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Accounting transactions are created when the following events have occurred:


  • User authorised purchase order or sale quote with deposit/prepayment. Nothing will be created if deposit or prepayment is not attached to the purchase order or sale quote.
  • User authorised purchase or sale invoice/credit note.
  • User authorised sale shipment.
  • User authorised manual journal transaction.
  • User authorised/completed stocktake.
  • User authorised/completed stock adjustment.
  • User authorised/completed finished goods task.
  • User authorised/completed issue to production task.
  • User authorised/completed disassembly task.
  •  User undo/voided any of items above.


Table of Contents

  • Purchase
  • Sale
  • Stock Adjustments and Stocktake
  • Assembly
  • Inventory Write-Off
  • Disassembly

.


Purchase



You have created a purchase order and attached a $25 deposit.


Dr
Cr
Amount
Transaction Date
Prepayment
Bank
$25
Prepayment date


When processing a purchase the following accounts are involved:

  • Inventory control Account
  • Account Payable
  • Tax Account
  • Optional Expense Account

In the image below is an example of a Purchase Invoice:

  • Tax rate is 10%
  • Purchase amount is $110 (including Tax)
  • $22 delivery fee (that is not capitalized however it is allocated to an expense account).

Dr
Cr
Amount

Transaction Date
Inventory control
Account Payable

$100
Invoice date
Tax
Account Payable
$10

Invoice date
Expense
Account Payable

$20
Invoice date
TaxAccount Payable$2

Invoice date


Account Payable will then be reduced by the amount of Prepayment made previously ($25).


Account Payable

Prepayment

$25

Invoice date



If Purchase Order is a Drop ship purchase the transactions are going to be the same as the above example plus the transaction below.


Dr

Cr

Amount

Transaction Date

COGS

Inventory control

$100

Invoice date


If the delivery fee is capitalized transactions will look like the image below:


Dr
Cr
Amount
Transaction Date
Inventory control
Account Payable
$100
Invoice date
Tax
Account Payable$10
Invoice date
Inventory control
Account Payable
$20
Invoice date
Tax
Account Payable
$2
Invoice date


You decided to distribute $8 in the Warehouse Overheads and allocate them to the inventory items on this invoice:


Dr
Cr
Amount
Transaction Date
Inventory control
Warehouse overheads
$8
Manual Journal Date


In a month you find a defect in the item and request a credit note (total amount is $11)


Dr
Cr
Amount
Transaction Date
Inventory control
Account Payable
$-10
Credit Note Date
Tax
Account Payable
$-1
Credit Note Date


Invoice Payment will cause the following:


Dr
Cr
Amount
Transaction Date
Account Payable
Bank
$110
Payment Date



Sale


You have created a Sale Quote, authorized it and received a client payment of $25.

Dr
Cr
Amount
Transaction Date
Bank
Prepayment
$25
Prepayment Date


A Sale Invoice includes the following accounts:

  • Accounts Receivable
  • Tax Account
  • Optional Expense Account

In the image below is an example of a Sale Invoice:

  • 10% Tax
  • Sale is $110 (including Tax)
  • $22 delivery fee (which is allocated to a different Sale Account)

Accounts Receivable will be reduced by the amount of Prepayment made before.


Dr
Cr
Amount
Transaction Date
Accounts Receivable
Sale
$100
Invoice Date
Accounts Receivable
Tax
$10
Invoice Date
Accounts Receivable
Sale 2
$20
Invoice Date
Accounts Receivable

Tax

$2
Invoice Date
Prepayment
Accounts Receivable
$25
Invoice Date

 


When you authorize the Shipment tab in the Sales Module the following accounts are involved:

  • Inventory Control Account
  • Cost of Goods Sold (COGS) Account

The amount of the transaction will depend on the value collected from the inventory cards that were picked according to the costing method (e.g. FIFO, FEFO etc.)


Dr
Cr
Amount
Transaction Date
COGS
Inventory control
$50
Max of Shipment Dates if multiple


You decided to distribute $8 in the Warehouse Overheads and allocate them to the COGS Account to change the profit of this sale:

Dr
Cr
Amount
Transaction Date
COGS
Warehouse overheads
$8
Manual Journal Date


The Invoice Payment will cause the following:


Dr
Cr
Amount
Transaction Date
Bank
Accounts Receivable
$110
Payment Date



In a month the customer finds a defect in the item and requests a credit note (total amount is $11).


Dr
Cr
Amount
Transaction Date
Accounts Receivable
Sale
$-10
Credit Note Date
Accounts ReceivableTax
$-1
Credit Note Date
COGS
Inventory control
$-5
Credit Note Date




Stock Adjustments and Stocktake


When changing the quantity of stock on hand you have an option to allocate the difference in cost, to a Selected Expense Account.

Below is a result of a $10 increase in stock value due to a stock adjustment:


Dr
Cr
Amount
Transaction Date
Inventory Control
Selected Expense Account
$10
Effective Date



Below is a result of a $10 decrease in stock value due to a stock adjustment:


Dr
Cr
Amount
Transaction Date
Inventory Control
Selected Expense Account
$-10
Effective Date


Finished Goods

There are two stages of manufacturing new finished goods:


  1. Component allocation
  2. Placing finished goods to the Inventory Account


User can select dedicated work-in-progress account and move the components inventory to this account. The transaction below will be created when user clicks the Allocate button.


Dr
Cr
Amount
Transaction Date
Selected ‘work in progress’ account
Inventory Control

$10

Date when user completed finished goods task


Once finished goods are ready user can finalize work order by pressing ‘Complete’ button. This will close the Work In Progress account and place finished goods to the Inventory account.


Dr
Cr
Amount
Transaction Date
Inventory ControlSelected ‘work in progress’ account
$10
Date when user completed finished goods task


If you need to add extra expenses for example labor and overheads:


Dr
Cr
Amount
Transaction Date
Inventory Control
Labour account or Overheads account
$150
Date when user completed finished goods task





Issue to Production

 

Issue to production is required when you need to write off stock from the inventory as a result of damage, expiration or to use it to perform some work (this is an element of Job Costing). Along with raw materials you can specify labor and overheads to be allocated on the expense accounts.


Dr
Cr
Amount
Transaction Date
Selected Expense AccountInventory Control$20Date when user completed issue to production task
Selected Expense AccountLabour account or Overheads account$100Date when user completed issue to production task



Disassembly

 

Disassembly works in a similar way as Finished Goods. Initially a product that needs disassembly will be put into the Work-In-Progress Account and the disassembled components will be placed to the Inventory Account. Along with raw materials you can specify labor and overheads to be allocated on the expense accounts.


Dr
Cr
Amount
Transaction Date
Selected ‘work in progress’ accountInventory Control$200Date when user completed disassembly task
Inventory ControlSelected ‘work in progress’ account
$200Date when user completed disassembly task
Inventory Control
Labour account or Overheads account
$100Date when user completed disassembly task


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