Transaction Accounting

This article is designed to illustrate the relationship between xTuple ERP transactions and the general ledger (G/L) accounts they impact. Think of this section as being a reference tool you can use to help you track G/L transactions.

Overview

This article is designed to illustrate the relationship between xTuple ERP transactions and the general ledger (G/L) accounts they impact. Think of this section as being a reference tool you can use to help you track G/L transactions.

Note: If you are not seeing G/L traffic for inventory transactions, verify that standard costs have been assigned to the affected items. If no standard costs are assigned, the costing aspects of the transactions will not be recorded.

Info: You must have accounting periods defined before you can post to the general ledger. If no accounting period is defined, transactions will not be posted. To correct this situation, create the accounting period and then attempt to post the transaction again.

The transactions have been listed by module — and only those transactions which create G/L records have been included. For each transaction, we have noted the G/L accounts affected by the transaction. These are based on account assignments that come from cost category, sales account assignments, AR account assignments, and AP account assignments.

Inventory Module

Inventory transactions are linked to the cost category set on the item site. This can vary if you have multiple sites with different cost categories. The information listed under "Debit" and "Credit" corresponds to the account set for account assignments.

To open the "Cost Category" window, follow these steps:

• Go to "Accounting" from the top menu
• Select the "Setup..." submenu
• In the "Setup" window, find "Account Mappings" in the left menu and expand it (if it's not already expanded)
• Select "Cost Categories" from the expanded menu 
• The list of cost categories will appear in the main window
• For this example we'll look at the MATERIALS cost category, so double-click MATERIALS from the list
• The "Cost Category" window will open for the MATERIALS category:

Shipping

Sales order items are removed from inventory at the point when they are issued to shipping. Issuing stock to shipping affects the following accounts:

TRANSACTION:	ISSUE STOCK TO SHIPPING
Debit	Shipping Asset
Credit	Inventory Asset

Prior to being shipped, sales order items that have been issued to shipping may be returned to inventory. Returning stock to inventory reverses the transaction records created when stock was issued to shipping:

TRANSACTION:	RETURN STOCK FROM SHIPPING
Debit	Inventory Asset
Credit	Shipping Asset

When stock is shipped, the shipping asset account is cleared out—and the "cost of sales" account is debited, as shown below:

If a shipment is returned to shipping, the action reverses the transaction records generated when the order was shipped:

Receiving

When purchase order items are received, they are entered into inventory and the P/O liability clearing account is credited for the standard cost of the received items. If the items being received are non-inventory items, the appropriate expense account will be debited. In either case, if any P/O line item freight charges exist, they will be debited:

If you need to correct the quantity received for a purchase order, you may do so using the "Correct Receiving" option on the right-click menu of the "Uninvoiced Receipts" screen. The "Uninvoiced Receipts" screen is found in the reports section of the Purchase module. The accounts affected will vary depending on whether the correction decreases or increases the original received quantity, as shown below for both inventory and non-inventory items. Freight expenses may also be corrected:

Other Inventory Transactions

The majority of Inventory module transactions are initiated in the inventory transaction section. This is the case with our first transaction type: "Miscellaneous Adjustment." You would enter a miscellaneous adjustment to change the "quantity on hand" (QOH) for an item in a particular item site. Using a miscellaneous adjustment, QOH can be adjusted either upwards or downwards:

TRANSACTION:	MISC. ADJUSTMENT (POSITIVE)
Debit	Inventory Asset
Credit	Inventory Adjustment

 

TRANSACTION:	MISC. ADJUSTMENT (NEGATIVE)
Debit	Inventory Adjustment
Credit	Inventory Asset

If an item is located in more than one site, you have the option of moving quantities of the item from one site to another. During a site transfer, you increase QOH at the receiving site and decrease QOH at the originating site.

Inventory may need to be scrapped for a variety of different reasons. Entering a scrap transaction decreases inventory value by the cost of the quantity being scrapped. The following accounts are affected:

Expense transactions are like scrap transactions, in that they decrease inventory value. The debit side of the transaction is assigned to an expense category. The accounts used for expense categories will depend on the account setup for the expense category selected.

