Meeting your accounting needs through Adempiere – Ledger Entry

We have talked to various SMEs and came to know that most of the people are looking for data entry and a little more. When it comes to a little more, what they are happy with is a way to drill down the summary to reach to detail level (i.e. source record).

By keeping this in perspective we tried to understand their common data entry points. We were surprised to know that their need were pretty simple. Many of them just wanted a way to post different types of financial transactions (e.g. a purchase invoice, a sales receipt, a petty cash, cash deposit and withdrawal, a bank interest statement, etc) by following the golden rules of accounting, which says – Debit what comes in and Credit what goes out. In accounting language, all these transactions are recorded through a document called voucher.

Following are the most commonly used accounting vouchers in the industry:

  1. Contra – A Contra voucher entry is a transaction involving transfer of cash between cash account and bank account. For example a financial transaction involving following scenario will require contra entry:
    1. Cash account to Cash account
    2. Cash account to Bank account
    3. Bank account to Cash account
    4. Bank account to Bank account
  2. Credit Note
  3. Debit Note
  4. Memo
  5. Journal
  6. Payment
  7. Purchase
  8. Receipt
  9. Receipt Note
  10. Sales

Mapping Accounting Vouchers to Adempiere features

Contra Vouchers

Adempiere provides you following interfaces to manage the need of Contra Vouchers:
Cash Journal
All the cash transactions can be recorded using this interface. This window is primarily used for recording disbursements from and receipts to the associated cashbook. If you compare this against typical Contra entry then it allows you to record
– Cash transfer from bank account into cashbook (positive amount) and
– Cash transfer into bank account from cashbook (negative amount)

While it allows you to do various other things – like accepting general cash receipt, doing general expenses, noting down differences and payment against charges – the default Adempiere doesn’t provide you a way to transfer balance from one cashbook to another cashbook.

Also, it doesn’t provide a direct way of handling bank account to bank account transfer as it always expect at least one cashbook to remain involved. However you can make use of a dummy cashbook to achieve this feature. Refer to Adempiere’s web link on Bank-to-Bank transfer.

You may like to note following points about this window:

  1. The Cash Book identifies a unique cash book. The cash book is used to record cash transactions. In a typical organization you may have multiple cashbooks, including petty cashbooks. All the transactions in a given cash book gets recorded in single currency.
  2. The Accounting Date indicates the date to be used on the General Ledger account entries generated from this document. It is also used for any currency conversion.
  3. The Beginning Balance is the balance prior to making any adjustments for payments or disbursements.
  4. The Statement Difference reflects the difference between the Statement Ending Balance and the Actual Ending Balance.
  5. The Posted field indicates the status of the Generation of General Ledger Accounting Lines

Credit Notes & Debit Notes

A Credit Note / Memo is a commercial document issued by a seller to a buyer. The seller usually issues a Credit Memo for the same or lower amount than the invoice, and then repays the money to the buyer or sets it off against a balance due from other transactions.
There are two types of credit note:
-Credit note sent to consumers and credit note received from suppliers (also known as debit notes).
-Credit note sent to consumers is considered as a sales returned whereas the other credit note is considered as a purchases returned and you create a debit notes in the system to record this entry.

Adempiere provides following document types which are directly getting mapped to credit notes and debit notes:
AP CreditMemo (often printed as Vendor Credit Memo) and
AR CreditMemo (printed as Credit Memo)

Memo (also known as Memorandum) – Memo Voucher is a non-accounting voucher and the entries made using it will not affect accounts. Adempire document with status “Draft” provides you exactly same functionality. The transaction will be posted against your accounts (ledgers) only when you complete the documemnt.

Journal – these kind of vouchers are used to adjust two accounts. Adempiere provides GL Journal window which allows you to capture journal entries.

Purchase – Purcahse Voucher is used to record the purchase entry without purchase order. Adempiere allows you to create invoice (vendor) without any PO.

Goods Receipt Note (GRN) the goods (items) that are received from the supplier are under Goods Receipt Note. Adempiere provides you Material Receipt window to achieve this functionality. This is primarily an inventory voucher. However there may be situations where accountants need to enter item details and he will create invoice later on (for example after receiving actual invoice) using the already received item detail.

Payment – this voucher allows you to settle paybales (liabilities) with the supplier. Adempiere provides you Payments window, where selecting a document type of AP Payment will allow you to record payment entry.

Receipt – this voucher allows you to settle receivables (liabilities) with the customer. Adempiere provides you Payments window, where selecting a document type of AR Receipt will allow you to record receipt entry.

Sales vouchers are used to record sales transactions. Adempiere allows you to directly create an invoice (customer) and completing the invoice creates ledger entries (e.g. Credits Trade Revenue and Debits Account Receivable – Trade) corresponding to Sales.

Sometimes people make use of Reversing vouchers, which Adempiere allows you to manage through document action, wherever appropriate. With this we have covered most of the commonly used voucher types. I hope above information helps you in taking advantage of Adempiere’s amazing power. In case you need any professional help, you can reach us by visiting our Contact Us page.

Also, we have started a poll to know your opinion regarding the best available ERP solution for the SME sector. Click here to participate in the poll. If your favorite ERP is not listed then do let us know.

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Posted in ADempiere, EagleRP

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