Training on Basic Accounting Using Adempiere


Walking Tree will be conducting a session on Accounting Basics using Adempiere on 8th May’2010. Duration for this session is 8-hours. This is a functional session, which will help you in understanding how to do end-to-end accounting for your business using Adempiere.

If you intend to attend this training then please send your nomination to alok.ranjan@walkingtree.in for further consideration.
Please find below the course outline Course Outline

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11 comments on “Training on Basic Accounting Using Adempiere
  1. Hi there! I know this is kinda off topic however , I’d figured I’d ask.

    Would you be interested in exchanging links
    or maybe guest writing a blog post or vice-versa? My website discusses
    a lot of the same topics as yours and I think we could greatly benefit from each other.

    If you are interested feel free to send me an e-mail. I look forward to hearing from you!
    Excellent blog by the way!

  2. Usually I do not read article on blogs, however I wish to say that this write-up very pressured me to check out and do so! Your writing taste has been surprised me. Thank you, quite nice post.

  3. Walking Tree says:

    Following links will be further helpful in understanding accounting and finance and how Adempiere enables you to manage them

    A nice tutorial on Balance Sheet

    A nice write-up on Performance Analysis Use Case
    http://www.adempiere.com/Performance_Analysis_Use_Case_Model

  4. Mark says:

    Thanks for the guide.

  5. Walking Tree says:

    Following link provides you more detail on accounting using Adempiere:

    Our expert went deep inside Adempiere code get more information for you.

  6. wtcindia says:

    I was creating a PO and saw that Currency Type is fixed to USA and the drop down is disabled. It gives a feeling as if I cannot raise PO in any other currency. Later realized that this currency is the currency mentioned in Pricing List. Hence make sure that you have appropriate pricing list configured in your desired currency.

  7. wtcindia says:

    Sometimes you thought that default accounting schema will be enough for you. However, later you realized that you need more accounts. Hope is not lost. You can add more accounts in the accounting file and import that using the “Import File Loader”. Make sure that in the Import Format field you select “Accounting – Accounts” from the list.

    Now go to Import Account window and import your new accounts. This will update your existing accounts and insert new accounts.

  8. wtcindia says:

    Very frequently, I am being asked, following question:
    “I am using Quickbook and want to migrate to Adempiere. However, what will happen to my accounts?”

    The answer is – Adempiere provides easier way to import your account from any system. For example – even a default installation comes with several import files which contains accounting schema. All you need to do is – create appropriate mapping between the fields that you have in your current system (e.g. Quickbook or Tally) and following fields”
    [Account_Value],[Account_Name],[Account_Description],[Account_Type],[Account_Sign],[Account_Document],[Account_Summary],[Default_Account],[Account_Parent],[Balance Sheet],[Balance Sheet_Name],[US 1120 Balance Sheet],US 1120 Balance Sheet_Name,[Profit & Loss],[Profit & Loss_Name],[US 1120 Income Statement],[US 1120 Income Statement_Name],[Cash Flow],[Cash Flow_Name]

    Some of the important fields that you may like to understand thoroughly are:
    Account_Value
    This is the actual account numbers in the General Ledger. The account format uses a numerical format, and it cannot contain a duplicate number. This field is mandatory.

    Account_Name
    This is a mandatory field and it is a user friendly (or call it business name) or the account.

    Account_Type
    This field is mandatory. In standard accounting principles, there are standard accounting types. ADempiere uses six standard account types:

    1. Asset
    2. Liability
    3. Owner’s Equity
    4. Revenue
    5. Expense
    6. Memo

    Account_Sign
    This is an optional field. Using this field you indicate if the expected balance of an account should be Debit or Credit. If set to Natural, then the account sign will follow the default behavior of that account’s type. For example, Asset and Expense will use the Debit account sign. If you do not supply any value in this field, it will use Natural as the default account sign value.

    Account_Document
    If an account is document controlled, then you need to indicate that using this field. When an account is document controlled, you cannot use this account manually within the GL Journal transaction.

    Account_Summary
    If you don’t want to do any transaction using a given account and you intend to create one or more account under this account then you can mark an account as summary account. As the name suggest, it often helps during reporting, which allows you to see summary of corresponding hierarchy.

    Account_Parent
    This defines the parent of an account value. If you have seen or heard the concept of chart of account then this relationship is primarily responsible for providing you that chart. Often the parent of an account is Summary Account (Account_Summary).

    With this now you will have answer regarding how to import your accounts from any system.

    Additional things Adempiere provide you is to manage accounts efficiently. You can manage accounts either using accounting schema screens or you can use account editor tool : http://downloads.sourceforge.net/adempiere/adempiereAcctEdit_v1.2.zip

    To understand Chart of accounts in more detail, you may like to visit following link
    http://www.adempiere.com/Chart_of_Accounts

  9. wtcindia says:

    Accounting using Adempiere

    Accounting Definition

    Accounting is called the language of business. It is the art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof.