To open the "Expense Category" window, follow these steps:

• Navigate back to the "Setup" window from the Accounting module
• Expand the "Account Mappings" list from the left-side menu and select "Expense Categories"
• The "Expense Categories" list will appear in the main window
• For this example we'll look at the OFFICE expense category, so double-click OFFICE from the list
• The "Expense Category" window will open for the OFFICE category:

 

TRANSACTION:	EXPENSE (POSITIVE)
Debit	Expense (on Expense Category)
Credit	Inventory Asset

 

Items may be received into inventory via a number of different paths:

• As a purchased item from the Purchase module
• As manufactured item from the Manufacture module
• As a credit memo item from the Sales module

If none of these paths is being used, you may receive inventory using a miscellaneous material receipt. When an item is received into inventory via a material receipt, the inventory value of that item is increased:

TRANSACTION:	MATERIAL RECEIPT
Debit	Inventory Asset
Credit	PO Liability Clearing

The transform utility enables you to transform quantities of a source item into quantities of a target item. As far as the source item is concerned, its inventory value is decreased. The reverse is true for the target item, whose inventory value is increased. The following accounts are affected:

 

To avoid the unnecessary confusion that can occur if negative QOH balances are used for planning purposes, xTuple ERP gives you the ability to reset negative QOH values to "0." Adjusting inventory from a negative value to "0" increases the value of the affected inventory.

TRANSACTION:	RESET QOH
Debit	Inventory Asset
Credit	Inventory Adjustment

At the end of a physical inventory count, the count totals are posted using count tags. A posted count tag affects inventory value in either a positive or a negative sense, depending on whether counted QOH was found to be greater than or less than recorded QOH. The inventory asset account will be adjusted accordingly:

Products Module Transactions

Whenever the standard cost for an item is updated, the G/L will record the update. If standard cost is increased, the inventory asset will be debited for the amount of the increase multiplied by the quantity on hand for the item in question. Both netable and non-netable quantities will be included in the calculation. If the standard cost is decreased, the opposite records will be generated, as shown below:

 

Purchase Module Transactions

Some might expect the posting of a voucher to be recorded as a Purchase module transaction. However, the system gives ownership over voucher postings to the Accounting module. Similarly, the process of receiving a purchase order item is owned by the Inventory module.

One exception to the pattern of ownership involves the return of purchase order items. While purchased items are returned using the Inventory module, the system considers returns to be Purchase module transactions. As shown below, the affected accounts vary based on whether the return involves an inventory or a non-inventory item:

 

Sales Module Transactions

While you might expect the posting of an invoice to be recorded as an Sales module transaction, the system considers posted invoices to be owned by the Accounting module. The posting of sales order credit memos, however, is owned by the Sales module.

It can be a bit complicated to follow the transaction records for posted billing returns/credit memos. The reason for this is that when a credit memo is posted, a couple of different things happen: One, the billing portion is owned by the Account module. Second, the merchandise the customer is returning must be placed back into inventory. It is the inventory return process which is owned by the Sales module, as shown below:

 

Manufacture Module Transactions

Owing to the complexity of work order processing, multiple transaction records may be generated from the Manufacture module. Perhaps the most basic transaction involves the issuance of materials to a work order. As shown below, materials are first removed from inventory and then transferred to the work order as work-in-process (WIP) assets:

Returning materials from a work order creates records opposite to those generated when materials are issued:

When materials are scrapped from a work order, the WIP asset account is credited for the amount of the scrap quantity — and the manufacturing scrap account is debited, as shown below:

When posting production for a work order, a number of different transactions occur — and each transaction generates its own G/L record:

• Materials that have not already been issued to the work order are issued to the work order.
• Manufactured item quantity is entered into inventory.
• Work order operations — that is, setup and run time records — are posted.

