This post describes how to do bank deposits, using Energy Corridor—unified accounting software for oil and gas.

When you’re in regular deposit creation mode, you have pending bank deposits, which are the ones you’re creating, and your outstanding receivables that you can pick from.

The first thing you should do is set your deposit date. In this case it was a long time ago. We’ll make it December 31, 2020. You may have noticed that the outstanding receivables have increased, because we’ve moved forward in time, so we have more receivables to pick from.

The other thing that controls what receivables you see is your account selection. In this case, we only have two receivables accounts selected. Let’s pick a couple more. We may also want to see some payables accounts, just in case somebody has netted off some payables.

Now, usually your account selection doesn’t change that often, so it’s better probably to hide it so you have more space. Now we have quite a number of outstanding receivables to select from. You should also pick the bank account that you’re depositing to. You can add a comment for your bank deposit run, if you like. The total amount is calculated for you, and this is for each individual deposit.

Let’s make a deposit. We’re going to do one for BP. We have a couple outstanding receivables, so we can pick them both.

Here’s our deposit for BP. We can say that it’s an EFT, if we like. In this case, it’s two receivables, so we’re just going to go ahead and create the deposit.

We could have viewed the deposit slip before, but here you’ll see the deposit slip when you book the deposit, and you can print it if you like. In this case we’re just going to go straight ahead and book it.

Now that you’ve made a deposit, you might want to go and see the deposit. You can view previous deposits. This is the deposit we just made.

Energy Corridor tells you what voucher it’s on and what date. It was created on Voucher 4500 for December 2020. Now, the voucher for deposits is created in the accounting month that the deposit is deposited on. This deposit date is important for that.

In this case, if we double-click the deposit, Energy Corridor will actually take us to the voucher viewer to see the voucher that was created for the deposit. If we look at the details, the two receivables, you can also double-click and it will take you to the receivable, the voucher that the receivable came in on.

You can drill down to see what’s gone on. Let’s go back to creating deposits and look at the vouchers created in the deposit function, which are created as a voucher type: in this case, a deposit. We suggest you set up a voucher type for your deposits. Any voucher type can be used for deposits, but what you do is check off deposits and that will make the voucher type good for deposits.

You can only have one voucher type for deposits, or for overhead or any of the voucher types here. In this case, we’re going to go to our deposit vouchers and this is the voucher for BP. Now, I’ve decided that I made a mistake and they actually short paid us this $38,000 receivable. I’m going to roll back this voucher.

This is how you delete or remove a deposit you’ve made. You have to roll back the voucher and then delete it. Now, if we go back to the deposit manager you will see that BP’s receivables are again available.

Let’s do this again and correct it. On this one they short paid, so we’ll make that a short pay of $38,000. Then we’ll book the deposit.

Our $38,000 receivable has been credited, but then we have an adjustment for what was short paid.

Next, we’ll look at another situation, if you have to make an adjusting entry. We’ll pay this invoice from Bob’s Well Maintenance.

Now, for some reason they like to round things, so they rounded the payment from $28,612.54 to $28,613.00. What we need to do there, you select the deposit, right-click it, add balancing entry and we’re going to adjust it by 46 cents to make the deposit an even $28,613.00.

We’ll book this deposit. And you can see on this deposit, the 46 cent manual balancing entry to balance the voucher. And again, if you haven’t used the voucher in, well, usually it would be, you’ve reconciled the deposit, then you can roll it back, delete the voucher, and then the receivable and/or payables that you’ve used are again available.

That is how to do bank deposits in Energy Corridor.

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This post and video tell you how to perform a bank reconciliation using Energy Corridor, the oil and gas accounting application.

We’re in the bank reconciliation screen. And right now we have a reconciled month for account 1010. You can see when an account is reconciled, it’s green. It also says in the bottom right-hand corner that the account is locked for this month.

An account is reconciled when you have included all of the items that are on your bank statement and you’ve input your bank statement closing balance, and your opening, plus all of the items you’ve included, equals your closing.

