Ledger Transactions Reference

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Accounts Receivable

COD Shipments and Receipts

In accounting terms, when the order is shipped to the recipient, the responsibility to pay resides with the recipient. Once the carrier has delivered the shipment, the responsibility to pay changes to the carrier. When payment is received from the carrier, then it is applied to the carrier’s receivables balance. In this process, we added a “Pending” state to the responsibility of the carrier to pay shipping charges, so that adjustments to the carrier’s payment could be made before it is made official and posted to the ledger.

Thus, the accounting transactions are:

1. Order is Shipped:

  DR Accounts Receivable for Recipient (asset), 
     CR Sales, etc. (revenue)

2. Shipment is delivered:

  DR Uninvoiced COD Receipts (asset), 
     CR Accounts Receivable for Recipient (asset)

3. Carrier COD bill is reviewed and approved:

  DR Accounts Receivable for Carrier (asset), 
  DR COD Fees (expenses)
     CR Uninvoiced COD Receipts (asset)

The Receive COD Statement Screen is specifically designed to facilitate this particular process.

4. Carrier forwards COD payment

  DR Undeposited Receipts or other Cash account (asset)
     CR Accounts Receivable for Carrier (asset)

If the recipient of the shipment declines to pay, then the receivable for the shipment remains with the recipient as in #1 above. When the package is returned, it should be processed as a return for “Store Credit”, and the billing account credit should be applied to the outstanding invoice of the recipient.

Gift Certificates

If you have configured gift certificates as recommended, then the following transactions will be posted:

1. Deposit to gift certificate:

  DR Accounts Receivables 
     CR Unredeemed Gift Certificates 

2. Withdrawal from gift certificate:

  DR Unredeemed Gift Certificates, 
     CR Accounts Receivables for Gift Certificate Withdrawals

These postings are consistent with the rules for payment GL account settings.

Purchasing

Vendor Invoices

When vendor invoices are marked as READY, they are posted to the ledger based on the invoice item type against accounts payable:

   DR Uninvoiced Shipment Receipt (liability)
   DR Supplies (expense)
   DR Freight In (expense)
      CR Accounts Payable (liability)

The exact debit transaction depends on the invoice item type: product items are debited against Uninvoiced Shipment Receipt, supplies are debited to Supplies, and freight to Freight In, etc. All vendor invoices are offset with a credit transaction in Accounts Payable.

Inventory

Receiving Inventory

When inventory is received, the transactions are:

   DR Inventory (asset)
      CR Uninvoiced Shipment Receipt (liability)


Adjust Inventory Values

When inventory values are adjusted, the value of the change in inventory value (quantity * change in unit cost) is recorded as a

DR Inventory Value Adjustment (expense)
   CR Inventory (asset)

This is recorded for each item whose value is adjusted.

Manufacturing

Reverting a Production Run

When a production run has been reverted, the work in progress inventory value of all the production run's tasks will be expensed against a reverted production run manufacturing expense account:

    DR Reverted Production Run Expenses
       CR Work In Progress Inventory

Then, for each part, which is salvaged from the reverted production run and return to raw materials inventory for use in a future production run, the value of the raw materials inventory will be increased:

    DR Raw Materials Inventory
       CR Reverted Production Run Expenses

If your company uses average cost accounting, and there is a difference between the average cost of the raw material and the unit cost of the items returned from a revert a production run, then this difference will also be added to the debit transaction to raw materials inventory.



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