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Transaction Accounting

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:

Transaction: Ship Order
Debit Cost of Sales
Credit Shipping Asset

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

Transaction: Recall Order to Shipping
Debit Shipping Asset
Credit Cost of Sales

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:

Transaction:

Post Purchase Receipt (Inventory Item)

Debit Inventory Asset
Credit PO Liability Clearing

 

Transaction: Post Purchase Receipt (Non-Inventory)
Debit Expense Category Account (selected on PO)
Credit PO Liability Clearing
Transaction: Post Purchase Receipt ("None" Controlled Item)
Debit Expense Account (on Cost Category)
Credit PO Liability Clearing

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:

Transaction: Correct Receiving (Decrease Qty.: Inventory Item)
Debit P/O Liability Clearing
Credit

Inventory Asset

P/O Freight Expense

Transaction: Correct Receiving (Increase Qty.: Inventory Item)
Debit

Inventory Asset

P/O Freight Expense

Credit P/O Liability Clearing
Transaction: Correct Receiving (Decrease Qty.: Non-Inventory)
Debit P/O Liability Clearing
Credit
Expense Account
P/O Freight Expense

Transaction: Correct Receiving (Increase Qty.: Non-Inventory)
Debit Expense Account
Credit P/O Liability Clearing

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.

Transaction: Site Transfer
Debit Inventory Asset (To Site)
Credit Inventory Asset (From 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:

Transaction: Inventory Scrap
Debit Inventory Scrap
Credit Inventory Asset

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

 

Transaction: Expense (negative)
Debit Inventory Asset
Credit Expense (on Expense Category)

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:

Transaction: Transform (Source Item)
Debit Transform Clearing
Credit Inventory Asset

 

Transaction: Transform (Target Item)
Debit Inventory Asset
Credit Transform Clearing

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:

Transaction: Post Count Tag (Positive)
Debit Inventory Asset
Credit Inventory Adjustment

 

Transaction: Post Count Tag (Negative)
Debit Inventory Adjustment
Credit Inventory Asset 

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:

Transaction: Post Actual Cost to Standard (Increase)
Debit Inventory Asset
Credit Inventory Cost Variance

 

Transaction: Post Actual Cost to Standard (Decrease)
Debit Inventory Cost Variance
Credit Inventory Asset

 

Purchase Module Transactions

Note: When purchase orders are posted, no G/L record is created. Instead, posting a purchase order makes it available to the Inventory module, where purchased items are received.

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:

Transaction: Post Purchase Return (Inventory Item)
Debit P/O Liability Clearing
Credit Inventory Asset

 

Transaction: Post Purchase Return (Non-Inventory Item)
Debit P/O Liability Clearing
Credit Expense Account

 

Sales Module Transactions

Note: No G/L records are generated when billing selections are posted. Instead, the posting of billing selections creates an invoice for the sales order quantity in question.

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:

Transaction: Post Billing Return/Credit Memo (Inventory)
Debit Inventory Asset
Credit Cost of Sales Account

 

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:

Transaction: Issue Work Order Materials
Debit WIP Asset
Credit Inventory Asset

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

Transaction: Return Work Order Materials
Debit Inventory Asset
Credit WIP Asset

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:

Transaction: Scrap Materials from Work Order
Debit Manufacturing Scrap
Credit WIP Asset

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.

Note: If a bill of operations is defined for a manufactured item, both setup time and run time costs will be posted to the G/L when production is posted. Overhead costs will be added to both the setup time and run time amounts, if overhead is specified for the given work center. In other words, the posted setup time amount (and also the posted run time amount) will include not only the setup time charge but also the applicable percentage of the hourly overhead rate.

Transaction: Post Production (Materials)
Debit WIP Asset
Credit Inventory Asset

 

Transaction: Post Production (Mfg. Items)
Debit Inventory Asset
Credit WIP Asset

 

Transaction: Post Production (Operations)
Debit WIP Asset
Credit Labor and Overhead Costs

A slightly different set of records is generated when posting production for a breeder item. To begin with, the breeder item itself must be accounted for. Since breeder items are transient in nature, their effect on inventory is temporary. When production is posted for a breeder item, a reversed pair of transactions is generated. These paired transactions effectively cancel each other out. Breeder items are both consumed by and received from manufacturing, as shown below:

Transaction: Post Production (Issue Breeder)
Debit WIP Asset
Credit Inventory Asset

 

Transaction: Post Production (Receive Breeder)
Debit Inventory Asset
Credit WIP Asset

Next, the material required for breeder production must be issued to the work order. The following accounts are affected when material requirements are issued to breeder production:

Transaction: Post Production (Issue Materials)
Debit WIP Asset
Credit Inventory Asset

The co-products and/or by-products which result from breeder production must be received into inventory, as follows:

Transaction: Post Production (Receive Products)
Debit Inventory Asset
Credit WIP Asset

Finally, if during production you vary the standard quantity when distributing co-products and/or by-products, the following accounts will be affected:

Transaction: Post Production (Cost Variance—Positive)
Debit Inventory Cost Variance
Credit WIP Asset

 

Transaction: Post Production (Cost Variance—Negative)
Debit WIP Asset
Credit Inventory Cost Variance

When you correct production posting, the records generated are the opposite of those generated when production is posted. Only the materials and the manufactured Items are corrected when posting a correction. Any operations that were posted must be corrected separately.

