Transaction Types

Overview

This topic provides information about each transaction type used in transactional accounts in Morningstar Office and the security types to which they apply. You will learn the following:

in what situations each transaction type is used
the security types with which each transaction type can be used
whether Cash transactions are affected for each transaction type, and what the default cash flow type is (if any) for each transaction type, and
how to manually enter each transaction type.

Before reading about each transaction type, it is important to familiarize yourself with the following terms related to importing in Morningstar Office:

cash account
cash offset transactions, and
cash flow type.

Understanding Morningstar’s Cash Accounting Methodology

This section explains the concepts behind the cash accounting methodology used in Morningstar Office when importing transactions. The following topics are covered:

what a cash account is
what a cash offset transaction is
what cash flow types are used in Morningstar Office, and
what the transaction process is in Morningstar Office for a cash account.

What is a cash account?

Morningstar Office uses a cash accounting method for transactions, and each custodian has its own cash account with a name unique to that custodian. A cash account is a “passthrough” account required by Morningstar Office to track the cash flow of transactions (with the exception of certain accounts from Charles Schwab and DST Vision).

That is, every time a client purchases a security, a corresponding withdrawal from the cash account takes place as well. Likewise, when a client sells a security, a deposit is made into the cash account. These transactions are referred to as cash offset transactions.

Cash accounts typically maintain a zero balance since they represent funds for (or proceeds from) a transaction that are required to move through these accounts before the funds reach their final destination, either as a security a client owns, or in a client’s money market account. It is extremely important to use the proper cash account when entering manual transactions.

Click here to view the cash account that is used for a specific Custodian.

What is a cash offset transaction?

Cash offsets are transactions that are paired with certain non-cash transactions (i.e., Buy, Sell, etc.) to combine and create a balanced, auditable transaction process. For example, when a client sells a security, a cash offset transaction takes place to deposit cash into the proper cash account.

These cash offset transactions occur automatically at the custodian level, and are brought into Morningstar Office as part of the importing process. If you create a manual transaction in Morningstar Office, cash offsets are automatically generated for you.

What cash flow types are used in Morningstar Office?

The cash flow for a transaction will be either external to an account, or internal to it, depending on the transaction type. These cash flow types indicate whether funds are moving within an account, or coming from outside of it.

The following table further explains these cash flow types:

Cash Flow Type

Description

External cash flow

This results from transactions where the funds or proceeds of a transaction move to (or from) an outside account, such as a Deliver-in or Deliver-out.

Transactions with external cash flow do not have an offsetting cash transaction.

Internal cash flow

This results from transactions between securities within an account. These transactions always have an offsetting cash transaction.

Users can change any transaction type that generates internal cash flow to external cash flow by manually coding the transaction as Out of Pocket. Note, though, that Out of Pocket transactions rarely occur.

What is the transaction process when a cash account is involved?

For most custodians, cash and money market accounts are used for tracking cash flows. These are used to complete some, but not all, transactions. The following transaction process shows an example of buying a stock with funds not currently in a client’s account:

1. Deposit cash
2. Buy into money market account
3. Withdrawal of cash (a cash offset for step 2)
4. Sell from money market account
5. Deposit cash (a cash offset for step 4)
6. Buy security
7. Withdraw cash (a cash offset for step 6)

What transaction types are available in Morningstar Office?

Transaction types used in Morningstar Office are listed in the following table. Be sure to read the Description column for each one, as well as the Cash Offset Transaction column. The latter will tell you whether you should expect another transaction type to be paired with the one in the row you’re reading about.

If you need to enter a transaction manually, the steps in the Description column guide you on how to do this for each type.

Transactions are presented in two ways - the list below is alphabetical, while the table groups the transactions according to the type of activity in regard to the investment.

Accrued Interest Bought	Distribution	Management Fee	Short-term Capital Gain
Accrued Interest Sold	Distribution Reinvest	Margin Interest	Short-term Capital Gain Reinvest
Adjust Cost	Exchange-in	Merge-in	Split
Adjust Lot	Exchange-out	Merge-out	Start Value
Buy	Expense	Redeem	Surrender
Cover Short	Expire	Return of Principal	Tax Withheld
Credit of Security	Income	Reversal	Transfer-in
Debit of Security	Income Reinvest	Sell	Transfer-out
Deliver-in	Interest	Sell Short	Withdrawal
Deliver-out	Long-term Capital Gain	Sell to Pay Expense
Deposit	Long-term Capital Gain Reinvest	Sell to Pay Fees