We’re going to do the bank reconciliation for January. Right now we have not included anything. We’re going to put in the closing balance as per our bank statement. You’ll notice that Energy Corridor gives us our out of balance amount. So what we do is include items until this out of balance is zero, and then we’ll be reconciled.

One thing you’ll notice is that some items are grayed out. A grayed out item, if we try and check it, will tell us it’s reconciled in a future month. If we look at February, we’ll see that someone has reconciled to it items for February. They know that they’re part of the February bank statement. You’ll also notice you get a warning that you’re not in the next month to reconcile and that January of 2020 still needs to be done.

Let’s go back to January. The first thing you’ll do is import your bank statement. All banks will supply a CSV file of your bank statement. If you select it —and you only have to do this once — you tell Energy Corridor the format of the statement by specifying which columns, debits, credits, comments, and the transaction data in and optionally the cheque number. Once you’ve done that, you can get your statement details. We’ll read the statement and import matching entries.

In this case, it’s matched all four entries. It matches based on the entry amount and optionally the cheque number. You can have more than one entry with the same amount. And in that case, it does not include them automatically. It marks them with yellow, and you’ll have to include those manually.

You can see that our four items have been included from the bank statement. Now, in theory, once you’ve done that, if all items were included from the bank statement and you’ve input your bank statement closing balance correctly, you should be reconciled.

In this case, we didn’t have it do that. When you include an item in the reconciliation, Energy Corridor clears the cheque as of the transaction date in the file. It also clears the entry. If the entry is not a cheque, it just clears it as of that date. But in this case, to reconcile this account, we have to include two more entries. You can see that they’re also cheques and now we’re reconciled. Our out of balance amount is zero.

Now, the entries that have been included, plus the opening balance, equals our closing balance. We can finalize this month, and we can also do our report. The bank reconciliation report shows the account for the month, shows the opening balance, withdrawals, deposits, withdrawals outstanding, the closing balance, and the matching ledger amount.

We can also see outstanding checks for the account. You’ll notice that you can set an initial opening balance that would only be used on your very first month. We also have an option to include all entries. So if you do have many, many entries, you can include them all and then start unchecking them if you want to do it that way.

That’s how to do a bank reconciliation in Energy Corridor. One other thing worth noting is that clients often have difficulty when they’re trying to roll back a deposit. When they try to roll it back, they see a message that it’s been used. Nine times out of ten, that means is that it has already been used in the bank reconciliation. We’ll go to February to see if the item is a deposit. It’s been included, you can’t roll it back. So come to your bank reconciliation, uncheck it, and you will be able to roll back your deposit. Of course, if you included it in a month that’s been reconciled, that deposit is done.

That’s how you do your bank reconciliation in Energy Corridor. Don’t you wish it was always that easy?

Operated cash calls with Energy Corridor are simple. This post tells you how to cash-call non-operating partners in a joint venture project.

Cash calls are used when you have a joint venture capital project. The operator of the project would cash call non-operating partners for their share of expenses the project is expected to incur on their behalf. Essentially, you’re asking them to pay upfront for their share of the project.

Operated Cash Calls

Operated cash calls with Energy Corridor are simple. In this case, we have an authorization for expenditure (AFE) to equip a well. The total budget for the AFE is $94,200. We have two partners, each with a working interest percent of 25%, which means their budgets are $23,550. That is the amount that they’re expected to contribute to the project.

So, we’re going to cash-call Questfire. This project is starting in January, so that’s when I’m going to cash call them. To see the effect of the cash call, we’ll look at the voucher — that is, the voucher generated from the cash call.

You can see that we’ve debited the 1435 cash call receivable account, so that’s the amount you’re expected to receive from Questfire, and credited the 6310 cash call payable. The cash call payable is a liability that will be drawn down as the operator incurs the expenses. Now, when you make a cash call, generally you’ll invoice the partner. So you create an invoice, and when you receive payment for that invoice, the entries are a credit to the 1435 cash call receivable, and you debit your cash account. So that, in a nutshell, is the basic cash call and how to handle it.

