GENERAL LEDGER/BANK RECONCILIATION - Citadel · PDF fileCITADEL BUSINESS SYSTEMS DOCUMENTATION GENERAL LEDGER/BANK RECONCILIATION OVERVIEW ... 26/03/2004 General Ledger

CITADEL BUSINESS SYSTEMS

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G E N E R A L L E D G E R / B A N K R E C O N C I L I A T I O N OVERVIEW GENERAL LEDGER SET-UP ♦ Master File Maintenance ♦ Chart of Accounts Verification GENERAL LEDGER INTEGRATION ♦ Posting Account Specification ♦ Posting Entries ♦ Balancing With Subsidiary Ledgers PROCESSING ♦ Journal Entries ♦ Miscellaneous Cash Receipts GENERAL LEDGER UPDATES REPORTING ♦ Base Reports ♦ User Defined Financial Reports ♦ User Defined General Ledger Lists FOREIGN CURRENCY GENERAL LEDGER BANK RECONCILIATION ♦ Set Up ♦ Reconciliation Procedure ♦ Bank File Adjustments

26/03/2004 General Ledger – System Manual – Version 14.1

TABLE OF CONTENTS OVERVIEW ........................................................................................................................................... 4

GENERAL LEDGER SETUP............................................................................................................... 6

MASTER FILE MAINTENANCE.................................................................................................................... 7 General Ledger Code Definition ......................................................................................................... 7

Financial Report Maintenance......................................................................................................................... 7 General Ledger Account Maintenance ............................................................................................................ 9 Department Maintenance............................................................................................................................... 11 Suffix Maintenance ....................................................................................................................................... 12 Multi Period Definition ................................................................................................................................. 14 Branch Maintenance...................................................................................................................................... 14

CHART OF ACCOUNTS VERIFICATION...................................................................................................... 15 CHART OF ACCOUNTS MERGING .............................................................................................................. 15 CURRENCY CHART OF ACCOUNTS MERGING............................................................................................ 15

GENERAL LEDGER INTEGRATION............................................................................................. 16

DETAIL UPDATES .................................................................................................................................... 16 GENERAL LEDGER UPDATES ................................................................................................................... 17 POSTING ACCOUNT SPECIFICATION......................................................................................................... 17

Sales and Cost of Sales.................................................................................................................................. 18 Stock Adjustments......................................................................................................................................... 18 Surcharges ..................................................................................................................................................... 18

COMPANY GENERAL LEDGER CODES MAINTENANCE ............................................................................... 19 Sales Tax AR (Australia only) ...................................................................................................................... 19 GST sales invoices (New Zealand only) ....................................................................................................... 19 Unpaid PO Receipts ...................................................................................................................................... 19 Unit Cost Change .......................................................................................................................................... 19 Accounts Payable .......................................................................................................................................... 19 P & L Appropriation...................................................................................................................................... 19 Asset Clearing ............................................................................................................................................... 19 Asset Revaluation Reserve ............................................................................................................................ 20 Capital Profits................................................................................................................................................ 20 Shipment Creditors........................................................................................................................................ 20 Unrealised Exchange Gains/Losses............................................................................................................... 20 Realised Exchange Gains/Losses .................................................................................................................. 20 Customs clearing ........................................................................................................................................... 20 Settlement discount taken.............................................................................................................................. 20 Sales tax AP (Australia only) ...................................................................................................................... 21 GST supplier payments (New Zealand only) ............................................................................................... 21 Foreign currency rounding ............................................................................................................................ 21 Vendor returns............................................................................................................................................... 21 Foreign currency conversion ......................................................................................................................... 21 GST liability (New Zealand only) ................................................................................................................. 21 Sales tax (Australia only) .............................................................................................................................. 21 Provision for rebate ....................................................................................................................................... 21 Standard cost variance................................................................................................................................... 22 Accrued warranty .......................................................................................................................................... 22 Exchange rate variance.................................................................................................................................. 22 Clawback suspense........................................................................................................................................ 22 Sales tax clawback ........................................................................................................................................ 22 Unpaid procure receipts................................................................................................................................. 23 GST output tax (sales) (Australia only)......................................................................................................... 23 GST input tax (purchases) (Australia only)................................................................................................... 23 GST consolidated invoice suspense (Australia): ........................................................................................... 23

BRANCH GENERAL LEDGER CODES MAINTENANCE................................................................................ 24 Sales .............................................................................................................................................................. 24 Debtors .......................................................................................................................................................... 24 Cost of Sales.................................................................................................................................................. 24 Stock.............................................................................................................................................................. 24 Stock Adjustment .......................................................................................................................................... 25 Negative Stock Cost Adjustment................................................................................................................... 25 Year to Date Profit ........................................................................................................................................ 25 Service Jobs in Progress ................................................................................................................................ 25

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Contract Revenue Suspense .......................................................................................................................... 25 Instalment Debtors ........................................................................................................................................ 25 Agency Sales Commission Income ............................................................................................................... 26 Project Jobs in Progress................................................................................................................................. 26 Freight Recharges.......................................................................................................................................... 26 Surcharges ..................................................................................................................................................... 26 Project revenue suspense............................................................................................................................... 27 Accounts receivable roundings...................................................................................................................... 27 Progress billing suspense............................................................................................................................... 27 Unbilled receivables ...................................................................................................................................... 27 Sales orders confirmed but uninvoiced (delayed invoicing).......................................................................... 28 Stock in transit between branches ................................................................................................................. 28 Stock on loan with customers........................................................................................................................ 28 Stock in transit branch and project ................................................................................................................ 28 Discount given............................................................................................................................................... 28 Stock under repair for customers................................................................................................................... 28 Backordered procures.................................................................................................................................... 28 Warranty fees cost of sales ............................................................................................................................ 29 Repair income ............................................................................................................................................... 29 Scrap recovery............................................................................................................................................... 29 STD cost purchase price variance (PPV)....................................................................................................... 29 Consolidated invoice suspense ...................................................................................................................... 29

Bank Account Maintenance ............................................................................................................... 30 Product Analysis Levels Maintenance ............................................................................................... 30 Stock Adjustment Reason Maintenance ............................................................................................. 30 Miscellaneous Charge Maintenance.................................................................................................. 31 Surcharge Code Maintenance ........................................................................................................... 31 Shipment Cost Type Maintenance...................................................................................................... 32 Fixed Asset Maintenance................................................................................................................... 33

Asset Cost Account ....................................................................................................................................... 33 Provision for Depreciation ............................................................................................................................ 34 Depreciation Expense.................................................................................................................................... 34 Asset Revaluation Account ........................................................................................................................... 35 Disposal Adjustment Account....................................................................................................................... 35

Manufacturing Departments.............................................................................................................. 36 Issue Material ................................................................................................................................................ 37 Record Labour............................................................................................................................................... 37 Product Production ........................................................................................................................................ 37 Job Close ....................................................................................................................................................... 38

POSTING ENTRIES.................................................................................................................................... 39 Code Definition ............................................................................................................................................. 39 Maintenance of Code Definition ................................................................................................................... 40 Transaction Source........................................................................................................................................ 41 General Ledger Account................................................................................................................................ 41

INTERFACE ENTRIES................................................................................................................................ 42 Sales Order Entry/Invoicing .......................................................................................................................... 42 Service Management Revenue ...................................................................................................................... 44 Accounts Receivable ..................................................................................................................................... 46 Inventory ....................................................................................................................................................... 49 Inventory costing basis (standard or average) ............................................................................................... 52 Accounts Payable .......................................................................................................................................... 54

BALANCING THE GENERAL LEDGER CONTROL ACCOUNTS WITH THE..................................................... 55 SUBSIDIARY LEDGERS............................................................................................................................. 55

PROCESSING...................................................................................................................................... 58

JOURNAL ENTRIES................................................................................................................................... 58 MISCELLANEOUS CASH RECEIPTS........................................................................................................... 59 BRANCH RECHARGES .............................................................................................................................. 60

GENERAL LEDGER UPDATES....................................................................................................... 61

General Ledger Updates in Foreign Currencies ............................................................................... 62

REPORTING........................................................................................................................................ 63

Financial Reports Percentage of Sales Reporting............................................................................. 63 BASE REPORTING .................................................................................................................................... 63

Master File Reports ........................................................................................................................... 63

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Processing Reports ............................................................................................................................ 64 Base Financial Reports...................................................................................................................... 64

USER DEFINED FINANCIAL REPORTING................................................................................................... 65 USER DEFINED GENERAL LEDGER LISTS ................................................................................................ 67

CONSOLIDATE SYSTEM ACCOUNTS.......................................................................................... 68

Set up Requirements .......................................................................................................................... 68

BANK RECONCILIATION ............................................................................................................... 70

SET UP .................................................................................................................................................... 70 RECONCILIATION PROCEDURE ................................................................................................................ 71 BANK FILE ADJUSTMENTS ...................................................................................................................... 72

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OVERVIEW The general ledger is totally integrated with the other CITADEL modules. Apart from general ledger journal entries and miscellaneous cash receipts processing all other entries or general ledger transactions are generated from the processing modules. These include: • Sales Order Processing/Invoicing • Accounts Receivable • Purchasing • Shipment Costing • Accounts Payable • Inventory Transfer Processing • Inventory Management • Fixed Assets • Service Management • Manufacturing • Agency Sales The transactions that are generated from within these modules update the general ledger either in detail or in summary form. If the postings are done in detail form each transaction becomes a general ledger transaction. If they are done in summary form the transactions are consolidated before they are posted to the general ledger. The update is therefore handled in two steps: • General ledger detail update (to consolidate the transactions) • General ledger update (to post the transactions) These two processes may be run at any time and as often as is required. Normally they are included in the end of day (EOD) job stream to ensure that the general ledger entries are posted regularly. The transactions are held in the general ledger in the manner defined in the general ledger code definition function. This can be either: Branch: Account or Branch: Department: Account Both options can include suffix after the account. Transactions are held by period with balances also by period. Both the transactions and balances may be accessed and viewed as required (general ledger enquiry, general ledger reports).