PURCHASES

LIQUIDATIONS

INCOME / DISTRIBUTIONS

FEES / TAXES

MISCELLANEOUS

Activity Type	Transaction Type	Description	Use with these Security Types	Cash Offset Transaction	Default Cash Flow Type
Purchases	Buy Back to Transaction List	Records the purchase of a security. When entering this transaction type manually, it requires a Withdrawal cash offset transaction. Enter the date of purchase. Enter one of the following: share quantity and price total dollar amount and price, or share quantity and total dollar amount. Verify the correct linked cash security is input in the Cash Security Name field.	All security types except Cash and Cash Equivalents	Withdrawal	Internal
Purchases	Deposit Back to Transaction List	Records a deposit into a cash security. Enter the date and deposit amount. Verify the linked cash security is populated in the cash security name field. When a linked cash security is selected, Deposits and Withdrawals are also automatically generated to accompany other transaction types such as buys and sells of securities.	Cash and Cash Equivalents	Varies	Internal Could also be an "out-of-pocket" transaction
Purchases	Deliver-in Back to Transaction List	Records the transfer of assets from another account. This transaction is also used to establish initial positions when importing for the first time. Enter the following: number of shares received date received position type, and price. You may also choose to enter the original purchase date and original cost basis of the holding.	All security types	None	External
Purchases	Credit of Security Back to Transaction List	Records the receipt of shares resulting from a merger, acquisition, spin-off, share class exchange, and/or split of a security already held in an account. Enter the following information: received date share quantity, and price. You may also enter original date and original cost basis, but this information is not required.	All security types	None	None
Purchases	Sell Short Back to Transaction List	Records the short sale of a security. Enter the trade date and matching method, if applicable. Enter one of the following: share quantity and price total dollar amount and price, or share quantity and total dollar amount. Enter any fees or commissions. Verify the correct linked cash security is input in the cash security name field.	Closed-End Fund Exchange-Traded Fund (ETF) Fixed Income Limited Partnership Open-End Fund Options Preferred Stock Stock Treasury Inflation Protected Unit Investment Trust 529 Portfolio	Deposit	Internal
Purchases	Transfer-in Back to Transaction List	Same as Credit of Security. Although Transfer-in can be used as a way to categorize transactions, for simplicity in reporting and accounting practices, it’s a best practice to use Credit of Security instead.	All security types	N/A	N/A
Purchases	Merge-in Back to Transaction List	This is the same as Credit of Security. Although Merge-in can be used as a way to categorize transactions, for simplicity in reporting and accounting practices, it’s a best practice to use Credit of Security instead.	Closed-End Fund Exchange-Traded Fund (ETF) Limited Partnership Money Market Fund Open-End Fund Preferred Stock Separate Account/CIT Stock Unit Investment Trust Variable Annuity Subaccount (VA) Variable Life Subaccount (VL) 529 Portfolio	N/A	N/A
Purchases	Exchange-in Back to Transaction List	Records the receipt (buy) of shares resulting from an exchange from another security. An Exchange-in occurs, for example, in portfolio re-allocation. An Exchange-in should always be accompanied by an Exchange-out with the same amount. This transaction does not generate external cash flow; it is a direct exchange from one security to another. Enter the transaction date and one of the following: share quantity and price dollar amount and price, or share quantity and amount.	Open-End Fund Unit Investment Trust 529 Portfolio	Exchange-out	None
Purchases	Start Value Back to Transaction List	This is the same as Deliver-in. Although Start Value can be used as a way to categorize transactions, for simplicity in reporting and accounting practices, it’s a best practice to use Deliver-in instead.	Closed-End Fund Exchange-Traded Fund (ETF) Fixed Income Hedge Fund Limited Partnership Open-End Fund Preferred Stock Separate Account/CIT Stock Unit Investment Trust 529 Portfolio	N/A	N/A
Liquidations	Sell Back to Transaction List	Records the sale of a security. Enter the trade date and matching method, if applicable. Enter one of the following: share quantity and price total dollar amount and price, or share quantity and total dollar amount. Enter any fees or commissions. Verify the correct linked cash security is input in the cash security name field.	All security types except Cash and Cash Equivalents	Deposit	Internal