Joint Interest Billing

Now, to see the effects of the cash call, we’ll run our joint interest billing (JIB) for January. The project started in January and has been incurring expenses. For Questfire, you can see that they won’t owe anything this month because of their cash calls. So, there’s their cash call. These are their share of the expenses for the month and because the $4,500 is covered by our cash call, you can see that they are not billed anything for January.

Now, to make this a bit more clear, we’ll run the JIB for February, and you will see that the cash call amount has now been drawn down by January’s expenses. It’s been drawn down from the $23,550. Again, expenses for February, $3,200, result in no billing because the cash call covers it. Eventually, your cash call will be exhausted and billing will commence.

Conclusion

So, that in a nutshell, are the cash call basics. Of course, there are many situations that occur that you need to account for. For example, projects are usually over or under budget. Refunds and additional funding requests are common. Partners don’t always pay the full cash call amount or pay too much. We provide more information on these situations in our post Operated Cash Calls.

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This post describes how to properly make operated cash call entries from the operator’s point of view. It includes standard procedures, and more importantly, how to handle cash calls when circumstances require non-standard adjustments.

Operated Cash Call Accounting Entries

Projects with multiple partners have budgets defined in an “authorization for expenditure,” or AFE. Once the AFE is approved by all partners, it becomes the authorization for the project to incur costs on behalf of all partners. Operators issue operated cash calls to invoice non-operating partners for their share of expenses the project is expected to incur on their behalf.

Cash calls are usually generated when the project is ready to start incurring costs. In an ideal situation, all partners will pay the cash call invoice in a timely manner, making the project fully funded.

Cash calls are, in effect, prepayments made by partners for expenses that will be incurred by the project (AFE). The operator maintains these prepayments in their cash call payable account. Partners maintain these prepayments in their prepaid cash calls account.

Making a Standard Operated Cash Call

Operated cash calls are generated by the operator for each partner. The cash call amount is equal to the partner’s percentage of the AFE budget.

The cash call payable account (6310 in this example) must have the AFE and partner/vendor as mandatory. This liability will be drawn down as the project progresses and costs are incurred and invoiced, either through a joint venture bill or standard invoice.

The cash call receivable account (1425 in this example) must have the partner/vendor and invoice number/date as mandatory. This account is then treated like any other receivable account. For this example, we’ll have a cash call of $100.

Cash Call Entries

1. Credit cash call payable	CR 6310 – Vendor Invoice: AFE: $100
2. Debit cash call receivable	DR 1425 – Vendor Invoice: $100

Payment Received for Amount Invoiced

When the partner pays the cash call, the cash call receivable is cleared and the bank account (1010) debited.

Cash Call Entries

1.  Credit cash call receivable	CR 1425 – Vendor Invoice: $100
2.  Debit bank account	DR 1010 – $100

Partner Pays More Than Invoiced Amount

When the partner pays more than the amount invoiced for the cash call, the partner is cash-called for the amount overpaid. The cash receipt entries do not change. In this case, the partner overpaid by $100.

Cash Call Entries

1.  Credit cash call payable – overpayment amount	CR 6310 – Vendor Invoice: AFE- $100
2.  Debit cash call receivable – overpayment amount	DR 1425 – Vendor Invoice: $100

Cash Receipt Entries

1.  Credit cash call receivable – full amount paid	CR 1425 – Vendor Invoice: $200
2.  Debit bank account – full amount paid	DR 1010 – $200

Partner Pays Less Than Invoiced Amount

When the partner pays less than the amount invoiced for the cash call, a reversal is made for the amount of the underpayment. The cash receipt entries do not change. In this case, the partner underpaid by $25.

Cash Call Entries

1.  Debit cash call payable – underpayment amount	DR 6310 – Vendor Invoice: AFE-$25
2.  Credit cash call receivable – underpayment amount	CR 1425 – Vendor Invoice: $25

Cash Receipt Entries

1.  Credit cash call receivable – full amount paid	CR 1425 – Vendor Invoice: $75
2.  Debit bank account – full amount paid	DR 1010 – $75

Refund Cash Call

Once the project has been completed and all expenses have been accounted for, if the project is under budget, a refund may be issued to the partners. This refund is for $50.

