I need to know if it is possible to manually create new folders for collections and albums. I have already created the folders on the web server, but it does not show up in the admin interface. Do I need to update a php file as well ? If so, what file needs to be updated ?
You can create it manually but what is the point because you will then have to edit your database and insert a new row for the new folders you created. The point of the admin interface is to automate that entire process. So the reason that your folders don't show up in the admin interface is because the admin interface isn't acknowledging the folders because their existence isn't being retrieved from the database, when the manage tab is requested.
I say delete the folders and use the manage tab to create your folders.