    Accounting Terms that you need to be aware of

    Entity
    Account
    Account Types
    Double Entry Systems
    Assets
    Liability
    Capital
    Drawings
    Revenue
    Income
    Expenses
    Equity
    Cash Book
    Creditors (payable)
    Debtors (receivable)
    Invoice
    Opening (Stock/Balance)
    Transactions (money)
    Journal (Primary Book)
    Ledger (Principal Book)
    Subsidiary Book
    Cash Flow Statement
    Income Statement
    Trial Balance
    Profit & Loss Account
    Gross Profit
    Net Profit
    Retained Earnings
    Balance Sheet
    Closing (Stock)
    Inventory
    Inventory Control
    Depreciation
    Profit After Tax
    Outstanding Expenses
    Prepaid Expenses
    Accrued Income
    Income received in advance
    Trade Discount
    Cash Discount
    Dividends

    Main Interest – of any business

    1. Cash Receipts & Disbursement (Business Activities)
      Journal (Recording)
      General Ledger (Classifying)
      Trial Balance (Summarizing)
      Final Statements (Interpreting)
    2. Balance Sheet
    3. Profit & Loss Statement
    4. Statement of Cash Flow

    Accounting Methods

    Accrual (or mercantile) Accounting

    1. Sales are recorded when the sale occurs; it doesn’t matter when the money is actually received
    2. Expenses appear on the income statement when they best match up with revenues, not when the expenses or goods are paid for

    Cash-based Accounting

    1. Sales are recorded when you receive the money, and
    2. Expenses are recorded when they are actually paid

    Revenue Recognition

  10. Revenues are recognized (no matter when cash is received) when they are
  11. realized (received cash or promise for payment – receivable for the sales of goods) or realizable ( received assets which are readily convertible to cash or claim to cash – receivable) and
  12. earned (usually when goods are transferred or services rendered)
  13. Recognition of Revenue from four types of transactions
  14. Selling Inventory – at the date of delivery
  15. Rendering Services – when services are completed and billed
  16. Permission to use companies services – as time passes
  17. Selling an asset other than inventory – at POS, when it happens
  18. If the revenue is realized but not yet earned then it is categorized as liabilities for the business.
  19. In general revenue is recognized when an invoice has been sent.

    Matching Principle

  20. Expenses are recognized (no matter when cash is paid out) when obligations are
  21. incurred (usually when goods are transferred or services rendered), and
  22. offset against recognized revenues, which were generated from those expenses (related on the cause-and-effect basis)
  23. Important Points
  24. If no cause-and-effect relationship exists, costs are recognized as expenses in the accounting period they expired
  25. Prepaid expenses are initially recognized as an asset
  26. If no connection with revenues can be established, costs are recognized immediately as expenses
  27. Revenue Recognition principle and Matching principle combined together forms the basis for Accrual Based Accounting. Which is very well supported by Adempiere.

    Double Entry Systems

  28. Each and every one of a company’s transactions will result in an amount recorded into at least two of the accounts in the accounting system
  29. Dual entry system is the basis of accounting systems and it follows following basic rule:
    Assets = Liabilities + Equity
  30. Assets are what company owns and controls
  31. Liabilities are what company owes to creditors against those assets
  32. Equity represents what company owes to investors / owners
  33. Often people expand Equity part and the expanded accounting equations looks like following:
    Assets = Liabilities + Paid-in Capital + Revenues – Expenses – Dividends – Treasury Stock
  34. The double entry system requires that the same amount of the transaction must be entered on both the left (debit) side of one account, and on the right (credit) side of another account. For example

  35. To increase an asset account’s balance, you put more on the left side (you debit the asset account) of the asset account
  36. To decrease an asset account balance you credit (enter the amount on the right side) the account
  37. Every transaction must ensure that following equation remains valid Assets = Liabilities + Equity

    Transaction Examples Observations

  38. When a company receives cash, the Cash account is debited.
  39. When the company pays cash, the Cash account is credited.
  40. Revenues accounts are credited when the company earns a fee (or sells merchandise) regardless of whether cash is received at the time.
  41. Expenses are (almost) always debited.
  42. If a company does not pay cash right away for an expense or for an asset, you cannot credit Cash. Because the company owes someone the money for its purchase, we say it has an obligation or liability to pay.
  43. The most likely liability account involved in business obligations is Accounts Payable
  44. Similarly, if a company does not receive cash right away for a revenue earned through services of sale, you cannot debit Cash account. Because the customer owes the money for its purchase, we say it has an asset for the company and company will receive money on the promised date
  45. The most likely asset account involved in business obligations is Accounts Receivable
  46. The Chart of Accounts

  47. A chart of accounts is a listing of the names of the accounts that a company has identified and made available for recording transactions in its general ledger.
  48. Accounts are often associated with a unique number of 5 or more digits, with each digit representing a division of the company, the department, the account type, etc.
  49. Examples of chart of accounts are
  50. Balance Sheet Accounts – for example Assets, Liabilities and Stock holder’s equity
  51. Income statement accounts – for example operating revenues, operating expenses, non-operative revenues & gains, non-operative expenses & losses
  52. A company has the flexibility to tailor its chart of accounts to best suit its needs, including adding accounts as needed