Refund Entries

1.  Debit cash call payable	DR 6310 – Vendor Invoice: AFE – $50
2.  Credit bank account	CR 1010 – $50

Reverse or Close Cash Call

In the following situations, the $100 cash call may be reversed or closed:

• The project has been put on hold or canceled with no payment received.
• The partner wishes to pay their share of costs as they occur and has been cash-called with no payment received.

Refund Entries

1.  Debit cash call payable	DR 6310 – Vendor Invoice: AFE-$100
2.  Credit cash call receivable	CR 1425 – Vendor Invoice: $100

Cash Call Drawn Down with No Payment Received

These entries are required if the cash call will not be paid. In this case, the joint venture process has drawn down the cash call by $10. We need to move the amount drawn down from the cash call payable account to the JV receivable account (1420).

Cash Call Reversal Entries

1.  Debit cash call payable	DR 6310 – Vendor Invoice: AFE-$100
2.  Credit cash call receivable	CR 1425 – Vendor Invoice: $100

Move Invoice to Receivable Account Entries

1.  Credit cash call payable – for the invoiced amount	CR 6310 – Vendor Invoice: AFE-$10
2.  Debit JV receivables – for the invoiced amount	DR 1420 – Vendor Invoice: $10

Partner Pays Cash Call, Then Rescinds Payment

This situation is effectively the same as the one in Cash Call Drawn Down with No Payment Received. The cash call has not been paid and the cash call has been drawn down. Payment may have been made but, for example, was netted off the next payment received from the partner.

Cash Call Reversal Entries

1.  Debit cash call payable	DR 6310 – Vendor Invoice: AFE-$100
2.  Credit cash call receivable	CR 1425 – Vendor Invoice: $100

Move Invoice to Receivable Account Entries

1.  Credit cash call payable – for the invoiced amount	CR 6310 – Vendor Invoice: AFE-$10
2.  Debit JV receivables – for the invoiced amount	DR 1420 – Vendor Invoice: $10

Transfer Cash Call to a Different AFE

Partner requests balance ($5 in this case) from one AFE to be moved to another AFE. This may happen when a project has ended with funds outstanding in the cash call payable account for the partner.

These funds may be transferred to another project instead of being refunded. Here we assume that the new AFE has been cash-called; therefore, we need to apply the transfer payment to the new cash call invoice.

Cash Call Reversal Entries

1.  Debit cash call payable – old AFE	DR 6310 – Vendor Invoice: AFE-$5
2.  Credit cash call receivable – new CC invoice	CR 1425 – Vendor Invoice: $5

Partner Sells Interest in Project and Requests Refund

Entries are required if the sale is for the project only. No entries are required if the sale is for the entire company.

The division of interest (DOI) for the AFE will also have to change to reflect the new partner. These entries are needed if the original partner is to be refunded the remaining cash call balance ($15) and the new partner cash-called for the same amount.

Cash Call Refund Entries

1.  Debit cash call payable – refund original owner	DR 6310 – Vendor Invoice: AFE-$15
2.  Credit general payable – refund original owner	CR 6210 – Vendor Invoice: $15

Cash Call New Partner

1.  Credit cash call payable	CR 6310 – Vendor Invoice: AFE-$15
2.  Debit cash call receivable	DR 1425 – Vendor Invoice: $15

Partner Sells Interest in Project and Transfers Cash Call Balance to New Partner

Entries are required if the sale is for the project only. No entries are required if the sale is for the entire company.

The DOI for the AFE will also have to change to reflect the new partner. These entries are needed if the original partner transfers the remaining cash call balance ($15) to the new partner.

Cash Call Refund Entries

1.  Debit cash call payable – refund original owner	DR 6310 – Vendor Invoice: AFE-$15
2.  Credit cash call payable – transfer to new partner	CR 6310 – Vendor Invoice: AFE-$15

Operated Cash Calls Are Routine Accounting

Operated cash calls are extremely common in joint venture projects, and they sometimes pose difficulties.

But once you know the rules for the standard situations — as well as some alternative methods for handling the non-standard situations — these difficulties fade away. Operated cash calls then become routine accounting.