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The balances are also used to compile the financial reports. These cover both profit and loss reports and balance sheet reports. The reports are formatted by the user using the format facilities and then run as required by period. It is important that a good understanding is obtained by the user on the interface entries, their source and their structure, in order that the implementation of the general ledger is done correctly. All interface accounts must be established as part of the base file maintenance process.


GENERAL LEDGER SETUP Most of the setup for the general ledger module is done when the base master files of the system are being established. It is done at a very early stage in the system implementation due to the need to reference interface accounts when many of the other base files are being established. This is due to the level of integration that the system has and because controls exist to ensure only valid accounts are referenced. The sequence of set-up is: General ledger code definition Compulsory General ledger financial report maintenance Compulsory General ledger account maintenance Compulsory General ledger department maintenance Optional General ledger suffix maintenance Optional Multi period definition Optional Branch maintenance Compulsory Note: Although the financial report formats are defined in the process general ledger

financial report maintenance (DD.GLFINMAINT), further financial report formats may also be set up using the facilities available under the options in user defined reporting.

After the base master files are set up the general ledger interface accounts should be defined. This is done in the processes: • Company general ledger code maintenance • Branch general ledger code maintenance Additional interface account definitions may also be input in the base master files of: • Bank accounts • Product analysis level keys • Stock adjustment reasons • Surcharges • Miscellaneous charges codes • Shipment cost types • Fixed assets • Manufacturing general ledger code definitions These interface account definitions either add a more specific interface definition than the branch/company defined account or are required to use the process or module.


Master File Maintenance General Ledger Code Definition The first base file that must be established is the file for the structure that the general ledger code must take. This file defines both the length and the structure of the general ledger code (DD.GLDEFNMAINT). The structure can take: • Branch (six maximum) • Department (three maximum) • Account (ten maximum) • Suffix (three maximum) It is important that both branch and account are made compulsory components of the structure. Once the structure has been established it should only be changed in conjunction with the software developers. If it is changed, values held in the general ledger under the old structure will not be accessible. They must be given identification under the new structure, which will require file editing. Likewise the length of the code should not be changed without consultation with the software developers. The structure is the first base file to be set up so that when the other general ledger base files are established, controls are in place to ensure their length conforms to the specified length. e.g. If the branch is defined as two digits then the branch master file maintenance process

ensures all branches are given two digits and not three. The structure that is established should consider the type of financial reporting that is required. It must be comprehensive enough to provide meaningful reporting for the organisation without being so complex that data entry and the understanding of the reports becomes a problem. This also applies to the length of the codes. Financial Report Maintenance A "base" layout of both a profit and loss report and a balance sheet report must be done in order that general ledger accounts can be linked to a valid report line when they are established (DD.GLFINMAINT). The general ledger financial report maintenance process allows both a profit and loss report and a balance sheet report to be formatted. Note: This format should be viewed as a "base" format. Additional formats can be defined

using the user defined financial report facility.


The report formats are established by report line. Each line the report is to contain is entered along with the narrative for the line. e.g. Line #

5 Sales - equipment 10 Sales - services 15 Sales - commissions 20 ___________ 25 TOTAL SALES 30 ___________ 35 Cost of Sales - Equipment etc

Line numbers default but can be overtyped to bring up the line number required to be entered or maintained. The number of lines that are skipped in the default process is specified in the program parameters. Lines are also established for lines on the report (eg line 20 and 30). As the line is being entered value buckets are defined for the line (X). e.g. Column 1 2 3 4 5 6 7 8

5 Sales - equipment X X X X X 10 Sales - services X X X X X 15 Sales - commissions X X X X X 20 _____________________ 25 TOTAL SALES 30 _____________________ 35 Cost of Sales - Equipment X X X X X etc

Accounts that are linked to the line get added into the value buckets when the financial reports are run. It is the total of all the accounts that are linked to the line that is printed on the financial report. The value buckets can be added by column by placing the column number in the add column field. The total will then print on the report when run. Add Column 1 2 3 4 e.g 5 Sales - equipment X X X

10 Sales - service X X X 15 Sales - commission X X X 20 ___________ 25 TOTAL SALES 1 30 ___________ 35 Cost of Sales X X X


When a column is totalled it is then cleared. This means that the column can be used again for another subtotal only. A column not totalled must be used for a grand total. i.e. Column one could be used for TOTAL COST OF SALES but column two values

would be necessary for a gross profit calculation (sales less cost of sales). A sign reverse indicator can also be given to each line on the report. This is because the buckets hold the values in the same manner as the general ledger but for reporting purposes they must be reversed. e.g. Sign Add revenue column 1 2 3 5 Sales - equipment Y X X X

10 Sales - service Y X X X 15 Sales - commission Y X X X 20 _____________ 25 TOTAL SALES Y 1 30 _____________ 35 Cost of Sales N X X X etc

Sales lines, gross profit lines and net profit lines would all carry reverse sign indicators. A space at the line number field allows the user to escape the process of defining the financial report layouts It should be noted that the reporting format across the page is defined each time the reports are run. By default, actual figures are given for the month and year to date, with the user choosing comparisons with budget, prior years, percentages to sales, etc. Note: The sales line that percentages are to be calculated on must be defined on the report

layout. Other reporting formats can be established using the user defined financial report format options as and when they are required. They are specified in the same manner except that each line must have its general ledger accounts specified rather than the general ledger account having its report line specified as is the case for the base reports. General Ledger Account Maintenance Each general ledger account that is required for analysis purposes must be established (DD.GLACCTMAINT). Each is given a code and a description. Each general ledger account is established as either a profit and loss account or a balance sheet account. Each one is given either a P indicator or a B indicator (P = Profit and Loss account, B = Balance Sheet account). This allows the functionality required at end of year when the balances held in the profit and loss accounts are cleared to the profit and loss appropriation account.


General Ledger accounts can be defined as either: (R)evenue or (E)xpense (profit and loss) (A)sset or (L)iability (balance sheet) These definitions are used in conjunction with Citadel CORVU reporting. The accounts are also given a financial report reference line. This line applies only to the "base" financial report layouts. Note: The report line must be valid for it to be entered. As the financial report line is specified its description is displayed to the operator. Care should be taken that each account set up is being placed on an appropriate line of the financial report. The general ledger accounts that are set up do not have to have any structure. i.e. Account - 1000 Entertainment expenses

- 1001 Trade debtors - 1002 Share capital

However it is recommended that some structure be given to them in order that their presentation on account listings is pleasing to the eye and in order that they can be easily remembered. Care and thought at this stage of the system's life will provide enormous benefits at a later date. As an example of a structured chart of accounts, ranges of accounts could be allocated: Assets 1000 - 1999 Liabilities 2000 - 2999 Revenue 3000 - 3999 Expenses 4000 - 4999 Then subgroups could be established for each category i.e. Assets

Cash and floats = 1000 - 1099 Prepayments = 1100 - 1199 Sundry debtor = 1200 - 1299 Fixed assets = 1300 - 1399

Accounts could then be allocated in some logical order within the subgroups.


To assist in recall of numbers it is also suggested that related accounts be set up with similar numbers. i.e. Motor vehicle cost 1305

Motor vehicle - provision for depreciation 2305 Depreciation expense 4305 Sales equipment 3701 Cost of sales equipment 4701

The length of the account number will already have been specified in the general ledger code definition process. It should be long enough to adequately group the accounts and still leave room to add additional accounts at a later date. Accounts can continually be added to the general ledger accounts file but care should be taken to ensure they are linked to the user defined financial reports that are in existence. Department Maintenance A department file need only be established if it has been defined that departments exist in the general ledger code structure (DD.GLDEPTMAINT). Use of a department structure allows each branch to be broken down into separate trading or cost centre elements. e.g. Departments within each branch might be 10 Equipment sales 20 Service 30 Administration or 10 Confectionery 20 Menswear 30 Furniture etc No linking of the departments to branches is required. All branches can automatically use them as soon as they are established (unless the account verification process is being used in which case each chart of account code must be defined as valid for the system). It is not necessary, however, that all branches use them. e.g. some branches may not have a service department in which case nothing should be

coded to that department for the branch.


Creation of departments gives another dimension to the way the financial reports can be run. However, thought should be given on whether the added complexity is actually required to run the organisation. e.g. If only two branches (out of 20) had service divisions and all administration was done

at one branch then it may be best to simply add three additional branches and not use departments.

Department analysis is only really required when similar cost centres run through a majority of the branches. If departments are established and used it is important that they are attached to the product analysis levels in order that sales and cost of sales are correctly coded and analysed. The general ledger does not hold the asset and liability accounts by department. These are still held at a branch level with a default department being used for balance sheet accounts e.g. Trade debtors Inventory If these are required to be held at a department level it is necessary that additional branches be used rather than departments. However, by having the department nominated on the product analysis level file (for sales and cost of sales) and being able to code expenses to departments, the financial profit and loss reporting can be done at a department level. Note: The default departmental code is defined in the program parameters

DD.GLDEFINE. Normally this would be defined as the administration department. Care should be taken to ensure it is a valid department.

Suffix Maintenance The general ledger suffix file can be used to provide a further breakdown of the general ledger code (DD.GLSUFMAINT). e.g. motor vehicle expenses - petrol - repairs - insurance It could also be used to classify expenses by employee (ie. each suffix could represent an employee).


Before a suffix file is used, however, thought should be given to what is trying to be achieved using it and whether the complexity is warranted within the general ledger code structure. eg. if only motor vehicle expenses have a suffix code a better alternative may be to

simply create three general ledger accounts for motor vehicle expenses 4301 Motor vehicle expenses petrol 4302 Motor vehicle expenses repairs 4303 Motor vehicle expenses insurance

The general ledger reporting facilities will allow motor vehicle expenses still to be reported as a single figure. Use of a suffix is optional but if they are to be used their length must be defined in the general ledger code structure.