    Journal Entry

    A general journal entry includes:

  53. The date of the transaction;
  54. Titles of the accounts debited and credited;
  55. The amount of each debit and credit; and,
  56. An explanation of the transaction also known as a Narration.
  57. General Ledger

  58. It is based on double-entry bookkeeping
  59. It is a collection of the group of accounts that supports the value items shown in the major financial statements
  60. It is built up by posting transactions recorded in the sales daybook, purchases daybook, cash book and general journals daybook
  61. The general ledger should include the date, description and balance or total amount for each account.
  62. The balance sheet and the income statement are both derived from the general ledger.
  63. There are at least seven basic categories in which all accounts are grouped:

    1. Assets
    2. Liability
    3. Owner’s equity
    4. Revenue
    5. Expense
    6. Gains (Profits)
    7. Losses

    Trial Balance

  64. It is used to prove that the value of all the debit value balances equal the total of all the credit value balances
  65. A trial balance is a list of all the nominal ledger (general ledger) accounts contained in the ledger of a business
  66. The value of the nominal ledger will hold either a debit balance value or a credit value balance on the respective columns in the trial balance
  67. A trial balance only checks the sum of debits against the sum of credits.
  68. Final Statements

    Income Statement

    An income statement shows how profitable the Company, Safe Cargo, has been during the time interval shown in the statement’s heading

  69. This period of time might
  70. be a week, a month, three months, five weeks, or a year – as decided by the business

  71. The reporting of profitability involves two things:
  72. the amount that was earned (revenues) , not necessarily collected and
  73. the expenses necessary to earn the revenues
  74. The difference between the revenues and expenses is often referred to as the bottom line and it is labeled as either Net Income or Net Loss. The income statement primarily consists of

  75. Revenue
  76. Expenses
  77. Capital gains or losses
  78. Statement of Retained Earnings

  79. Beginning retained earnings
  80. Net income
  81. Dividends paid during the accounting period
  82. Ending Retained Earnings = Beginning Retained Earnings – Dividends Paid + Net Income

    Balance Sheet

    Balance Sheet is a financial statement that reports the amount of a company’s (A) assets, (B) liabilities, and (C) stockholders’ (or owner’s) equity at a specific point in time

    It follows the accounting equation Net Worth = Net Assets – Net Liabilities

    A balance sheet often consists of

  83. All asset accounts
  84. All liability
  85. Capital stock balance and
  86. Retained earnings
  87. Cash Flow Statement

    This statement shows how cash amount has changed during the time interval shown in the heading of the statement. This statement allows you to see at a glance the cash generated and used by the company in following format

  88. Operating activities
  89. Investing activities
  90. Financing activities
  91. Supplemental information
  92. This statement depends on:

  93. Sources of Cash
  94. Uses of Cash
  95. and it is derived by converting the accrual information to a cash-basis using direct or indirect method

    You need to remember that for a change in assets (other than cash)—the change in the Cash account is in the opposite direction. Similarly, for a change in liabilities and owner’s equity—the change in the Cash account is in the same direction.

    Few things from Adempiere side

    In order to view the accounting in action – you need to setup following details:

  96. Create a client and organization – including setting up calendar and importing accounting schema
  97. If you want to post any transaction, which is document controlled then make sure that the documents are open during that period.
  98. Setup Business Partners, which can include your customer, vendor, employee — everyone who is related to your business
  99. Bank and Cash books
  100. Multi-currency
  101. Configure Products and Services
  102. Setup price information
  103. The Accounting Schema Window defines an accounting method and the elements that will comprise an account structure. Create and activate elements for detailed accounting for Business Partners, Products, Locations, etc. Review and change the GL and Default accounts.

    The Accrual checkbox indicates if this accounting schema will use accrual based account or cash based accounting. The Accrual method recognizes revenue when the product or service is delivered. Cash based method recognizes income when then payment is received.
    The Costing Method indicates how costs will be calculated (Standard, Average, Lifo, FoFo). The default costing method is defined on accounting schema level and can be optionally overwritten in the product category. The costing method cannot conflict with the Material Movement Policy (defined on Product Category)

    You can define multiple cost types. A cost type selected in an Accounting Schema is used for accounting.

    If you want to maintain different costs per organization (warehouse) or per Batch/Lot, you need to make sure that you define the costs for each of the organizations or batch/lot. The Costing Level is defined per Accounting Schema and can be overwritten by Product Category and Accounting Schema.

    Overall, this is the window – where you will be configuring – your accounting process.

    Financial Reporting

    ADempiere provides the following list of windows for working with financial reporting

  104. Report Line Set
  105. Report Column Set
  106. Reporting Hierarchy
  107. Financial Report
  108. Hope you find this information useful.

  • suman says:

    Hi,
    Happy to see that there is training on Adempiere Accounting. Will it be possible to upload the presentation or any document related to this training.

    Thanks,
    Suman

    • wtcindia says:

      Hi Suman,
      I will not be able to upload any ppt. However, I can definitely share some excerpt of that ppt, which will provide you enough direction on accounting basics and how Adempiere implement them.

      Regards
      Alok

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