Liquidations	Withdrawal Back to Transaction List	Records a withdrawal of a cash security. Enter the date and withdrawal amount. Verify the linked cash security is populated in the cash security name field. When a linked cash security is selected, deposits and withdrawals are automatically generated to accompany other transaction types such as buys and sells of securities.	Cash and Cash Equivalents	Varies	Internal or Out-of-Pocket
Liquidations	Deliver-out Back to Transaction List	Records the transfer of assets out of an account. Enter the following information: share quantity deliver-out date price, and position type.	All security types	None	External
Liquidations	Debit of Security Back to Transaction List	Records the removal of shares resulting from a merger, acquisition, spin-off, share class exchange, and/or split of a security already held in an account. Enter the following information: transaction date share quantity, and price.	All security types	None	None
Liquidations	Redeem Back to Transaction List	Records the redemption of a fixed income class security at the maturity date. Enter the trade date and matching method, if applicable. Enter one of the following: share quantity and price total dollar amount and price, or share quantity and total dollar amount. Enter any fees or commissions. Verify the correct linked cash security is input in the cash security name field.	CD CMO Fixed Income Treasury Inflation Protected	Deposit	Internal
Liquidations	Cover Short Back to Transaction List	Records the purchase of a security to close an open short position. When entering this transaction type manually, it requires a Withdrawal cash offset transaction. Enter the trade date and matching method, if applicable. Enter one of the following: share quantity and price total dollar amount and price, or share quantity and total dollar amount. If applicable, enter any fees or commissions. Verify the correct linked cash security is input in the Cash Security Name field.	Closed-End fund Exchange-Traded Fund (ETF) Fixed Income Limited Partnership Open-End Fund Options Preferred Stock Stock Treasury Inflation Protected Unit Investment Trust 529 Portfolio	Withdrawal	Internal
Liquidations	Expire Back to Transaction List	Records the expiration of contracts for an option or other derivative security. Enter the expiration date.	CMO Options Tangible Assets Warrants and Rights	None	None
Liquidations	Surrender Back to Transaction List	Records the sale of a Variable Annuity or Variable Life subaccount resulting from the surrender or partial surrender of the policy. Enter the trade date. Enter one of the following: share quantity and price total dollar amount and price, or share quantity and total dollar amount. Enter surrender charge, if any. Verify the correct linked cash security is input in the cash security name field.	Variable Annuity Subaccount (VA) Variable Life Subaccount (VL)	Deposit	Internal
Liquidations	Transfer-out Back to Transaction List	Same as Debit of Security. Although Transfer-out can be used as a way to categorize transactions, for simplicity in reporting and accounting practices, it’s a best practice to use Debit of Security instead.	All security types	N/A	N/A
Liquidations	Merge-out Back to Transaction List	This is the same as Debit of Security. Although Merge-out can be used as a way to categorize transactions, for simplicity in reporting and accounting practices, it’s a best practice to use Debit of Security instead.	Closed-End Fund Exchange-Traded Fund (ETF) Limited Partnership Money Market Fund Open-End Fund Preferred Stock Separate Account/CIT Stock Unit Investment Trust Variable Annuity Subaccount (VA) Variable Life Subaccount (VL) 529 Portfolio	N/A	N/A
Liquidations	Exchange-out Back to Transaction List	Records the removal (sale) of shares resulting from an exchange from another security. An Exchange-out occurs, for example, in portfolio re-allocation. An Exchange-out should always be accompanied by an Exchange-in with the same amount. This transaction does not generate external cash flow; it is a direct exchange from one security to another. Enter the transaction date and one of the following: share quantity and price dollar amount and price, or share quantity and amount.	Open-End Fund Unit Investment Trust 529 Portfolio	Exchange-in	None
Income / Distributions	Distribution Back to Transaction List	Records a distribution payment from a stock or fund. Enter the following information: date ex-date total dollar amount or the amount received per share held. Verify the correct linked cash security is input in the cash security name field.	Category (Category Average) Closed-End Fund Exchange-Traded Fund (ETF) Hedge Fund Index Limited Partnership Money Market Fund Open-End Fund Objective (MF Objective) Other Preferred Stock Proxy Separate Account/CIT Stock Tangible Assets Unit Investment Trust Variable Annuity Subaccount (VA) Variable Life Subaccount (VL) 529 Portfolio	Deposit	Internal