Multi Period Definition The system can be set to either run twelve calendar months or to run a user defined number of periods. The nomination of the number of periods the system is to use is done in the company maintenance facility. If the number of periods is user defined then each period must be defined in the multi period definition process (DD.GLPDEF). If the system is to be run by calendar months the field defining the number of periods in the company maintenance facility should be left blank. Branch Maintenance The branch maintenance facility is used to define the branch structure for system purposes and for general ledger purposes (DD.BRANCHMAINT). The general ledger uses the code and the name from the branch file. Each branch established can be either a locality or a cost centre. If it is only a location then a parent branch is defined on the branch record. Branch or groups of branches do financial reporting. The length of the branch code is defined in the general ledger code definition process. Some structure is advisable for easy reference but is not mandatory. Branches can be added to the system as required and then used in conjunction with the other elements of the general ledger code structure without nominating any links (unless the account verification process is being used, in which case each chart of accounts code must be defined as valid for the system). Branches that are specified as stocking locations are not treated as cost centres. The parent branch receives all the financial entries that are generated for the stocking locations, but stock can be held, transferred, sold etc within the stocking location. When initially setting up branches as stocking locations, it is important that no general ledger values are held for the branch. It is only the transactions generated after the flag has been set that will be posted automatically to the parent branch. The parent branch must exist on the branch file and be a cost centre branch before it can be used as a parent branch. Note: When comparing the value held in the stock file with the stock accounts in the general

ledger, the stock file values of the stocking locations must be added to the parent branch. It is possible that a parent branch can have multiple stocking locations attached to it.


Chart of Accounts Verification The system can be run using all chart of account combinations or using only specified combinations. This is determined by the setting of the program parameter in DD.GLCODENTRY. If the system is set to only accept entry of specified combinations these must be established using the processes:

Chart of account additions DD.CAADD Chart of account deletions DD.CADEL

The chart of accounts additions facility is a mass maintenance facility. Specified accounts for specified branches should be established and updated in bulk. The Chart of accounts deletions facility should then be used to delete the specific accounts that are not required to be valid combinations. Note: Using the validation facility will not stop interface postings to invalid combinations.

It stops manual entry only of invalid account combinations. It is therefore important to ensure the interface definitions are correct.

The validation facility is not an essential part of the system and should really only be used if it is found that operators are continually posting to accounts that are incorrect.

Chart of accounts merging The merge CA accounts process (DD.CAMERGE) allows CA accounts to be merged together. Merging of accounts should only be done where the detail of one account is no longer required. All transactions held are transferred to the nominated account.

Currency Chart of accounts merging Merging of currency accounts should only be done where the detail of one account is no longer required. All transactions held are transferred to the nominated currency account.


GENERAL LEDGER INTEGRATION All modules within Citadel are integrated with the general ledger. All transactions processed within the Citadel operational modules create automatic posting entries to the general ledger. These posting entries are posted to the general ledger when the processes general ledger detail update and general ledger update are run (DD.GLDETAILUPDATE and DD.GLUPDATE). These processes can be run when required and are normally included in the End of Day job stream to ensure the general ledger receives the posting entries on a regular basis. Note: If the processes are not run daily the entries to the general ledger will still be by day

when they are posted. If the processes are run more than once a day, multiple entries will be held in the general ledger for the day.

The entries to the general ledger can either be in the form of a detail update or direct from the posting source. This depends on the type of transaction and in the case of accounts payable transactions, the setting of the program parameters.

Detail Updates Detail updates are the summary of a number of transactions for the day. By posting to the general ledger in summary form, the size of the ledger can be kept under control. For example, rather than post individual posting entries for each invoice raised only one entry is made for the day to each of the general ledger accounts affected e.g:

Sales Debtors Cost of sales Inventory

Note: The detail of the summary posting can still be obtained via the detail transaction list

DD.GLDETAILLIST. Transactions that are summarised for one posting per day to the general ledger are sales invoices and inventory transactions. These are summarised due to the high volumes of both types of transactions. Accounts payable transactions can optionally be summarised via the program parameter settings.


General Ledger Updates The general ledger update posting consists of both the detail update transaction and the transactions that are generated in the operating modules that are to be posted individually. The transactions posted individually are from accounts payable (optional) and general ledger journals. By posting individual transactions to the general ledger from accounts payable a high level of detail can be incorporated in the ledger. This can include payment detail, vendor and narrative comment.

Posting Account Specification Interface entries to the general ledger are posted to accounts nominated on the base master file screens of: Company general ledger code maintenance Branch general ledger code maintenance Bank account maintenance Product analysis level maintenance Optional Stock adjustment reason maintenance Optional Miscellaneous charge code maintenance Surcharge code maintenance Optional Shipment cost type maintenance - shipment costing Fixed asset maintenance - fixed assets Department general ledger code maintenance - manufacturing It is very important that all interface accounts are specified before the system is operational. To understand the interface accounts it is necessary to understand the double entry postings that are created when transactions occur. These are listed in the section general ledger postings. Interface accounts are specified at either a general ledger account level or a chart of accounts level. If specified at a general ledger account level the balance of the chart of account code is determined from the transaction being processed. e.g. Sales is specified at a general ledger account level. The branch identity is determined

from the sales branch specified on the sales order entry screen. If a department code is also incorporated in the GL code structure this is taken from the product analysis key for the product being sold.


If specified at a chart of accounts level the full general ledger code structure that has been defined must be entered. Some interface codes must be held this way because all postings must be put to a single account. e.g. for each bank account on the system a specific chart of accounts code must be

specified. All transactions for the bank must be held in the one general ledger record. Note: Interface accounts nominated at a chart of accounts level should be nominated in

one place only. This also applies generally to interface accounts nominated at a general ledger account level. However, this may not always be the situation. e.g. If the sales general ledger account code is held on the product analysis level file some

general ledger accounts may be used more than once. This will depend on the level of detail on sales that is required in the general ledger.

For interface postings that are defined at a general ledger account level, it is important to understand how the balance of the chart of accounts code is determined. The source of the balance is also listed in the section general ledger postings but it can get very complex in certain situations. Some transactions can also have the interface postings based on more than one interface account specification. In these situations the most specific posting code is used. This applies particularly to: Sales and Cost of Sales The sales code and cost of sales code can be nominated at a customer analysis/product analysis level or a product analysis level with a default code being nominated on the branch general ledger code screen. Stock Adjustments Stock adjustments are coded to accounts nominated on the stock adjustment reason file with a default code being nominated on the branch general ledger code screen. Surcharges Surcharges can be coded to the account nominated on the surcharge code file with a default code being nominated on the branch general ledger code screen.


Company general ledger codes maintenance Interface accounts nominated in the process company general ledger codes maintenance (DD.GLCOCTLMAINT) relate to accounts that are held as company accounts rather than branch accounts. These cover: Sales Tax AR (Australia only) Amounts charged to customers for wholesale sales tax through the sales invoicing process. This account represents wholesale sales tax collected on behalf of the government prior to the implementation of Australian GST. It should be represented as a liability account in the balance sheet. Australian GST accounts are defined on the next screen. GST sales invoices (New Zealand only) Amounts charged to customers for New Zealand GST through the sales invoicing process. This account represents GST collected on behalf of the government. It should be represented as a liability account in the balance sheet. Unpaid PO Receipts This account represents the liability arising from the receipt of goods and services in the processes of purchase order receipting and procure entry. The liability is decreased as the receipt liability is acknowledged in the process accounts payable voucher entry. The account nominated here forms the control account for the unpaid purchase order receipts report and the unpaid procures report. Unit Cost Change If the unit cost of inventory is changed via the manual unit cost change processes then the gain or loss resulting from the change is reflected in this account. Accounts Payable This account represents the value of vendor invoices held in the system awaiting payment. The liability is accrued through input of vendor invoices in the accounts payable voucher entry process. The liability is automatically decreased when cheque payments are made to the vendors using the accounts payable cheque print processes. P & L Appropriation The P&L appropriation account represents the prior financial year's profits/losses of the organisation. A posting to this account is generated in the general ledger month end roll at each financial year-end. Asset Clearing The asset clearing account is used as the offset account when fixed assets are either added to the system or disposed of.


This account is cleared through payment for assets purchased or on receipt of the proceeds for the sale of assets. These two entries are, however, simply coded to this account in the accounts payable voucher entry process or the miscellaneous cash receipts process. Asset Revaluation Reserve If assets are revalued automatic entries are posted to a revaluation account nominated on the asset record plus the asset revaluation reserve account. Capital Profits Profits generated on the sale of assets that represent a recovery above the cost of the asset are classified as a capital profit. The capital profits account receives the postings for all capital profits made. These are calculated automatically in the fixed asset disposal process. Shipment Creditors This account represents the liability arising from the receipt of goods in the process shipment receipting. The liability reflects only the supplier's liability and not the total receipt liability. (The balance of the receipt liability is held in the shipment cost type accounts - see shipment cost type maintenance). The liability is decreased as the vendors are paid and the shipment receipt referenced. (This is done through accounts payable voucher entry. The shipment is acknowledged automatically through the shipment receipts being referenced). Note: Shipment receipts do not appear on the unpaid purchase order receipt report. The

liability is held on the shipment summary file that should be balanced to the shipment creditor's general ledger account.

