Open Source ERP Academy

Accounting (00045)

The purpose of this lesson is to help you understand material and service accounting practices in general as well as how iDempiere implements global accounting.

Accounting - Primer

See notes below.
In the video, I describe Owner Equity as the sum of all profits. Technically, these historical profits belong to Retained Earnings, an account inside the Owner Equity group. Owner Equity for private companies is comprised of four accounts:
  1. Shareholder Contributions (Cr)
  2. Retained Earnings (Dr/Cr)
  3. Current Earnings (Dr/Cr)
  4. Shareholder Distributions (Dr)
Public companies have additional stock considerations. The word shareholder can be replaced with "Owner" for sole-proprietor or "Member" for LLC. The name you choose depends on the type of company you operate.

Accounting  - Primer Live Discussion

Accounting - Major Considerations and Decisions before Creating your Client

The follow is a list of the "major" Accounting decisions you need to make while learning in the GardenWorld and before you create your own client for your business.

Accounting - Accounting Schema

Accounting - Material Management Trial Balance

See notes below.
It is worth mentioning that this video describes the default configuration of iDempiere and ADempiere. This complex structure is beneficial for larger multi-national companies. It is possible to simplify this structure by consolidating Inventory Clearing into Not Invoiced Receipts, Payment Selection into AP Trade, Checking Unallocated Receipts into AR Trade. I do NOT recommend consolidating Banking In_Transit into Bank Asset. This control account is beneficial for many reasons. Consolidating accounts is accomplished by updating the Accounting Schema window => Defaults tab. A video will be created at a later date to describe this process. Contact me if you need immediate assistance with this process.

Accounting Combination and Default

Accounting - Trial Balance XLS

This document shows you a convenient way to see the transactions described in the above Material Management Trial Balance video. This file is a great way to test your accounting knowledge. I recommend you create a scenario where you buy, store, sell and invoice a product. See if your trial balance agrees with your Financial Reports.

Accounting Sub-Accounts

The purpose of this section is to introduce sub-accounts. The average company does not need to use sub-accounts because of how iDempiere structures it COA with a tree hierarchy. However, there are time when you do need to use sub-accounts, and the below video demonstrates how.
The purpose of this page is to help you import your Chart of Accounts both at the time of Client creation and after Client creation.

Creating your Chart of Accounts COA

Accounting Processor Schedule

View the System Configurator => "Client Accounting" to disable immediate posting. FYI, I do not allow my system to post immediately. Instead, I use the "Client Accounting" = "Q". Use the Accounting Processor window to set the schedule. FYI, I set the processor to only run overnight. If you need to run the processor during the day, use the Client Accounting Processor to manually mass post unposted documents. If you have multiple application servers, make sure you set the Accounting Processor => Schedule to a record that only runs on a dedicated server.

Accounting - Financial Reporting

2015-01-12 Department Financial Reporting

Illustrates how to configure and use department (departmental) based accounting.

2015-01-15 Transactional Organization - Org Trx - AD_OrgTrx_ID

Link to Departmental or Cost Center Accounting demonstration  

2014-10-03 - Better Income Statement and Balance Sheet Reports and Demonstrated End of Year EOY Process

This is a great resource for better understanding how financial reporting works! One thing I forgot to mention is that you cannot import the Income Statement and Balance Sheet pack in's to any other client other than GardenWorld. The reason is that the pack in's rely on the accounts that exist in GardenWorld. Your COA in your new client will have different accounts with different account IDs. Therefore, you should us the new GardenWorld examples as a quick reference when creating your Income Statement and Balance Sheet in your new client. NOTE 20170307: the below video references the December Adjustment period. This feature/fix exists in iDempiere today as late in version 2.1.
References:

Using Excel XLS to Create Pretty Financial Report

I was once involved in a project where a company spent an inordinate amount of money trying to get their financial reports exactly the way the wanted them. They first tried to use the existing Financial Reports report viewer. This did not have the layout capabilities needed to put logos in the right place, create spacing between lines, add the right borders and double underlines, etc... They second tried Jasper Reports as the front end to iDempiere's Financial Report process. This gave them all the pretty layout stuff; however, it has two issues:
  1. When they wanted to export the report to XLS for post processing, the column formatting from Jasper to XLS was terrible. It created hundreds of very small columns.
  2. Jasper was great for making the reports pretty; however, it did nothing for handling the complexities of producing the final product in a way the company wanted to see financials. Example, they wanted to see Financials Quarter by Quarter with the current Quarter broken out by month.
The one truth about Accounting people is that they know XLS. If you give them the data in XLS, they can work miracles. If you wanted to use iDempiere to produce the report but use XLS format and display the final financial reports, you have a couple of options:
  1. Export the iDempiere Financial Report to XLS. Create an Excel macro that makes the report look according to specification. If you see the 00:33:00 minute of Better Income Statement and Balance Sheet Financial Reports and Demonstrated End of Year EOY Process, you will see an example where I use the description field to include markup hints. The hints include '2u' for double underline this line and 2s for indent this line by two spaces. Once the macro is written, all the accounting person has to do to the report is (a) add the correct markup keys, and (b) run the XLS macros to beautify the report. Here is a series of videos to help you sharpen your XLS macro skills.
  2. Create an XLS workbook where you pre-format worksheet #2. This includes all the logos, column an line formatting, etc... All you need to do is copy the iDempiere Financial Report export into worksheet #1. Once worksheet #1 is populated, click on worksheet #2. All the references will be populated. Here is an example.
  3. Combine both above bullets to perform your manipulation.
In the end, the company got exactly what they wanted:

Accounting Accrual Types and Processes

In my experience, there are two accrual scenarios:
  1. When you need to estimate the accrual for purposes of financial statement accuracy
  2. When you know to the penny what the accrual amount should be
In Case #1: the estimate - accrue at the end of the month/period and reverse the following day
  • Let's assume your freight bills comes in on the 13th of every month.
  • Because the bill is big enough and it varies enough from month to month, you need to make an accrual so that your financials are accurate.
  • The EOM GL Journal accrual debits freight expense and credits freight accrual.
  • The next day (the start of your new month/period) you Reverse Accrue (document action) the GL Journal which debits freight accrual and credits freight expense.
  • When the expense comes in on the 13th, you code the invoice directly against freight expense.
  • The process starts over with the next EOM accrual
  • At the end of any given month, your freight expense will be (1) the negative amt from the previous period's reversal + (2) the freight expense from the bill + (3) the new accrual amount for this period.
  • The benefit to this approach is that you will never grow a balance in your accrual account regardless of how badly you estimate the expense.
  • To execute this process, either name the GL Journal as "Reversing xxxx" or create a checkbox that flags that GL Journal as needing to be reversed.
  • On the second day of each month, you confirm you have no completed "reversing" gl journals. If you do, someone made a mistake.
  • I would create an alert to catch and notify someone of such a situation.
In Case #2: the exact accrual - accrue at the end of the month and code your invoice directly against your accrual account
  • Let's assume that your iDempiere instance calculates sales commissions with every transaction and that sales commissions are always paid about 90 days later in a once-per-month payroll process that occurs on the 15th of each month.
  • At any moment in time, you know exactly how much commission expense you owe any given sales rep by simply adding the commission from the respective invoices.
  • At the end of a month/period, you add all sales commissions for that month and accrue the amount to a sales accrual account (debit commission expense and credit commission accrual).
  • Note: this accrual is NOT reversed the following period.
  • In the following month on the 15th, you pay your sales people for commissions incurred 90 days in the past. This payment will get coded directly against the commission accrual (not commission expense).
  • The balance in commission accrual can be defended at any time by the sum of all unpaid commission records.
  • When you use this accrual scenario, you will usually build a dedicated report to help you defend the sub-ledger balance (commission records in this example) with the accrual account balance.
If you have a scenario not covered above, please email the mailing list with the details. Please reference this page when you send the email.

2015-10-20 - AM Open Discussion - Moving Financial Reports from one Client to another - Advanced 2Pack Discussion

2015-01-15 Transactional Organization - Org Trx - AD_OrgTrx_ID

Link to Departmental or Cost Center Accounting demonstration  

End of Period Adjustments

This video references some key features such as Accounting Schema, Organization, Calendar/Year/Period, Dimensions, Activity to show you how you can organize your end of period or year activities to produce a complex combination of financial reports.

Accounting - Add Custom Element or Column to Accounting Schema Dimension

Link to video series

Accounting - Removing Clearing Accounts

iDempiere's accounting engine is modeled after Oracle Financials. As a result, it contains a number of 'clearing' accounts in the product and money GL workflows. An example of a clearing account is 'Bank in Transit', the GL account where Payments hold money value before they are reconciled through a Bank Statement into the final Bank Asset GL account. This discussion illustrates how to remove the clearing accounts from your GL workflows. If you are a small company, this change might be a consideration. It is definitely not a consideration for a larger or multi-currency organization.

Accounting - Calendar Year and Period

Accounting Processor Scheduled or Periodic vs Immediate

Here is a discussion that reviews how to schedule your accounting processor to post documents (immediate vs scheduled or periodic). References the System Configurator 'CLIENT_ACCOUNTING' setting.

Good References:

2013-12-17 PM Meeting (ppt) - Accounting

2013-12-17 AM Meeting (ppt) - Accounting

2014-04-22 AM - Open Discussion - Includes Good Accuonting References

See notes below video before watching.