OrderStream Debits and Credits

Accounts Payable

This is the function used to process Vendor Invoices. Typically you will issue a PO, receive the merchandise and subsequently be issued an invoice from your supplier. Some simple journal entries are illustrated below. In addition there are two types of variances that can be tracked at the time of processing a vendor invoice:

Purchase Price Variance (PPV):  The difference between the Vendor Invoice Amount and the Purchase Order Cost on your PO

Standard Cost Variance:  The difference between the PO Cost and the Standard Cost of the Item from the Item Master

Note: Purchase Price Variance is not the same thing as Standard Cost Variance.  Standard Cost Variance gets calculated when you either alter the purchase cost at the time you create a PO OR you have Static Standard costs and the Vendor cost fluctuates.  The Purchase Price Variance however, tracks changes to the PO cost that you have in Seradex and the Cost of the item that is listed on the Vendor Invoice.  It is possible to have both.

Each of the variances can be tracked and placed against separate GL accounts.

For Accounts Payable you have several posting options available to you depending on how you Setup your accounting preferences.  Below illustrates the different postings.  For this example we are using an item that you purchased for $100 with GST and PST Applied

AP Accrual batches used, no PPV Variance, Actual Cost posting

Accounts Payable Batch Entry

AP Accrual batches disabled, no PPV Variance, Actual Cost posting

AP Accrual batches enabled, $10.00 PPV Variance (item was really $110.00 on invoice), Actual Cost posting

AP Accrual batches disabled, $10.00 PPV Variance (item was really $110.00 on invoice), Actual Cost posting

AP Accrual batches enabled, $10.00 PPV Variance (item was really $110.00 on invoice), Actual Cost posting disabled.  Standard cost of item was $90.00, The purchase Price was $100.00.

Notes:

AP credit notes follow the same Gl Distribution as above; however, the debits and credits are reversed.

Clearing accounts can be used for accruals when using supported accounting packages other than Quickbooks.  When using Quickbooks an Accrual account must be used.

Accrual Processing at Time of Receipt

This function is to create a journal entry for all items received in the month that you do not yet have the vendor invoice. It will create a month end GL batch with summary accruals by GL account. This will be entered into your General Ledger and reversed every month during Vendor Invoicing.

Example: You have received the following items for $100 with a standard cost of $90

Actual Cost Posting Enabled

Actual Cost Posting Disabled

Note that as you invoice these receipts the AP clearing is debited with the same amount that you accrued. Your credit balance in AR Clearing is your total amount that you received but not paid for yet.

Please note whenever you have a vendor return situation the GL distribution is identical; however, the debits and credits are reversed.

Accounts Receivable Sample

Sample Approved Invoice in OrderStream:

1 Widget Sold for:        

       Sales $100 CDN

       GST $7

       PST $8

Standard Cost:

       $70.00 CDN

Actual Cost:

       $75 CDN

The following table illustrates the distribution of GL accounts:

A Credit Note follows the same logic however the Debits and Credits are reversed.  All inventory postings and COGS are in your native currency.

Cost Of Goods Sold Sample

Cost of Goods Sold records the Value of the items you sell.

Note: Accounting Preferences has flag for standard or actual costing

Scenario 1 - Standard Costing

X = Standard Cost from Item Master

Y = Actual Cost from Inventory

GL Entry upon OE day end is:

COGS X

Cost Variance Y-X If Y>X

Cost Variance X-Y If X<Y

Inventory Control Y

Example from above:

Scenario 2 - Actual Costing

X = Std Cost from item main

Y = Cost from Inventory Items

Note:  Credit notes are the reverse for both scenarios.

Inventory Adjustment

When making a cost adjustment to inventory a journal entry will be created.

Inventory Adjustment Write-off (From Category)                $X

Inventory Control (From Category)                                $X

Start Work Order and Allocate Material

When we begin a work order we will transfer materials to that Work Order. Note that the location being transferred into would normally be a WIP asset account. In this case we are assuming that Revenue Recognition is not required during the Job. This is typical of companies who manufacture finished goods for sale and where a work order requires less than one month completing. In this case we will ultimately complete the work order and transfer dollars from WIP to Finished Goods. When the finished goods are shipped to a customer we will transfer dollars to COGS in OE day end processing.

Transfer raw materials to WIP. This can be done one item at a time or by transferring a complete bill of materials created for the estimate or the work order. It can be also be done continually throughout the life of the work order. This is done through either the Work Order or Item transfer form.

Debit (WIP):

GL WIP Account (Category of Finished Good Item)                $10

Credit (Raw Material)

GL IC Account Child Item 1 (Category of Child Item 1)                $7

GL IC Account Child Item 2 (Category of Child Item 2)                $3

Work Order Completion

When a work order is completed, an item is created and transferred to finished goods inventory.  In the following example we will complete the work order and transfer dollars from WIP to Finished Goods. Note that actual costs have been recorded and tracked. When the finished goods are shipped to a customer we will transfer dollars to COGS in AR day end processing.

Example: We manufacture a finished good Item A from two components:

Standard labor hours are 5 hours @ 10.00. Actual labor hours were 6 hours at 10.00

Total Standard Cost is $10 + $8 + (5 x 10 = $50) = $68.00

Material Variance  = $25 - $18 = $7

Note that the material variance has already been recognized at the time of receipt so there is no material variance when the work order is completed.

Labor Variance = $60 - $50 = $10

Revenue Recognition WIP Schedule

For those companies that have revenue recognition issues – these can be accommodated through the Job Costing functionality. For this requirement Seradex implementation personnel will work with you to Setup appropriate Excel spreadsheets to accommodate your requirements.

Billing For Revenue Recognition

Four cases exist. In general if billings exceed revenue we have a customer deposit. If the revenue is greater than the billings we have unbilled revenue.  Typical threshold percent complete values for recognizing revenue would be 65%.