Income / Distributions	Distribution Reinvest Back to Transaction List	Records the payment and reinvestment of a cash distribution as a single transaction. Enter the reinvest date and exdate. Enter either the amount and price, or the amount per share and price. (The number of shares bought is automatically calculated.)	Category (Category Average) Closed-End Fund Exchange-Traded Fund (ETF) Hedge Fund Index Limited Partnership Money Market Fund Open-End Fund Objective (MF Objective) Other Preferred Stock Proxy Separate Account/CIT Stock Tangible Assets Unit Investment Trust Variable Annuity Subaccount (VA) Variable Life Subaccount (VL) 529 Portfolio	None	None
Income / Distributions	Income Back to Transaction List	Records an income payment from a fixed income security. Enter the pay date and total dollar amount received in the income field. Verify the correct linked cash security is input in the cash security name field.	CD CMO Fixed Income Treasury Inflation Protected Variable Annuity Subaccount (VA) Variable Life Subaccount (VL)	Deposit	Internal
Income / Distributions	Income Reinvest Back to Transaction List	Records the payment and reinvestment of a cash income payment as a single transaction. Enter the following information: trade date total dollar amount, and the price per share. The number of shares bought will be automatically calculated.	CD Fixed Income Treasury Inflation Protected Variable Annuity Subaccount (VA) Variable Life Subaccount (VL)	None	None
Income / Distributions	Interest Back to Transaction List	Records an interest payment from a cash security. Enter the amount. Verify the correct linked cash security is input in the Cash Security Name field. (If the interest is reinvested, the linked cash security will be the cash security paying interest.)	Cash and Cash Equivalents	Deposit or None	Internal or None
Income / Distributions	Accrued Interest Bought Back to Transaction List	Records the purchase of accrued interest accompanying the purchase of a fixed income security. Note that when entering this transaction type manually, you must pair it with a Withdrawal transaction. Be sure to use the correct Cash source for this. Enter the purchase date and interest amount. In the Cash Security Name field, verify the linked cash security is correctly input.	CD CMO Fixed Income Treasury Inflation Protected	Withdrawal	Internal
Income / Distributions	Accrued Interest Sold Back to Transaction List	Records the sale of accrued interest accompanying the sale of a fixed income security. Note that when entering this transaction type manually, you must pair it with a Deposit transaction. Be sure to use the correct Cash source for this. Enter the sale date and interest amount. Verify the correct linked cash security is input in the Cash Security Name field.	CD CMO Fixed Income Treasury Inflation Protected	Deposit	Internal
Income / Distributions	Margin Interest Back to Transaction List	Records a cash withdrawal from an account to pay interest due on a margin balance. Enter the date and margin interest amount.	Cash and Cash Equivalents	None	External
Income / Distributions	Long-term Capital Gain Back to Transaction List	Records the receipt of a long-term capital gain payment from a security. Similar to Distribution. Enter the following information: pay date and amount or amount per share	Closed-End Fund Exchange-Traded Fund (ETF) Money Market Fund Open-End Fund Separate Account/CIT Unit Investment Trust 529 Portfolio	Deposit	Internal
Income / Distributions	Long-term Capital Gain Reinvest Back to Transaction List	Records the payment and reinvestment of a long-term capital gain payment as a single transaction. Similar to Distribution Reinvest. Enter the following information: pay date and amount or amount per share	Closed-End Fund Exchange-Traded Fund (ETF) Money Market Fund Open-End Fund Separate Account/CIT Unit Investment Trust 529 Portfolio	None	None
Income / Distributions	Short-term Capital Gain Back to Transaction List	Records the receipt of a short-term capital gain payment from a security. Similar to Distribution. Enter the following information: pay date and amount or amount per share	Closed-End Fund Exchange-Traded Fund (ETF) Money Market Fund Open-End Fund Separate Account/CIT Unit Investment Trust 529 Portfolio	Deposit	Internal
Income / Distributions	Short-term Capital Gain Reinvest Back to Transaction List	Records the payment and reinvestment of a short-term capital gain payment as a single transaction. Similar to Distribution Reinvest. Enter the following information: pay date and amount or amount per share	Closed-End Fund Exchange-Traded Fund (ETF) Money Market Fund Open-End Fund Separate Account/CIT Unit Investment Trust 529 Portfolio	None	None
Fees / Taxes	Management Fee Back to Transaction List	Records a withdrawal from the client’s account to pay a management fee to the advisor. Note that payments not related to management fees should be classified with the Expense transaction type. To understand how to handle sales related to paying management fees, see the Sell to Pay Fees transaction type. Enter the transaction date and management fee amount.	Cash and Cash Equivalents Money Market	None	External