Unrealised Exchange Gains/Losses Unrealised exchange gains/losses arise when amounts are held on the customer/debtor files or the accounts payable files in foreign currency and the exchange rates are changed on the system. As amounts are paid by the customer or payment is made to the vendor any unrealised gain or loss held is transferred to the realised exchange gains/loss account. Realised Exchange Gains/Losses Realised exchange gains/losses occur when customers held in foreign currency pay their account and an unrealised gain/loss is held. The unrealised gain/loss is transferred to the realised gain/loss account. In addition, if amounts are held in bank accounts and the exchange rate is changed, a realised exchange gain/loss entry is generated. Customs clearing Settlement discount taken The settlement discount taken account records the settlement discounts taken in the accounts payable cheque run process. It is an expense recovery and should be classified as a profit and loss account. Tax elements of discounts taken are recognised in the general ledger posting entries. The net amount of the discount is posted to the discount taken account and the tax element to the tax (GST) suppliers’ payments account. (refer tax (GST) supplier payments.) The discounts are calculated based on the settlement discount percentage specified on the vendor master file.


Sales tax AP (Australia only) The wholesale sales tax on supplier payments account records the wholesale sales tax element of settlement discounts taken in the cheque run process. This is calculated based on the wholesale sales tax percentage held on the company master file and the discount amount as calculated in the cheque run process. The account specified is likely to be the account that is used when coding the wholesale sales tax element of vouchers entered in the accounts payable process. GST supplier payments (New Zealand only) The tax on supplier payments account records the tax element of settlement discounts taken in the cheque run process. This is calculated based on the tax percentage held on the company master file and the discount amount as calculated in the cheque run process. The account specified is likely to be the account that is used when coding the tax element of vouchers entered in the accounts payable process. Foreign currency rounding The foreign currency rounding account is used to accumulate rounding adjustments caused by exchange rate changes done and applied to foreign currency transactions held. These are only to round the transactions to the cent so values posted to the account are minor. Vendor returns The vendor returns account represents the asset for return of product to a vendor through the vendor returns facility and in particular the vendor returns entry process (DD.VENDORRETURN). This facility allows a return of product to be made to a vendor without reference to a purchase order or shipment file. An independent return file is created for each return made in order that remuneration detail can be matched to the items returned. Values held are at the average cost of the items at the time of the return. Foreign currency conversion The foreign currency conversion account is referenced and receives posting entries if foreign currency vendor invoices are paid from a local currency bank account. This can only occur in the manual cheque payment process (DD.MANCHQPAY). A debit and a credit posting is made to the base CA file (which contra), a debit posting in the local currency CA file (foreign curr x ex rate) and a credit posting in the foreign currency CA file (foreign curr). These entries are needed to enable double entry postings to be done in the respective currency CA files when two different currency files are referenced for one transaction. See accounts payable - manual cheque payments. GST liability (New Zealand only) The GST liability account is used to record the liability generated in the cardnet process. Sales tax (Australia only) Prior to introduction of Australian GST. Provision for rebate This account is used to record rebate costs for native currency customers.


Standard cost variance This account is used to record the variance between the standard cost of products receipted and the receipt cost if stock is to be held at standard cost rather than average cost. If the product cost is to be standard rather than average the program parameters must be set in both DD.POREC and DD.RECUPDATE to allow this i.e. DD.POREC - pick up cost product file to force standard cost for receipt - “Y” DD.RECUPDATE - disallow any change to average cost or general ledger - “Y” The financial entries at the time of purchase order receipt are:

debit Stock (at standard cost) credit Unpaid purchase order receipts (at the receipt cost) debit/credit Standard cost variance (with any difference)

The “standard cost” is actually held in the average cost field on the product master. As only some processes have been changed where the product cost can be altered, care must be taken that processes that have not been modified to deal with holding stock at standard cost are not used e.g. Costed quantity adjustments DD.STOCKADJD Shipment costing all programs and especially receipting Product conversion DD.PRODCONV Kit assembly / disassembly DD.KITASSY Jobs to stock DD.JOBTOSTOCK Attachment maintenance DD.ATTACHMAINT Service management the attachment facility should not be used If the average cost change processes are used to alter the cost held on the product file and the new cost is to be the standard then it is important to also change the standard cost as defined on the product / bill of material file. Changes made to the cost of the product using the average cost change processes will update stock values and post entries to the average cost change account. Accrued warranty This account is used to record warranty fees when they are captured as a portion of customer sales. Exchange rate variance Used when exchange variations are charged to customers (the difference between the exchange rate when the order was taken and when it was invoiced). Clawback suspense Used when a charge is put on a call that is tax exempt and tax is stripped from the price (held inclusive of tax) Sales tax clawback Used to define the account for tax to be clawed back when “exempt” service calls are invoiced (clearing the clawback suspense file)


Unpaid procure receipts Procure receipts are separated from purchase order receipts GST output tax (sales) (Australia only) Amounts charged to customers for Australian GST through the sales invoicing process. This account represents GST collected on behalf of the government. It should be represented as a liability account in the balance sheet. GST input tax (purchases) (Australia only) The tax on supplier payments account records the tax element of settlement discounts taken in the cheque run process. This is calculated based on the tax percentage held on the company master file and the discount amount as calculated in the cheque run process. The account specified is likely to be the account that is used when coding the tax element of vouchers entered in the accounts payable process. GST consolidated invoice suspense (Australia): Used when pseudo invoices are raised in call close and when the pseudo invoices are consolidated into a real invoice (see consolidated invoicing for service calls)


Branch General Ledger Codes Maintenance Interface accounts nominated in the process branch general ledger codes maintenance (DD.GLBRCTLMAINT) relate to accounts that are held at a branch level. These cover accounts like sales, cost of sales, debtors, stock, etc. These are the areas where detail by location is required rather than for the company as a whole. The balance of the chart of accounts code is determined from the processing source (ie branch or department). At the point of processing this can either default from pre-set parameters or may require to be entered by the operator. e.g. In the sales order processing/invoicing function the supply branch is nominated. This

then represents the branch that the inventory records will be adjusted for. The sales branch is also nominated. This branch will receive the sales and cost of sales entry. The debtor branch is pre-set on the customer master file.

Users are reminded that some of the general ledger codes nominated in the branch general ledger code process can be overridden by more specific account nominations. These are: • Sales • Cost of sales • Stock adjustments • Surcharges Sales This account represents the amount charged to customers for goods and services. Note that this is the default account for sales. Postings to this account do not include tax charged. Debtors This account represents where the asset generated in the invoicing process is posted. The total value of the invoices raised in the invoicing process is posted to this account. It also reflects the account that accounts receivable cash receipts are posted to. The debtor's account should be balanced regularly with the accounts receivable trial balance or ageing report. Cost of Sales This account reflects the cost of the goods and services invoiced. Costs are taken from the product file, procure data entered and miscellaneous charge file. Note that like sales this is the default account for cost of sales postings. Stock The stock account represents the account that holds the inventory valuation in the general ledger. It receives entries from a number of sources including: • Invoicing • Purchase order receipting • Shipment receipting • Stock adjustments • Stock average cost changes


This account should be balanced regularly with the stock valuation reports. Stock Adjustment This account receives the postings for all stock adjustments done (ie manual increases or decreases in quantities held) unless a more specific account has been nominated on the stock adjustment reason master file. As the code nominated in the branch general ledger code function receives the postings from the adjustments done in the stocktake update process the account nominated should reflect this. (The account should reflect stock gains or losses rather than adjustments done for reasons like sample use, own use, etc. These should be specified by stock adjustment reason). Negative Stock Cost Adjustment This account is used to post the transactions that are generated when cost changes are done that impact on branches that are holding negative quantities of inventory at the time of the cost change. In effect the account should reflect a cost of sales account as when the inventory was driven into negative, the incorrect cost of sales value would have been used. Year to Date Profit The year to date profit/loss account should receive entries only at the time the balance sheet process is being run. The record is built for the balance sheet reporting and then automatically cleared. The account must, however, be a valid account in order that it can be defined in each balance sheet format and used when the profit/loss is calculated at specific point in time. Service Jobs in Progress The service jobs in progress account is used to hold the cost of service calls until the service calls are closed. The account is then cleared of any costs associated with the service call. The account is debited as inventory, procures or miscellaneous charges are costed to service jobs. The cost is taken from the appropriate file. The credit to the account is created when the calls are closed. Cost of sales is then appropriately debited. Contract Revenue Suspense The contract revenue suspense holds all service contract revenue billed but not released to sales. Entries are credited to this account during the service contract billing process. All revenue from the billing run is put to the revenue suspense account. The account is cleared (debited) in the process release contract revenue. This process releases the appropriate revenue for the period nominated. The account should be balanced with the contract revenue suspense report on a regular basis. Instalment Debtors Entries are posted to the instalment debtors’ account as amounts are transferred to instalment debtors from trade debtors. The transfer process moves invoiced amounts from trade debtors to instalment debtors and holds them on the instalment file as due at a future point in time. They can then be transferred back to debtors using the instalment release process and cleared from the instalment debtors’ file. The account should be reflected as a balance sheet account in the general ledger.


Agency Sales Commission Income This account reflects commissions generated from the agency sales module. Commission income is recognised when the agency sales shipment receipt process is used. (This is also when the principal [debtor] is invoiced for commission owing). The agency sales commission income account should be a different account to "sales". It reflects commission only on a sale and not the gross value of the sale. No cost of sale account relating to commissions earned is necessary. Project Jobs in Progress This account represents the cost of projects that have yet to be billed to the customer. The costs are accumulated through the project maintenance facility and the accounts payable facility. The project maintenance facility allows miscellaneous charge items (which hold a cost value) to be charged to the job. Entry of miscellaneous charges therefore builds up the value held in project jobs in progress. The miscellaneous charge general ledger recovery account is credited. The accounts payable facility also builds up the value held in the project jobs in progress account. This happens whenever the amount being paid is related to a project and the project is referenced. This is known and the project # referenced if the general ledger coding in the accounts payable voucher entry process reflects a project cost type/general ledger account. As well, the normal accounts payable entries are posted:

DR GL account nominated CR Accounts payable DR Project jobs - progress CR Project jobs contra account

Entries are cleared from project jobs in progress as the projects are invoiced to the customer. Freight Recharges The freight recharge account is used to charge the receiving branch for any freight costs that are incurred when stock is transferred between branch locations. The freight is recharged as stock is put in transit to the receiving branch. This occurs as the transfer is raised in the one step process and as pick slips are confirmed in the two step process (Inventory Transfer processing). Surcharges The surcharge account receives the credit posting for any surcharges invoiced to customers. The amounts posted represent the invoiced amount. Amounts may come automatically from the surcharge file if the surcharge is mandatory or may come from an entered amount if the surcharges are entered as an invoice line item. In effect the account represents an additional sales account.


