ambivo Books day to day. Click + New Invoice, fill in the form, and Books figures out the debits and credits for you. But sooner or later you will see a number on a report that surprises you, and the only way to make sense of it is to understand what is going on underneath. This guide covers that.
Double-Entry Bookkeeping
Every financial event affects at least two accounts, and the change to one is balanced by an equal and opposite change to the other. That is the entire idea of double-entry. Total debits always equal total credits, which is why a Trial Balance balances.
A worked example
You sell a customer $1,000 of consulting services on credit (they will pay you next month). What happened, accounting-wise?
- The customer now owes you $1,000 — that is an asset called Accounts Receivable, and it goes up.
- You earned $1,000 — that is revenue, and it goes up.
In double-entry terms:
| Account | Debit | Credit |
|---|---|---|
| Accounts Receivable | $1,000 | |
| Sales Revenue | $1,000 |
When the customer pays you next month:
| Account | Debit | Credit |
|---|---|---|
| Bank | $1,000 | |
| Accounts Receivable | $1,000 |
Notice Accounts Receivable goes up (debit) when the invoice is created, then comes back down (credit) when the payment arrives. The net is zero — which is correct, because that customer no longer owes you anything.
Why "debit" and "credit" feel backwards
In everyday English, "credit" sounds positive and "debit" sounds negative — your bank statement says "Credit $1,000" when money comes in. That is your bank's perspective: from their books, your deposit is a liability (they owe you the money), and liabilities go up with credits.
In your books, your bank account is an asset, and assets go up with debits. That is why your bank statement and your books move in opposite directions for the same event.
The simplest rule:
- Debit the side of the equation where things "live": assets and expenses go up with debits.
- Credit the side that funds the business: liabilities, equity, and revenue go up with credits.
You do not need to memorize this. Books handles it for you on every transaction. You only need to recognize the words when you read a report.
The Accounting Equation
Underneath every set of books is one equation:
Assets = Liabilities + Equity
This is what the Balance Sheet shows. The left side is what the company owns; the right side is who has a claim on it.
When you bring revenue in or pay an expense, the equation expands to:
Assets = Liabilities + Equity + (Revenue - Expenses)
Revenue and expenses ultimately roll into equity at year-end (that is what closing the books does). The Income Statement shows the Revenue − Expenses part for a period.
If you ever see a Balance Sheet that does not balance, something is wrong with the data — Books will not let it happen under normal use, but imports of opening balances are the typical culprit.
Account Types and Normal Balances
Every account in your Chart of Accounts has a type. The type determines its normal balance (debit or credit) and where it appears on which report.
| Category | Account types in Books | Normal balance | Appears on |
|---|---|---|---|
| Assets | Asset, Bank, Current Asset, Non-Current Asset, Receivable, Inventory | Debit | Balance Sheet |
| Contra Assets | Contra Asset (Accumulated Depreciation, etc.) | Credit (offsets assets) | Balance Sheet |
| Liabilities | Liability, Current Liability, Non-Current Liability, Payable, Control | Credit | Balance Sheet |
| Equity | Equity, Retained Earnings | Credit | Balance Sheet |
| Revenue | Revenue, Operating Revenue, Non-Operating Revenue | Credit | Income Statement |
| Contra Revenue | Contra Revenue (Sales Returns, etc.) | Debit (offsets revenue) | Income Statement |
| Expenses | Expense, Operating Expense, Direct Expense, Overhead Expense, Non-Operating Expense, Other Expense | Debit | Income Statement |
| Other | Reconciliation | Varies | Used for clearing accounts |
A "normal balance" of debit just means the balance is expected to be on the debit side. Cash should normally have a positive (debit) balance. Sales Revenue should normally have a positive (credit) balance. If you see a credit balance in Cash, that is an overdraft — and it is a flag worth looking into.
See Chart of Accounts (UG-010) for how to set up and edit accounts.
Transactions and Line Items
In Books, every financial event is a transaction. Each transaction has:
- A type (Client Invoice, Supplier Bill, Client Receipt, etc.)
- A date
- A main account (the bank, the receivable, the payable…)
- One or more line items (the income, the expense, the inventory…)
- An amount that the line items must sum to
The transaction layer hides the debit/credit detail from you. You pick the customer and the products, type the amount, and Books fills in the right accounts based on what is selected.
The Ten Transaction Types
Books supports ten transaction types. You usually create them through dedicated screens (Invoices, Bills, Payments) rather than picking the type by hand, but it helps to know what they all do.
| Type | What it represents | Main account | Line items |
|---|---|---|---|
| Client Invoice | A credit sale to a customer | Receivable (DR) | Revenue (CR) |
| Supplier Bill | A credit purchase from a vendor | Payable (CR) | Expense or Asset (DR) |
| Client Receipt | A payment received from a customer | Bank (DR) | Receivable (CR) |
| Supplier Payment | A payment to a vendor | Bank (CR) | Payable (DR) |
| Cash Sale | An immediate-cash sale | Bank (DR) | Revenue (CR) |
| Cash Purchase | An immediate-cash purchase | Bank (CR) | Expense (DR) |
| Journal Entry | A manual adjustment | Any | Any |
| Contra Entry | A bank-to-bank transfer | Bank | Bank |
| Opening Balance | Beginning balance for a period | Any | Equity |
| Closing Balance | End-of-period rollover | Any | Equity |
Most people only ever create the first six — the rest are produced by Books automatically (Opening / Closing) or are reserved for accountants (Journal, Contra).