Fees / Taxes	Expense Back to Transaction List	Records a withdrawal of cash from the client's account to pay an expense other than a management fee. This transaction applies either to a cash security, in which the transaction is similar to a Withdrawal, or to a money market fund, in which it is similar to a Sell.	Cash and Cash Equivalents Money Market	Withdrawal	External
Fees / Taxes	Sell to Pay Expense Back to Transaction List	Records the sale of a security to pay an expense other than a management fee. Enter the trade date and matching method, if applicable. Enter one of the following: share quantity and price total dollar amount and price, or share quantity and total dollar amount. Enter any fees or commissions. Verify the correct linked cash security is input in the cash security name field.	Closed-End Fund Exchange-Traded Fund (ETF) Hedge Fund Limited Partnership Money Market Fund Open-End Fund Preferred Stock Separate Account/CIT Stock Unit Investment Trust Variable Annuity Subaccount (VA) Variable Life Subaccount (VL) 529 Portfolio	None	External
Fees / Taxes	Sell to Pay Fees Back to Transaction List	Records the sale of a security to pay a management fee to the advisor. Enter the trade date and matching method, if applicable. Enter one of the following: share quantity and price total dollar amount and price, or share quantity and total dollar amount. Enter any fees or commissions. Verify the correct linked cash security is input in the cash security name field.	Closed-End Fund Exchange-Traded Fund (ETF) Hedge Fund Limited Partnership Money Market Fund Open-End Fund Preferred Stock Separate Account/CIT Stock Unit Investment Trust Variable Annuity Subaccount (VA) Variable Life Subaccount (VL) 529 Portfolio	None	External
Fees / Taxes	Tax Withheld Back to Transaction List	Records a withdrawal from the client’s account to deposit into an escrow account. Enter the date and tax withhold amount.	Cash and Cash Equivalents Money Market	None	External
Miscellaneous	Reversal Back to Transaction List	Cancels a previously entered transaction. Specify the lot and transaction type to which the reversal applies. Enter the following information: reversal date share quantity and/or amount.	All security types	Deposit, Withdrawal, or neither, depending on original transaction. For example, if you are reversing a Buy transaction, then the offsetting cash transaction the Reversal should be paired with is Deposit.	External, Internal or neither, depending on original transaction
Miscellaneous	Split Back to Transaction List	Records a stock split. Enter the following information: date conversion price and pre/post split ratio. In the case that fractional shares result, indicate whether fractional shares are maintained or converted into a dividend or capital gain payment.	Closed-End Fund Exchange-Traded Fund (ETF) Limited Partnership Open-End Fund Preferred Stock Separate Account/CIT Stock Unit Investment Trust 529 Portfolio	None, unless fractional shares are paid out. In the latter case, a Split transaction should be paired with a Deposit transaction.	None, unless fractional shares are paid out, in which case cash flow is internal.
Miscellaneous	Return of Principal Back to Transaction List	Records a full or partial return of principal received. Enter the date and amount received in the ROP field. Verify the correct linked cash security is input in the cash security name field.	Category (Category Average) CD CMO Closed-End Fund Exchange-Traded Fund (ETF) Fixed Income Hedge Fund Index Limited Partnership Open-End Fund Objective (MF Objective) Other Proxy Preferred Stock Stock Treasury Inflation Protected Unit Investment Trust Warrants and Rights 529 Portfolio	Deposit	Internal
Miscellaneous	Adjust Cost Back to Transaction List	Adjusts the original cost basis of an existing tax lot. When entering this transaction type manually, note that it requires no cash offset transaction. Specify the lot. Enter the original trade date and original amount.	All security types except Cash and Cash Equivalents	None	None
Miscellaneous	Adjust Lot Back to Transaction List	Adjusts the date and amount of the original purchase and/or the deliver-in of a security. When entering this transaction type manually, the type of offsetting cash transaction you need to enter depends on the type of transaction that was originally entered. For example, if you are adjusting a Deposit, you would need to enter a Withdrawal from Cash as well. Specify the lot. Edit any details needing to be changed, including the following: original date original per share cost basis received date, and received date price.	All security types	Deposit, Withdrawal, or neither, depending on original transaction. For example, if you are reversing a Buy transaction, then the offsetting cash transaction the Reversal should be paired with is Deposit.	External, Internal or neither, depending on original transaction