It may be, however, that items invoiced as surcharges will need to be credited at some point in time. If this is the situation the account may be classified as a balance sheet account (ie surcharge liability suspense). If classified as a balance sheet account the balance held in the account should be monitored as part of normal accounting procedures. Project revenue suspense Accounts receivable roundings The accounts receivable roundings account is used to post entries created if sales invoices are rounded rather than being printed for the exact sales amounts. Rounding can be either up, down or either up or down (nearest value) to a specified amount which means the entry can be either a debit or a credit. eg if rounding was done down to the nearest 5 cents and the sale was for $15.62 the posting entries would be:

debit trade debtors 15.60debit AR roundings 0.02credit sales 15.62

If the rounding was done up to the nearest 5 cents the entries would be:

debit trade debtors 15.65 credit AR roundings 0.03 credit sales 15.62

The rounding specification is set in the process customer rounding maintenance DD.CUSTROUNDMAINT. It is set by customer. Progress billing suspense The progress billing suspense account defines the liability for progressive billed sales orders invoiced in advance of their deliveries. The account is only accessed if the progressive billing facility is being used. Orders to be progressively billed rather than invoiced as part of the delivery process must be flagged as progressive billed orders on the order header and then billed using the progressive billing invoicing process DD.PROGRESSINV. The unbilled receivables account is used in conjunction with the progress billing suspense account. Unbilled receivables The unbilled receivables account is used to record the asset for deliveries made on progressive billed orders where the invoicing has not been done. Like the progress billing suspense account this account is only accessed if the progressive billing facility is being used. As deliveries are made to the order this account is debited rather than trade debtors. It is cleared as invoices are raised and trade debtors debited. The account is used in conjunction with the progress billing suspense account.


Sales orders confirmed but uninvoiced (delayed invoicing) Orders can be flagged as delayed invoicing orders. This holds the invoicing detail until such time as the order is approved for invoicing and the invoicing done in the delayed invoicing process DD.DELAYEDINV. The delayed invoicing facility is similar to the progressive billing facility but is quite separate. It simply allows deliveries of orders to be invoiced as and when required and, until they are invoiced, for the stock value to be held in another asset account. Stock in transit between branches The stock in transit between branches account records the asset of stock intransit between branches. This account can be defined as the inventory account if no distinction is required in the general ledger between stock on hand and stock in transit between branches. Entries are posted to the account when transfer orders are put into intransit and cleared from the account as intransit receipting is done. Having a separate intransit account means that transfer stock transactions all have a corresponding general ledger transaction. Stock on loan with customers Stock placed on loan with customers can be posted to a separate account to inventory even though it is still owned by the branch and is in effect still part of its inventory. This allows loan stock transactions to all have a corresponding general ledger transaction. If a separate general ledger account is not required for stock out on loan to customers this account should be defined with the same code as the inventory account. Stock in transit branch and project The stock in transit between branches and projects account is used to record the value of stock transferred from a branch to a project that has not been receipted to the project. Discount given Stock under repair for customers Backordered procures If procures are recorded in the order entry to pick process and in effect placed on backorder, the asset that is created is posted to the backordered procures account. The value is cleared as the backorder is picked and despatched. The entry to record the procures entered in the order entry to pick process is

debit backordered procures credit unpaid purchase order/procure receipts

The entry to clear backordered procures is done in the invoicing process

Debit trade debtors credit sales debit cost of sales credit backordered procures


Posting the initial entry allows the unpaid procure receipt liability to be recorded at the time the procure is recorded. Warranty fees cost of sales If a warranty unit fee is held and the customer is not excluded from generating accrued warranty fees then the order line is flagged with the warranty detail (service agent and fee). Invoices raised generate the accrued warranty fee transactions and update the warranty payable file DD.WARRANTYDUE. General ledger transactions generated to record the financial affect of the sale are:

debit warranty fees – cost of sales

credit accrued warranty fees

Credit notes raised when product is returned to stock also generate an accrued warranty fee transaction. The detail is obtained from: • The order for credit notes referencing an invoice line • The product master file for credit notes not referencing an invoice line. General ledger transactions generated to record the financial effect of the credit note are:

debit accrued warranty fees

credit warranty fees – cost of sales

Repair income Used for the cost recovery when a faulty part is converted to good part (based on the $ value held on the product file) Scrap recovery Used for the cost recovery when a faulty part is converted to a good part (based on the % value held on the product file) STD cost purchase price variance (PPV) Used when inventory postings are being done at standard cost rather than average cost and there is a difference between the purchase price and the standard cost held for the product receipted Consolidated invoice suspense Used when service calls are consolidated onto one invoice for billing purposes


Bank Account Maintenance As each bank account is established (DD.BANKMAINT) the general ledger account that is to act as the general ledger control account for the bank must be specified. It is essential to have different control accounts for each bank account. This then allows the bank reconciliation process to be done by general ledger account. This applies particularly if some bank accounts are held in a foreign currency. The general ledger code nominated for each bank account is the full chart of accounts code as defined in the general ledger definition process. Product Analysis Levels Maintenance Sales and cost of sales accounts can be defined by product analysis levels. This is optional in that the accounts for sales and cost of sales are also defined within the branch general ledger code maintenance function. Allowing the sales and cost of sales codes to be defined by product analysis level permits a degree of sales analysis within the financial accounts rather than relying totally on sales analysis reports. It is important to determine first how much detail is required in the financial accounts and how this is to be presented in report form. It is likely that many analysis levels will contain the same accounts for sales and cost of sales if only a summary picture of sales is to be presented in the financial reports. Stock Adjustment Reason Maintenance General ledger accounts for the postings from stock adjustments can be specified by stock adjustment reason. This is, however, optional as postings will default to the account specified in the branch general ledger control file. Being able to specify general ledger accounts by stock adjustment reason allows specific types of adjustments to be put to different general ledger accounts and therefore to different places on the financial reports. e.g. It is felt that it is desirable to separate adjustments done for a specific purpose (ie

used as a sample) from adjustments done to account for unexplainable variances between stock physically held and the computer records.


Miscellaneous Charge Maintenance Each miscellaneous charge code holds a general ledger account that defines where the cost recovery is to be credited when the miscellaneous item is invoiced. The account is only used where there is a recovery of cost (ie a cost has also been defined on the miscellaneous charge code). Each miscellaneous code is also defined for sales analysis purposes (with a product analysis level code). The general ledger postings to sales and cost of sales is determined either by the product analysis level that is defined on the code or from the branch general ledger control file. The recovery account defined is in effect the offset to any cost of sales entry. The recovery account nominated may be simply the expense account that the charge relates to or could be a recovery account set up for the expense account. e.g. Any value left in the wages expense account or in the nett of the expense account and

the recovery account for the expense would represent wages paid but not charged out (assuming the hourly rate paid was the same as the "cost" of the recovery code).

Where the recovery account is place on the financial reports will determine if costs affect the gross profit or are treated below the gross profit line. Codes can also be defined for the internal sales and cost of sales accounts. These apply if the work type is an internal change work type. Surcharge Code Maintenance General ledger postings for surcharges invoiced can be specified on the surcharge code file. This, however, is optional as a default posting account is specified on the branch general ledger control code file. Being able to define surcharge postings by surcharge code allows the various types of surcharges to be coded to different areas in the financial reports. This may, however, not be necessary in which case the code may be left blank and all postings done to the code defined on the branch general ledger control file. The amounts posted to the surcharge account represent the invoiced amount. This may come from the surcharge file if the surcharge is entered automatically on the invoice or may come from a value that is nominated if surcharges are entered as a sales order/invoice line item. The account represents an additional sales account and should generally be treated as income. However, it may be that some items invoiced as a surcharge will need to be credited when returned by the customer. If this is the situation the account could be classified as a balance sheet account to recognise the potential liability that may occur. If the account nominated is a balance sheet account it should be monitored to ensure the potential liability is realistically shown.


Shipment Cost Type Maintenance If the shipment costing module is to be used it is necessary first to establish the cost types that are to be used in the costing of shipments and to specify the general ledger control accounts for each cost type. Cost types that would normally be set up would include: • Freight • Duty • Minor charges The number of cost types is dependent on the level of cost breakdown that is required on each shipment file. As a guide it is suggested that each major cost be allocated its own cost type. The smaller costs can be grouped together and held in one control file due to their insignificance in the costing. It is recommended that the number of cost types specified not exceed five. Each cost type specified has a general ledger control account nominated. This account receives entries through the shipment receipt process (credit - quantity receipted x cost type unit value). The cost type unit value is determined by the amounts entered in the shipment cost entry process, how they were spread over the shipment lines, and the quantities held on the shipment lines. Amounts are cleared from the shipment cost type control account either through accounts payable voucher entry (DD.APENTRY) or the shipment variance journal facility (DD.SCJNL). The accounts payable process clears amounts by simply coding payments to the cost type control account. (note: when this is done the shipment that the payment relates to must be specified in the AP process). The shipment variance journal facility allows differences between amounts entered via the shipment receipt process and the accounts payable voucher entry process to be written off (to a specified account). The shipment cost type control accounts therefore, always reflect the unpaid liability for the shipment receipts by each cost type. The breakdown of this liability, by shipment, is available from the shipment summary report (DD.SHIPSUMM). The shipment cost type control accounts should be regularly balanced to the shipment summary report. It is very important that once the cost types have been established, along with their associated general ledger control accounts, that maintenance is not done without carefully considering the implication of such maintenance - ie costs will continue to be held in the old general ledger account, etc.


