Accounting Conventions and Journal Entries in SAP Business One: Sales Process, Lecture notes of Accounting

Download Accounting Conventions and Journal Entries in SAP Business One: Sales Process and more Lecture notes Accounting in PDF only on Docsity! Accounting for Sales and Purchasing SAP Business One —| Version 9.0 Welcome to the course on accounting for the sales and purchasing processes. Objectives At the end of this topic, you will be able to: ¢ Discuss some general accounting conventions « Give examples of the automatic journal entries created during the sales, purchasing and inventory processes * Review the financial settings that affect the processes of automatic journal entries. In this topic, we will cover some general accounting conventions and give examples of the automatic journal entries that are created during the sales, purchasing, and inventory processes. We will also talk about some financial settings that affect these automatic journal entries. Finance Basics System Configuration Master data Pee ene Cue eas ae controlling = Every business transaction is recorded in the company's books. = This allows you: = To manage your company effectively with the option of producing financial reports = To report the business transactions to the authorities. = Every business transaction results in a value exchange: = Acertain account increases value and another decreases value, resulting in the recording of balancing debit side and credit side postings. Automatic Journal Entries: Reflection Question Standard 2 / Sales Quotation Sales Order Delivery A/R Invoice Incoming Payment Deposit In previous topics we learned about the documents in the sales process and their consequences on bookkeeping. To review this process let us try to answer the following question: = Inastandard sales process which documents affect the accounting system? Automatic Journal Entries: Answer Standard Sales Quotation Sales Order Delivery. += A/R Invoice Incoming Payment Deposit NZ Lh ae | 4 When managing perpetual Inventory i 7 NZ 3s IS These are the documents in the sales process that create automatic journal entries and therefore affect the accounting system: the delivery, the A/R invoice, the incoming payment and the deposit. Note that the delivery only creates an accounting posting if you are using perpetual inventory. Account Types decrease decrease Receivable Payable Capital b ’ : s Electricity Revenue Here, we see the typical account balance of the different account types. For example, let us look at the value exchange for assets and liabilities. For assets: = Debit transactions always increase the asset value. = Credit transactions always decrease the asset value. For liabilities: = Credit transactions always increase the liability. = Debit transactions always decrease the liability. We will discuss the different account types in a later course. 10 Value Exchange Reflection Question AIR Invoice oS f oS Customer account Debit Credit 440 Revenue 440 account = Ina typical A/R invoice, what is the effect of the debit and credit amounts on the involved account balances? = Once again we will make some assumptions to keep the example simple: Let us assume that the customer is tax exempt and that this is a non-perpetual inventory system 11 Value Exchange Answer AIR Invoice oS f oS Customer account Debit Credit 440 Revenue account eau (The two accounts increase their values: 4 The answer is that the two accounts increase their values. The customer account is considered an asset so any debit to this account increases the account's value. Acredit to the revenue account, as we saw on the previous slide, increases the account's value. Note that you can preview the corresponding journal entry posting and the involved accounts before you add a document that generates journal entry. You can do so by choosing the Journal Entry Preview icon from the toolbar or by right click the document and choosing the Journal Entry Preview option. 12 G/L Account Determination For Items Used in Documents S rr = Traditional Solution — Default G/L method for an item = G/L Account Determination Window = Sales = Purchasing = General (for example, Period End Closing) = Inventory = Advanced G/L Account Determination First let us review how accounts are determined for items used in business processes. As we mentioned, when you first implement SAP Business One you define default G/L accounts to be used when transactions are created during the different business processes, such as sales, purchasing and inventory. These default accounts are defined in the setup menu under the Administration module. Under Setup you will find a section for Financials which includes the transaction for G/L Account Determination. When items are used in the transactions, there are 2 options for account determination: = Inthe traditional solution the system looks for the default accounts based on the account determination set in the item master data. = Starting at version 9.0, you can work with the advanced solution for account determination. = The advanced solution provides a centralized matrix to determine rules for assigning G/L accounts in journal entries according to a predefined (closed) list of criteria. = Both options are based on the G/L Account Determination window. = Weill discuss these options in the Manage the Chart of Accounts topic. 15 Control Accounts The Link Between the BP Sub-Ledger and the General Ledger * @ Accounts Receivable = Control Account AIR Invoice Control Account Accounts Sloe Receivable Customer Tax account Tax account SS | Revenue account Revenue account In the G/L Account Determination window you also define the Control Accounts: Accounts Receivable for the Sales process and Accounts Payable for the Purchasing process. A control account links the business partner sub-ledger accounts to the general ledger. You need to define a G/L account as a Control Account in the Chart of Accounts. Whenever you post a document to a business partner, the system automatically registers the journal entry to: = The Business Partner Master Data account balance, and = The control account balance. = You cannot post journal entries directly to a control account. In an A/R Invoice, for example, when the customer is debited the Accounts Receivable account is also debited. This journal entry appears now in both accounts balances (the customer and the control account). 