 

 

 

 

 

When work order operations are posted separately from production posting, the following accounts are affected:

The same accounts affected when posting operations are impacted in reverse order when correcting operations posting:

TRANSACTION:	CORRECT OPERATIONS
Debit	Labor and Overhead Costs
Credit	WIP Asset

When closing a work order, you may elect to post material usage and/or labor variances. The sense of the records will depend on the transaction. If any variances exist for the work order in question, the following accounts will be affected:

TRANSACTION:	CLOSE WORK ORDER
Debit	WIP Asset Inventory Cost Variance
Credit	Inventory Cost Variance WIP Asset

 

Payables Transactions

Even though vouchers may be posted from the Purchase module, these transactions are owned by the Accounting module. Posting a voucher affects several accounts. The payables account is credited for the voucher amount. The P/O liability clearing account is debited for the standard cost of the items received against the given purchase order. If there are differences between the vouchered amount and the standard cost of received items, the purchase price variance account will be debited or credited to reflect those differences. Finally, freight charges may be added, depending on the details of the transaction.

If you make a miscellaneous distribution when posting a voucher, the following additional accounts will be affected. The debit side of the transaction will vary depending on whether a miscellaneous account or an expense category is selected:

When a miscellaneous voucher is posted, the debit account may vary—depending on the circumstances of the transaction. As with regular vouchers, though, the accounts payable account is credited, as shown below:

Purchasing discounts may be taken when a voucher is selected for payment. The following accounts are affected when applying a discount to a voucher:

When posting checks, the bank account selected at the time of posting determines which asset account will be used. This is true whether posting a single or multiple checks. The following accounts are affected:

TRANSACTION:	POST CHECK(S)
Debit	Accounts Payable
Credit	Asset Account

The accounts affected differ slightly when a miscellaneous Payable is posted, as shown below:

Miscellaneous payable credit memos may be used, among other things, to register prepaid amounts paid to vendors. The following accounts are affected when a miscellaneous payables credit memo is posted:

Similarly, miscellaneous payables debit memos may be posted, with the reverse accounts being affected:

Receivables Transactions

The G/L records generated when invoices are posted are fairly straightforward. The receivables account is debited, and the sales account credited. Several other accounts may also be credited, depending on whether any additional charges are associated with the order:

When posting a cash receipt that is fully applied to open Receivables, the asset account specified for the selected bank account is debited, while the accounts receivables account is credited:

If you enter a cash receipt and do not apply the cash to an open invoice (and your system is not configured to enable customer deposits), the following accounts will be affected when the cash receipt is posted. In this example, a miscellaneous receivables credit memo will be generated—a credit memo which may be applied at a later point. The credit memo portion of the transaction is represented by the second pair listed below:

If your system is configured to enable customer deposits, then the following alternate accounts will be affected when you post an unapplied cash receipt balance. The credit memo portion of the transaction is represented by the second pair listed below:

The deferred revenue account will be cleared when the credit memo generated by the customer deposit is applied to receivables open items:

If you make a miscellaneous distribution when posting a cash receipt, the following additional accounts will be affected:

Whenever you void a cash receipt, the transactions from the original cash receipt posting will be reversed, as in the following:

TRANSACTION:	VOID CASH RECEIPT
Debit	Opposite of original posting
Credit	Opposite of original posting

When billing returns/credit memos are posted, the Sales module owns the inventory return process; however, the billing aspects are owned by the Accounting module. The following accounts represent the billing portion of an billing return/credit memo posting:

Miscellaneous receivables credit memos may be used, among other things, to register prepaid amounts received from customers. The following accounts are affected when a miscellaneous receivables credit memo is posted:

Similarly, miscellaneous receivables debit memos may be posted, with the reverse accounts being affected:

When charging a customer credit card on the sales order "Payments" tab or creating a cash receipt with a credit card as the funds type, you get the same transactions as when posting an unapplied cash receipt. A miscellaneous receivables credit memo will be generated — a credit memo which should be applied at a later point — and the cash is posted to the asset account for the relevant bank account:

General Ledger Transactions

G/L transactions entered from the G/L module may affect the broadest possible spectrum of G/L accounts. For example, the following actions are user-defined, meaning the accounts affected will vary from case-to-case:

When posting a bank adjustment, the sense of the transaction will vary based on the adjustment type:

TRANSACTION:	POST ADJUSTMENT (NEGATIVE)
Debit	Adjustment Account
Credit	Asset Account