Fixed Asset Maintenance Five general ledger account codes are nominated for each fixed asset. These are: • General ledger asset cost account • General ledger provision for depreciation account • General ledger depreciation expense account • General ledger revaluation account • General ledger disposal adjustment account The accounts are specified for each asset on the asset master file when assets are established. The account is entered according to the general ledger account definition (ie branch/account or branch/department/account). Asset Cost Account The asset cost account is used to hold the cost value of the asset as defined on the third screen of asset maintenance (accounts cost). This value is also used for accounts depreciation purposes (less any residual values). As the asset is being established an entry is posted to the asset cost account for the specified accounts value. The double entry is posted to the asset clearing account (nominated in the company general ledger code file). The cost account is also affected when the asset is disposed of. The cost value held for the asset is then credited. This is done automatically in the asset disposal process (DD.FADISPOSAL). The asset cost account for each asset can be maintained which allows assets to be transferred from one location to another in the general ledger. This does not, however, move their location on the asset value reports which is driven from the location field on the asset master. Care should be taken when nominating the asset cost account, as the branch identification does not have to be the same as the location for the asset. Logical groups should be established in order that the asset reports can be balanced to the general ledger control account. The general ledger cost account should also be related to the asset level structure to assist in balancing the fixed asset register to the general ledger - e.g. assets within an analysis level should all contain the same cost account. Multiple level codes can be put to the same cost account but this makes reconciling the report to the general ledger difficult. It is therefore recommended: • The asset location code is the same as the branch identity for the general ledger code. • Assets within each analysis level all have the same cost account.


Provision for Depreciation The provision for depreciated account records depreciation provided for the asset. It receives its entries as the depreciation update process is run (DD.FACEPN). Values are removed from the account as assets are disposed of (DD.FADISPOSAL). Like the asset cost account maintenance can also be done which allows the assets to be transferred from one location to another in the general ledger. Care should be taken when nominating the provision for depreciation account. The branch identification does not have to be the same as the location for the asset but logical groups should be established in order the asset reports can be balanced to the general ledger control account. The location should also be the same as that nominated for the asset cost account. Like the asset cost account the general ledger provision for depreciation account should be related to the asset level structure. This will assist in balancing the fixed asset report to the general ledger. Assets within each analysis level should all contain the same provision for depreciation account. It is recommended that: • The asset location code is the same as the branch identity for the general ledger code. • The branch identity of the general ledger code is the same for the provision for

depreciation account as for the cost account. • Assets within each analysis level all have the same provision for depreciation account Depreciation Expense The depreciation expense account receives the postings for depreciation expense when the depreciation update process is run (DD.FADEPN). The double entry in this process is posted to the provision for depreciation account. Like the asset cost account and the provision for depreciation account this account can also be balanced to the asset reports. However, it is not as critical and it may be that the expense is to be put to a different location than that defined for the asset cost. i.e. although one branch may own the asset another branch may be using the asset and should therefore bear the expense. It is up to each organisation to decide on the degree of analysis required within the general ledger for depreciation expense. If only one depreciation expense account is to be held in the general ledger then all assets, no matter what analysis key they are coded with, will have a common depreciation expense coding.


Asset Revaluation Account The asset revaluation account receives the posting for any revaluation done to an asset through the asset revaluation facility (DD.FAREVAL). The amount of any revaluation done is not added to the cost of the asset and shown as a revaluation so the revaluation account should not be the same as the asset cost account. The asset revaluation account should however, have a relationship to the asset cost account that has been set up (by analysis level). This will then allow meaningful analysis within the general ledger and financial reporting facilities. Note: Any revaluation done to an asset is taken into account when calculating

depreciation for accounts purposes. It is not taken into account, however, for tax depreciation purposes.

The double entry for the revaluation of assets is posted to the revaluation reserve account (nominated in the company general ledger code file). Revaluation amounts held are reversed when assets are disposed of. The entry credits the asset revaluation account and debits the revaluation reserve account. Disposal Adjustment Account The disposal adjustment account is used to recognise the difference between the proceeds and the nett book value of the asset (excluding any capital profit - proceeds in excess of the original cost) when the asset is disposed of. In effect the disposal adjustment account is a depreciation adjustment account as any difference between the proceeds and the nett book value of the asset being disposed of represents an under or over provision of depreciation for the asset. This account may be the depreciation expense account previously specified although it is recommended it is kept as a separate account. The account represents an expense and should be a profit and loss account.


Manufacturing Departments The manufacturing department general ledger control file (DD.DEPTGLMAINT) defines the general ledger interface accounts that are used in the manufacturing module. These accounts are:

• Material issues at standard • Labour issues at standard • Overhead issues at standard

• Material issue cost variance:

• Labour recovery • Overhead recovery

• Material usage variance • Labour usage variance • Overhead usage variance

• Production at standard:

• WIP - balance sheet • WIP - profit and loss

Bill of material department maintenance must be done before the general ledger codes can be specified. It is important that each department that is defined in the bill of material department maintenance process (DD.BMDEPTMAINT) has general ledger account codes defined. This enables each factory department to have unique general ledger codes, which enables separate financial reports to be generated for each department (using user defined financial reporting) without having to have a chart of accounts structure that incorporates departments. However, if the factory departments are not required to be kept separate for general ledger reporting purposes the same accounts can be assigned to all departments. The total chart of accounts code for manufacturing is determined by: • The branch that is defined on the job record • The general ledger accounts nominated on the manufacturing department general ledger

account file for the department referenced as per the bill of material operation The actual postings are determined by the transaction being done. These are: • Issue material • Record labour • Record production • Close job


Issue Material The postings for the issue of material to a job are: DR WIP (Balance sheet) CR Inventory DR/CR Material issue cost variance DR Material issued at standard CR WIP (Profit and Loss) As WIP is held at standard any variance at the time of the issue of material from its average cost is written off to the material issue cost variance account. This account should be treated as a cost of production account but incorporated in the financial accounts in such a way that it does not affect the reporting of the factory's performance. Record Labour Labour is transferred to work in progress at the standard value held on the BOM file. This transfer or recording of labour is also used to record the use of overheads. Overheads are based directly on labour hours used but at the overhead rate held on the BOM file. Recording labour (and overhead) to the job along with the issue of material allows all costs associated with the job to be recorded. These are all recorded at standard values. The general ledger postings are:

DR WIP (balance sheet) CR Labour recoveries CR Overhead recoveries DR Labour issues at standard DR Overhead issues at standard CR WIP (profit & loss)

Product Production Recording of production clears the WIP accounts (both balance sheet and profit & loss) and places the value of the production into inventory. Production revenue is credited. As both the issue of materials and labour and the production receipts are done at standard the WIP accounts should be cleared totally when the jobs are finished (assuming the quantities of the issues of materials and labour were at standard). If the WIP amounts are not cleared (and the job is finished) then it will be the job close process that clears them and recognised the usage variances. As inventory is receipted at standard, average cost changes will be done if appropriate to the product records and posted to the general ledger. The posting entries are:

DR Inventory CR WIP (balance sheet) DR WIP (profit & loss) CR Production at standard


If a BOM is multi-department then production is only receipted from the final department. Any production recorded from earlier departments is recorded for information purposes only but no general ledger postings are done. Job Close The job close facility records the usage variances that occur based on: • Material, labour and overheads issued to a job versus • The required amount of material, labour and overheads for the production receipted from

the job The variances are all determined based on quantity variances x standard values. Variances remaining in the WIP accounts are cleared to the usage variance accounts and the material, labour and overhead issued at standard accounts as appropriate. The posting entries are:

DR/CR Material usage variance DR/CR Labour usage variance DR/CR Overhead usage variance DR/CR WIP (balance sheet) DR/CR WIP (profit & loss) DR/CR Materials issued at standard DR/CR Labour issued at standard DR/CR Overhead issued at standard

The usage variance can be favourable (CR) or unfavourable (DR) and cover material, labour and overhead. e.g. A favourable variance will occur where the BOM requires 10 units of a component

and only nine were issued to make the production receipted. The variance is taken at standard value. (note the standard value is determined at job release).

An unfavourable variance will occur where the quantity issued to make the production receipted is greater than that allowed on the BOM file.

The materials, labour and overhead issues at standard accounts are also adjusted to reflect the quantities that should be issued to make the quantity receipted from production. At the time of issue any quantity can be issued. It is only when the production receipt is done that the standard quantity that should be issued is known. In effect it is this variance that becomes the usage variance.


Posting Entries The posting entries are determined by: • The transaction source • The interface account definition Note: In some cases the interface account definition may also define the transaction

source - ie company defined general ledger codes (tax, creditors, etc).

In some cases the interface account definition may be held at multiple levels. It may be defined at a specific level and it may be defined at a base level - ie sales and cost of sales can be defined by product analysis level but a default code is also specified on the branch general ledger code file.

It is important to understand the complete posting code. This is the code as defined in the general ledger code definition file. To understand only one part of the code will not allow a complete understanding of the posting entry. Code Definition This process GL code definition (DD.GLDEFNMAINT) defines the structure of the general ledger code. It defines the length and meaning of the transaction source or location plus defines the length of the account code. The transaction source or location is defined by a branch code and optionally a department code. The branch code can be up to six digits long. The code relates to the branch master file (DD.BRANCHMAINT). The department code can be up to three digits long. It relates to the general ledger department master file (DD.GLDEPTMAINT). It is essential that some identity be defined for branch. This then ensures that all transactions will have a location code. The number of locations set up in the branch file is of course optional. Running departments is optional. They allow a breakdown or a subcoding of each branch. If departments are used each product analysis level must be defined with a department. This then allows sales and cost of sales to be posted by its absolute location. A default department code should also be set up in the program parameters (DD.GLDEFINE). This code is used to post all the interface entries that have no strict department identity - eg debtors, creditors. The code that is defined in the program parameter should be a valid department code. It is likely that the department defined is the general/admin department as the accounts that use the default department code are administration type accounts.