Posting and the Ledger
A transaction starts life as a draft. While it is a draft, you can edit it freely; nothing has changed in your books yet.
When you click Post, Books does three things:
- Validates that debits equal credits (they always should).
- Writes one ledger entry per debit and per credit into a permanent, append-only table.
- Marks the transaction as is_posted = true.
After a transaction is posted:
- It affects every balance and every report.
- It can no longer be edited.
- It can only be reversed (with a credit note, debit note, or reversing journal).
- A SHA-256 integrity hash is stored alongside the ledger entry so the books cannot be silently tampered with.
This is the most important rule in Books. Treat Post like a one-way door.
Assignment / Clearing
When a customer pays an invoice, Books needs to know which invoice the payment cleared. Otherwise the payment lives as a credit on the customer's account, and the invoice still shows up as outstanding on your AR Aging report.
The link from a payment to an invoice is called an assignment (or "clearing").
- A payment can be assigned to one invoice or split across many.
- An invoice can be cleared by one payment or many.
- Books offers an Auto-match that pairs payments and invoices when amounts and customer match exactly.
- The same idea works in reverse for vendor bills and supplier payments.
A fully cleared invoice no longer appears on your Outstanding Receivables list. A partially cleared invoice still appears, with its remaining balance.
See Payments Received (UG-022) and Bank Transactions (UG-031) for how clearing happens in practice.
Accrual vs. Cash Basis
There are two ways to recognize income and expense:
- Accrual — Revenue is recognized when you earn it (when you send the invoice), and expense is recognized when you incur it (when you receive the bill). This is the default in Ambivo Books, and what most CPAs and lenders expect.
- Cash — Revenue is recognized when the customer pays you, and expense when you actually pay. Simpler, but less informative.
The basis is set when you create the entity and cannot be changed afterwards. Most small businesses are on Accrual, and Books reports are presented on that basis.
If you have selected Cash basis, your reports follow cash-basis logic — but the entry mechanics in the system itself remain double-entry.
Fiscal Year and Reporting Periods
A fiscal year is the 12-month window your books are organized around. You picked the start month when you created the entity. A reporting period is the unit Books uses internally — usually one period per fiscal year, but multi-period setups exist for some industries.
Reports support two date framings:
- As-of reports (Trial Balance, Balance Sheet) take a single date. They show the cumulative position as of end of business that day.
- Range reports (Income Statement, Cash Flow) take a start and end date. They show activity during that range.
When you produce a Year-To-Date Income Statement on March 31, Books takes every transaction dated Jan 1 (assuming a calendar fiscal year) through March 31 and rolls them up.
Opening Balances
If your business existed before you started using Ambivo Books, you have an opening balance to bring across — the closing balance of every account on your last day in the old system.
Books has two ways to load opening balances:
- Trial Balance import — You upload a CSV from your prior system and map columns. Books creates an Opening Balance transaction that posts to every account at once. This is the recommended path. See Data Import (UG-060).
- Manual journal entry — For very small operations, you can post a single journal entry that debits and credits each account into its starting balance.
Once opening balances are in place, every report reflects both the starting position and the activity since.
Reports — A One-Paragraph Tour
The five core reports are:
- Trial Balance — Every account, with its debit or credit balance, on a single date. Total debits should equal total credits. Used to check the books are internally consistent.
- Income Statement (Profit & Loss) — Revenue minus expenses for a date range. Shows whether you made or lost money.
- Balance Sheet — Assets, liabilities, and equity on a single date. Shows the company's financial position.
- Cash Flow Statement — How cash moved in and out during a date range. Bridges the Income Statement and Balance Sheet.
- AR / AP Aging — How much customers owe (AR) or you owe (AP), bucketed by how overdue.
See Financial Reports (UG-050) for details on each.
Common Questions
I see "credited: true" in a transaction. What does that mean?
It is Books' internal way of recording whether the line item is a debit or a credit. credited: true means the line is a credit; credited: false means it is a debit. You will rarely need to see this — it is mainly useful for support tickets and audit logs.
Why is my "Cash" account negative?
Either you have an overdraft, you posted a payment before recording the deposit that funds it, or you have not yet imported your opening cash balance. Run a Bank Reconciliation to find the gap.
Why does my Balance Sheet not balance?
In a normally operating system this should not happen, because Books validates debits = credits on every post. The most common cause is an opening-balance import where the source numbers themselves did not balance. Re-check the imported Trial Balance.
Can I undo a posted transaction?
No — you reverse it. Open the transaction, choose Reverse, and Books creates an offsetting entry. The original transaction stays in the ledger for audit; the net effect is zero.
What is the difference between a transaction's date and its created-at date?
The transaction date is the financial date that drives reporting. The created-at date is when the record was made in Books. They can be different — for example, you might back-date a journal entry to last month while entering it today.
Tips and Best Practices
- Don't post until you are sure. Drafts are free; reversals are forever.
- Keep your transaction dates honest. Back-dating to bend a report is the kind of thing auditors notice.
- Import opening balances once, carefully. Then never touch them again.
- Run a Trial Balance after every big import or month-end adjustment. If it balances, you are fine. If not, fix it now, not at year-end.
- Treat the Ledger as sacred. It is the source of truth, and Books makes it impossible to silently rewrite it. Lean into that.