16 Chart of Accounts Level 1 Accounts Receivable . . ‘Account Financial Reports Accounts Payable Account Bs £ o / : 2 GS Balance © 8 s Cost of Sales Sheet Note, that the Business Partner Master Data balances do not appear in the Chart of Accounts. Only the receivable and payable control accounts appear. The receivable and payable control accounts accumulate the customer’s and vendor’s transactions in their balances. Therefore, the Chart of Accounts presents the complete financial status of the company. The Financial Reports also show the full picture. For example, the balance sheet contains the accounts receivable and accounts payable accounts. 17 In SAP Business One, Jean copies the Sales Quotation to a Sales Order. 2 days later Joe, the warehouse manager, dispatches the company truck with the weekly deliveries, including 4 portable media players for Star Trek Computers. Later on the day, the accountant copies the Delivery to an A/R Invoice. Since no change was done to the price during the Copy To process, the Invoice’s total value is 440, and these are the Credit and Debit amounts in the automatic journal entry created by the A/R Invoice. 20 Value Calculation — Purchasing , Purchasing Price List = 100 o Reseller Price List = 110 @ ¢ Retail Price List = 120 eo j Coconut Devices = Purchasing Price List o vi Purchasing Unit Price * Quantity = Total Value 100* 10 = 1000 rice List = 100 . . Purchase Order Good ReceiptPO —_ AIP Invaice Debit Credit Vendor 1000 Clearing ace. 1000 In the Purchasing process a common scenario of how prices are set would be: Joe, the warehouse manager, issues a purchase order of 10 portable media players. He chooses the vendor Coconut Devices and then the item - portable media player. The price per unit appears in the Purchase Order. How? = Since Coconut Devices is a vendor, his default price list as defined in his master data record is the Purchasing Price List. = Therefore, in the Purchase Order, the unit price for portable media player is 100, the price from the Purchasing Price List for the portable media player item master data. Joe enters a quantity of 10. The total value of the Purchase Order is 1000 (assuming there are no additional items in the Purchase Order and that no discount, freight charges or tax amounts are added). Joe e-mails the Purchase Order to the vendor. Few days later Joe receives a delivery including 10 portable media players from Coconut Devices. In SAP Business One, he copies the Purchase Order to a Goods Receipt PO. A week later, the Invoice from Coconut Devices arrives via mail and the accountant copies the Goods Receipt PO to an A/P Invoice. 21 = Since no change was made to the price during the Copy To process, the A/P Invoice total value is 1000, and these are the Credit and Debit amounts in the automatic journal entry created by the A/P Invoice. 22 Summary i =( Here are some key points to take away: i. The account balance represents: The difference between the total debit transactions and the total credit transactions recorded for that account. In each journal entry: Acertain account increases value and another decreases value + The debit side and the credit side balance. Assets, Expenses, and Drawings + Debit accounts are generally in: Liability, Revenue, and Capital (Equity) + Credit accounts are generally in: In automatic journal entries the system + You defined default G/L accounts in the G/L ‘knows’ which accounts to use Account Determination window (including because: control accounts that link the business partner sub-ledger accounts to the general ledger). Here are some key points to take away: = The account balance represents the difference between the total debit transactions and the total credit transactions recorded for that account. In each journal entry a certain account increases value and another decreases value and the debit side and the credit side balance. = Assets, Expenses, and Drawings accounts are generally in debit. = Liability, Revenue, and Capital (Equity) accounts are generally in credit. = In automatic journal entries the system “knows” which accounts to use because you defined default G/L accounts in the G/L Account Determination window. These default accounts include control accounts that link the business partner sub-ledger accounts to the general ledger. 25 The Business Partner Master Data balances are represented in the chart of accounts in: + The receivable and payable control accounts that accumulate the customer and vendor transactions in their balances. In an A/R Invoice the system “knows” the value to be credited and debited in the automatic journal entry using the: In a Delivery the system “knows” the value to be credited and debited in the automatic journal entry using the Default price list as defined in the customer master record. And the item price in this price list. Item cost value that is calculated automatically, behind the scenes, according to the valuation method chosen for the item. = The Business Partner Master Data balances are represented in the chart of accounts in the receivable and payable control accounts that accumulate the customer and vendor transactions in their balances. = In an A/R Invoice the system “knows” the value to be credited and debited in the automatic journal entry using the default price list as defined in the customer master record and the item price in this price list. = Ina Delivery the system “knows” the value to be credited and debited in the automatic journal entry using the item cost value that is calculated automatically, behind the scenes, according to the valuation method chosen for the item. 26 Thanks a (5) You have completed the accounting for sales and a purchasing topic Thank you for your time! You have completed the accounting for sales and purchasing topic. Thank you for your time. 27