The account code definition defines the length of the general ledger account code. This should not exceed ten digits. It refers to the general ledger account file (DD.GLACCTMAINT). Maintenance of Code Definition The general ledger code structure should be very carefully thought out before the system is installed. The structure should be kept as simplistic as possible as this will assist in data entry and reporting when the system is live. However, it must also be defined to a level that will allow the organisation to produce its financial accounts in the manner required to operate the business. Specifying a department level and a suffix adds a degree of complexity to the general ledger. If the requirement can be handled through a branch-account structure in some way then this should be carefully considered. e.g. If each branch has say two departments and there are only a few branches it may be

easier to set up a branch for each department and then use a code structure of only branch-account.

If only the telephone expense has suffix codes (ie for rental and tolls) it may be easier to set up two separate general ledger accounts and not use suffix codes at all.

The number of digits defined for each set should be kept as low as possible without compromising the future growth of the organisation. e.g. If a company has six branches then a branch code of two digits should be defined.

One digit limits the company for future growth but three digits is overkill and will simply involve more punching of data, etc when the system is operational.

It is recommended that: • The code structure is defined as numeric only. This assists in data input when the system

is operational. • Once defined the code structure should not be changed without reference to the software

house. Additional work is necessary to alter the transaction database.


Transaction Source The branch code is normally defined at the source of the transaction. The exception to this is where the total posting code is defined for the transaction in the general ledger code interface definition file. If the branch code is defined at the source of the transaction, it can be defined by: • Entry of the code

or • Entry of a piece of information that allows the system to identify the code In some transaction types (eg sales order entry/invoicing) it is possible that each leg of the general ledger posting is posted to a different branch account. The entry to sales will be posted to the sales branch nominated, the inventory adjustment to the supply branch nominated, the entry to debtors to the debtor branch as per the customer file and the tax entry to the branch/account nominated on the company general ledger code file. These could of course be the same branch although this is unlikely. The branches that are specified for the various legs of the posting are either entered by the operator or set to default through system parameters. For example in sales order entry the supply branch is nominated by the operator but the sale branch defaults to either the supply branch (as nominated) or the customer branch depending on the program parameter settings. The posting to the debtors’ ledger is determined by the customer master file data. This will normally be the branch defined on the customers master file unless the customer is linked to a debtor account in which case it will be the branch defined on the debtors master file. These postings are determined automatically and unseen by the operator. General Ledger Account These are all defined in the section general ledger integration. Apart from manually entered transactions like general ledger journals and accounts payable codings the general ledger code is automatically determined by the system. The operator is not made aware at the time of transaction processing what general ledger account code the posting is to.


Interface Entries Sales Order Entry/Invoicing Inventory Sales:

DR Debtors (for branch holding debtor account) CR Sales (for branch specified at time of order entry) CR GST (defined on company GL code file) DR Cost of Sales (for branch specified for sales) CR Stock (for supply branch specified at time of order entry)

Procure Sales:

DR Debtors } CR Sales } CR GST } as per inventory sales DR Cost of sales } CR Unpaid procure receipts (defined on company GL code file)

General Ledger Codes:

DR Debtors (for branch holding the debtor account) CR GL Code (for branch nominated at GL code input) CR GST (defined on company GL code file)

Miscellaneous Products:

DR Debtors } CR Sales } as per inventory sales CR GST } DR Cost of Sales CR GL recovery account (for supply branch - specified at the time of order entry)

Surcharges:

DR Debtors (for branch holding the debtors account) CR Surcharge (for sales branch specified at the time of order entry)

Sales Credit Notes: The reverse of invoice entries.


General Ledger Account Source Debtors Defined on branch general ledger code file Stock Defined on branch general ledger code file Sales Defined on the product analysis level file with default

from the branch general ledger code file Cost of Sales Defined on the product analysis level file with default

from the branch general ledger code file. GST Defined on company general ledger code file Unpaid Purchase Order receipts Defined on company general ledger code file Unpaid Procure receipts Defined on company general ledger code file GL Recovery Code Defined on miscellaneous product file Surcharges Defined on the surcharge code file with default from

the branch general ledger code file


Service Management Revenue Service Contracts Service Contract Billing:

DR Debtors (for branch holding debtors account) CR Contract revenue suspense (for branch specified on the contract) CR GST (defined on company GL code file)

Service Contract Revenue Release:

DR Contract revenue suspense (for branch specified on the contract) CR Sales (for branch specified on the contract)

Service Calls: Call cost recording

DR Service jobs progress (for branch specified at call entry CR Inventory (supply branch specified at call cost recording) CR GL recovery code (supply branch specified at call cost recording) CR Unpaid purchase order receipts (defined on company GL Code file)

Service Call Close (invoicing):

DR Debtors (for branch holding debtors account) CR Sales (for branch specified as the call branch) CR GST (defined on company GL Code file) DR Cost of sales (for branch specified as the call branch) CR Service calls in progress (for branch specified at call entry)


General Ledger Account Source Debtors Defined on branch GL code file Contract Revenue Suspense Defined on branch GL code file GST Defined on company GL code file Sales (contract revenue) defined on the product analysis keys attached to the contract

line or the default sales code in the branch GL code file Service Jobs in Progress Defined on the branch general ledger code file Inventory Defined on the branch GL code file GL Recovery Code Defined on the miscellaneous product file Unpaid Purchase Order Receipts

Defined on the company GL code file

Debtors Defined on the branch GL code file Sales - (Service call charging)

Defined on the product analysis keys that are specified for the service call or the default sales code in the branch GL code file

Cost of Sales Defined on the product analysis keys that are specified for

the service call or the default sales code in the branch G/L code file.


Accounts Receivable Linking customers together:

DR Debtors (for debtor branch receiving the debtor transactions) CR Debtors (for debtor branch transferring the transactions)

Note: This applies for both the debtors account and the instalment debtors’ account AR Cash Receipts:

DR Bank the account specified on the bank file referenced CR Debtors for branch holding the debtors account

Transfer "on Account" Cash: • If debtors are the same branch - no entry • If debtors are held by different branches

DR Debtors (for branch transferring cash) CR Debtors (for branch receiving cash)

AR Journals:

DR/CR Debtors (for branch holding the debtor account) DR/CR GL code (as nominated)

Transfer to instalment debtors:

DR Instalment debtors (for branch holding debt) CR Debtors (for branch holding debt)

Release from instalment debtors:

DR Debtors (for branch holding debt) CR Instalment debtors (for branch holding debt)

General Ledger Account Source Debtors Defined on the branch general ledger code file Bank Defined on the bank file Instalment Debtors Defined on the branch general ledger code file Inventory Receipt


Purchase Order Receipt

DR Inventory (for receiving branch) CR Unpaid purchase order receipts (defined on company GL code file)

Note: The valuation of the receipt is as per the purchase order cost or the receipt cost as

specified in the receipt cost maintenance process (receipt cost maintenance must be done if the purchase order is held in foreign currency).

Average cost adjustment entries are also done if stock is held in another branch and

the average cost is changed as a result of the receipt. A negative cost adjustment is done if negative stock is held in a branch and the

stock is reaveraged as a result of the receipt. This account is specified in the branch general ledger code file.

Miscellaneous Purchase Order Receipt:

DR GL code (defined on misc part or purchase order) CR Unpaid purchase order receipts (defined on company general ledger code file)

Shipment Receipt:

DR Inventory (for receiving branch) CR Overseas creditors (defined on company general ledger code file) CR Shipment cost type general ledger codes (company defined in shipment cost type

maintenance) Note: The valuation of the receipt is the unit cost on the shipment file. This is derived

from:

• The supplier unit costs • Supplier on costs • The shipment file exchange rate(s) • Additional shipment costs

Average cost adjustment entries are also done if stock is held in another branch and the average cost is changed as a result of the receipt. A negative cost adjustment entry is done if negative stock is held in a branch and the stock is re-averaged as a result of the receipt. This account is specified in the branch general ledger code file.


General Ledger Account Source Inventory Defined on the branch general ledger code file Unpaid Purchase Order receipts Defined on the company general ledger code file Overseas Creditors Defined on the company general ledger code file Shipment Cost types Defined in the shipment cost type accounts


Inventory Average Cost Change:

DR/CR Stock (for branches holding stock) DR/CR Average cost change (defined on the company general ledger

code file) Adjustments:

DR/CR Stock (for branch defined for the adjustment) DR/CR Stock adjustment account (for branch defined for the adjustment)

Transfers:

DR Stock (for receiving branch) CR Stock (for sending branch)

(The entry occurs from the "in-transit receipt" process). General Ledger Account Source Inventory Defined on the branch general ledger code file Average Cost Defined on the company general ledger code file Stock Adjustment Defined on the stock adjustment code file with the default code

being held on the branch general ledger code file. Location Types and Categories The default inventory accounts of “stock on hand”, “stock intransit” and “stock on loan” are defined in the Branch General Ledger Interface definition process ( DD.GLBRCTLMAINT ). More specific inventory accounts can be defined at a location category / location type level if a more detailed analysis of inventory is required in the general ledger and locations ( branches ) have been setup at this level i.e.:

Categories of stock could be setup for finished goods and spares. Types of stock could be setup for good stock, repairable stock and scrap stock Accounts (on hand, intransit and on loan) could then be defined for valid category / type combinations i.e.: On hand intransit on loan Finished goods / good stock 1501 1511 1521 Finished goods / repairable stock 1502 1512 1522 Finished goods / scrap stock 1503 1513 1523


Spare parts / good stock 1504 1514 1524

( note : it is chosen that there are not valid category / types for spare parts / repairable or spare parts / scrap.)