Note: You may not post a correction to a work order that manufactures a breeder item. Instead, you must manually adjust the quantity on hand values for the breeder materials, the co-products, and the by-products.

Transaction: Correct Production (MFG Items)
Debit WIP Asset
Credit Inventory Asset
 
Transaction: Correct Production (Materials)
Debit Inventory Asset
Credit WIP Asset

The records generated when posting miscellaneous production are similar to those generated when posting regular production — the main difference being that when operations are posted, the inventory cost variance account is used instead of the labor and overhead costs account.

Note: Miscellaneous production may not be posted for breeder items.

Transaction: Post Misc. Production (MFG Items - Positive)
Debit Inventory Asset
Credit WIP Asset

 

Transaction: Post Misc. Production (MFG Items - Negative)
Debit WIP Asset
Credit Inventory Asset

 

Transaction: Post Misc. Production (Materials - Positive)
Debit WIP Asset
Credit Inventory Asset

 

Transaction: Post Misc. Production (Materials - Negative)
Debit Inventory Asset
Credit WIP Asset

 

Transaction:  Post Misc. Production (Operations - Positive)
Debit WIP Asset
Credit Inventory Cost Variance

 

Transaction: Post Misc. Production (Operations - Negative)
Debit Inventory Cost Variance
Credit WIP Asset

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

Transaction: Post Operations
Debit WIP Asset
Credit Labor and Overhead Costs

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.

Note: The same accounts are affected regardless of whether a voucher is posted for inventory or non-inventory items.

Transactions: Post Voucher
Debit
P/O Liability Clearing
Purchase Price Variance
Credit
Accounts Payable
Purchase Price Variance

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:

Transactions: Post Voucher (Misc. Distribution)
Debit Misc. Account /Expense Account (optional)
Credit Accounts Payable

Info: You may reverse the sense (Db/Cr) of a miscellaneous distribution by entering a negative distribution amount.

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:

Transaction: Apply Discount
Debit Accounts Payable
Credit Discount Account

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:

Transaction: Post Misc. Payable
Debit Expense Account
Credit Asset Account

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:

Transaction: Post Misc. Payables Credit Memo
Debit Accounts Payable
Credit Prepaid Payables

Note: The system does not generate G/L account records when a miscellaneous payables credit memo is applied to either a voucher or a miscellaneous payables debit memo.

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

Transaction: Post Misc. Payables Debit Memo
Debit Prepaid Payables
Credit Accounts Payable

 

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:

Transaction: Post Invoice
Debit Accounts Receivable
Credit
Sales Account
Sales Tax Account
Freight Account
Misc. Charges Account

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:

Transaction: Post Cash Receipt (Fully Applied)
Debit Asset Account
Credit Accounts Receivable

Note: The asset account used when posting cash receipts will vary depending on which bank account is specified.

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:

Transaction:  Post Cash Receipt (No Application)
Debit Cash
Prepaid Receivables
Credit
Prepaid Receivables
Accounts Receivable

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:

Transaction: Post Cash Receipt (Customer Deposit)
Debit Cash
Prepaid Receivables
Credit
Prepaid Receivables
Deferred Revenue

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

Transaction: Apply Credit Memo (Customer Deposit)
Debit Deferred Revenue
Credit Accounts Receivable

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

Transaction: Post Cash Receipt (Misc. Distribution)
Debit Asset Account
Credit Misc. Account (varies)

Info: You may reverse the sense (Db/Cr) of a miscellaneous distribution by entering a negative distribution amount.

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:

Transaction: Post Billing Return/Credit Memo
Debit
Credit Memo Account
Sales Tax Account
Freight Account
Misc. Charges Account
Credit Accounts Receivable

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:

Transaction: Post Misc. Receivables Credit Memo
Debit Prepaid Receivables
Credit Accounts Receivable

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

Transaction: Post Misc. Receivables Debit Memo
Debit Accounts Receivable
Credit Prepaid Receivables

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:

Transaction: Charge Credit Card (No Application)
Debit Cash Prepaid Receivables
Credit
Prepaid Receivables
Account Receivable

Note: The default bank account used for credit card charges is defined on the "Configure Credit Card" screen in the System module. This bank account may be different from other bank accounts used for other purposes. 

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:

Transaction: Post Simple Entry
Debit Varies
Credit Varies
Transaction: Post Series Entry
Debit Varies
Credit Varies
Transaction: Post Standard Journal
Debit Varies
Credit Varies
Transaction: Post Standard Journal Group
Debit Varies
Credit Varies

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

Transaction: Post Adjustment (Positive)
Debit Asset Account
Credit Adjustment Account

 

Transaction: Post Adjustment (Negative)
Debit Adjustment Account
Credit Asset Account
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