Branches should then be categorised by stock category and stock type i.e.: Branch 100 = Sydney Finished goods / good stock Branch 101 = Sydney Finished goods / repairable stock Branch 102 = Sydney Finished goods / scrap stock Branch 103 = Sydney Spare parts / good stock Branch 110 = Brisbane Finished goods / good stock Branch 111 = Brisbane Finished goods / repairable stock

Stock for each of the location categories and types would then be held in different accounts in the general ledger making it possible, in the example given, to see within the general ledger the value of finished goods / good stock, the finished goods / repairable stock, or the spare parts stock etc.rather than just the total stock value Set up requirements Set up location inventory categories ( DD.BICMAINT ). Categories are simply a code and a description i.e.:

1 = finished goods 2 = spare parts

Set up location inventory types (DD.BITMAINT ). Types are simply a code and a description i.e.:

1 = good stock 2 = repairable stock 3 = scrap stock

Define inventory accounts for each valid combination ( DD.BRINVGLMAINT ) i.e :

On hand intransit on loan Finished goods / good stock 1501 1511 1521 Finished goods / repairable stock 1502 1512 1522 Finished goods / scrap stock 1503 1513 1523 Spare parts / good stock 1504 1514 1524 ( note : it is chosen that there are not valid category / types for spare parts / repairable or spare parts / scrap.)

Categorise each branch by inventory category and type ( DD.BRANCHMAINT ) i.e.:


Branch 100 = inventory category 1 ( finished goods ) inventory type 1 (good stock )

Set the program parameter in DD.GLUPDATE to check the inventory account file for the inventory postings to the general ledger. ( This program parameter is used in DD.GLDWRITE and DD.GLTWRITE to convert posting entries from the default posting accounts to the more specific accounts ) Inventory Expense Account An inventory expense account can be defined on the branch file ( DD.BRANCHMAINT ) to direct posting entries for inventory write offs that are done if stock is receipted into the branch from the intransit receipt process. Definition of an account on the branch file automatically triggers a write off ( stock adjustment ) from the intransit receipt process. The stock is receipted in and then adjusted out The stock transaction enquiry shows both transactions.


Inventory costing basis (standard or average) Inventory valuations and the financial entries for stock movements can be based on either a “ national average” cost or a “standard” cost. A company parameter determines the method that is to be used by the system i.e. DD.COPARAMAINT Use standard costing instead of average - Y/N The main difference between the two methods is in the stock receipting processes and to a lesser extent in the unit cost change processes. National average costing creates no gain or loss when stock is receipted at a different value to stock already held. All stock is simply revalued to reflect a new national average. If the standard cost method is used any variance between the receipt cost and the standard cost (the current inventory value) is written off to a purchase price variance account at the time of the stock receipt. The standard cost purchase price variance account is defined in the company general ledger control file. Attribute 11 on the product file is used to hold the cost of the product irrespective of the inventory valuation method used. A standard cost for use in the manufacturing module can also be defined for each product. General ledger entries created when standard costing is used as the method of inventory valuation are: Purchase order receipting DD.PORECEIVE

debit Stock (at the standard cost)

credit Unpaid purchase order receipts (at the receipt value)

debit/credit Standard cost purchase price variance

Shipment receipting DD.SHIPRECEIVE


credit Shipment creditors(at the vendor cost value)

credit Shipment cost suspense accounts (at the shipment values)


Costed quantity adjustment DD.STOCKADJD


credit Stock gain or loss (at the nominated value)



Job to stock DD.JOBTOSTOCK

debit Stock(at the standard cost)

credit Stock (at the standard cost)

credit Miscellaneous change recovery a/c

credit Unpaid procures


Indent invoicing DD.INDENTINV (for indent stock transferred to stock)

debit Stock ( at the standard cost)

credit Indent stock (at the indent stock value)


Fixed assets to stock DD.FATOSTOCK

debit Stock(at the standard cost)

debit Provision for depreciation

credit Fixed asset cost


Unit cost changes DD.AVGCOSTCHANGE/DD.AVGCOSTCHANGED

debit/credit Stock

debit/credit Unit cost change


Accounts Payable Voucher Entry Expense invoices:

DR GL code (nominated at entry) CR Accounts payable (defined on company general ledger code file)

Invoices Paying Purchase Order Receipts:

DR Unpaid purchase order receipts (defined on company general ledger code file) CR Accounts payable (defined on company general ledger code file)

Invoices Paying Shipments Receipts:

DR Overseas creditors (nominated at entry) DR Shipment cost type accounts (nominated at entry) CR Accounts payable (defined on company general ledger code file)

Note: If voucher entry is done for a pre-drawn manual cheque the credit entry goes to the

general ledger account on the bank file referenced rather than to accounts payable. Cheque Processing:

DR Accounts payable (defined on company general ledger code file) CR Bank (account specified on bank master file)


Balancing the General Ledger Control Accounts with the

Subsidiary Ledgers The system contains a number of subsidiary files that should be balanced regularly with the control account held for the file in the general ledger. For example trade debtors and inventory. Whenever a subsidiary file gets updated during transaction processing (ie raising of invoices) the relevant general ledger control account has an equivalent value posted to it. This therefore means that a valuation of each subsidiary file should show the same value that is held in the corresponding general ledger control account. It is possible, however, for the subsidiary files to get out of balance with the general ledger control accounts. This can be caused by a system malfunction, software errors or postings made to the general ledger control accounts in error. As it is important that the subsidiary files balance to the general ledger control accounts, it is important that any imbalances are picked up and rectified as soon as is possible. It is also important that the reason for the imbalance is determined and the appropriate action taken. The subsidiary files that should be balanced to the general ledger control accounts can be categorised into two areas: • files held at a company level • files held at a branch level The files that are held at a company level are where there is no necessity to split the transactions by location and where control is not required by location. The files that are held at a branch level are in areas that require control and management by location. If held at this level it is important that the control accounts are balanced by location to the subsidiary file as it is possible that compensating errors may occur between locations. The subsidiary files are balanced to the general ledger control accounts by comparing the balance held in the general ledger against a subsidiary file valuation report. It is important to compare the general ledger account balances with the subsidiary file balances at the same point in time. To do this the general ledger must be updated for all the posting entries before the comparison is made with the subsidiary files. Note: The subsidiary files are updated real time but the general ledger is only updated

when the G/L update process is run. The comparison must be made after the G/L update and before further entries are posted to the subsidiary files.


The best time therefore, to do the comparison is during a period of no activity on the system. This would normally be during the end of day process. The end of day process should therefore include: • The general ledger update processes • The subsidiary file valuation reports To assist in the reconciliation a listing of the general ledger account balances should also be run in the end of day process. This saves looking each one up individually using the general ledger enquiry process. The locked account report can be used for this purpose. This report simply lists the general ledger account balances. The required accounts - i.e. debtors, inventory, etc - must be in the locked accounts file in order to be listed on the report. The accounts are put in this file in the process general ledger account lock maintenance (DD.GLLOCKMAINT). Note: The general ledger account lock facility is primarily used to prohibit entry to the

various control accounts without reference to the subsidiary files. If the subsidiary file is found to be out of balance with the general ledger control account the transactions in both files must be compared to determine the reason for the imbalance. The detail in the general ledger can be obtained by looking at the general ledger enquiry screen and the general ledger detail transaction reports if the entry to the general ledger came from a detail update (DD.GLENQ and DD.GLDETAILLIST). The detail in the subsidiary files is a bit more complex. In some instances the report that is being compared with the general ledger contains enough detail for the comparison with the general ledger (unpaid purchase order receipts list) whilst in others it is necessary to run a subsidiary file transaction report. The main two subsidiary file transaction reports are: Stock transaction list DD.STTRANSLIST Accounts receivable transaction list DD.ARTRANSLIST These reports list, by transaction type, all transactions that have been posted to the subsidiary file for a specified period. When comparing these reports with the general ledger control accounts and reports it is often possible to match the transactions in total by type. This saves time when comparing the reports. When a transaction type total does not match, the individual transactions must be matched to determine the imbalance. The aim is to find a transaction that has been posted to the subsidiary file and not the general ledger or vice versa. When this is achieved the reason for the imbalance should be able to be determined and the appropriate action taken.


The action to fix an imbalance is very difficult to document. Often, however, it is fairly obvious what action is necessary. The action may be a simple one-entry fix or may involve a series of steps to be taken. It should be thought out carefully first to ensure that what is done puts the files in balance and does not adversely affect any other parts of the system. In addition, if the imbalance has caused other system problems, the fix must also correct these. One problem that can occur is where the general ledger has not been updated properly - ie the general ledger posting for the subsidiary file transaction has not been done. To fix this a normal general journal should be done (after removing the general ledger account from the locked account file). The journal should be done for all the posting entries not done. These could be for sales, debtors, cost of sales, inventory, tax, freight, etc. An understanding of the entries that should be created by the transaction in question is therefore necessary for the journal to be done. Care should be taken to replace the locked account flags after doing the appropriate journal. It is also possible that only one leg of the posting is missing. This will also cause an imbalance in the general ledger (the daily update report should always balance to zero). If this should happen a one-legged journal should be done (DD.ONELEG). This process should be used with care and only to fix system problems. If used a transaction will be posted to the general ledger along with the appropriate references. Care should be taken to ensure the correct currency ledger is updated. It should be recognised that it is also possible to have an imbalance between the files with no missing transactions. These can be caused by balances not being held correctly - ie accounts receivable account balances. To fix these the system utilities should be used and the files rebuilt.


PROCESSING Due to the integration with the other system modules most of the general ledger transactions are generated automatically from the processing done within the operational modules. The exceptions to this are: • General journal processing • Miscellaneous cash receipts

Journal Entries General journals can cover a variety of journal types. These are: • Normal journals • Reversing journals • Standing journals • Standard journals The general journal screen (DD.GLJNLENTRY) is used to process normal journals and reversing journals. Detail for the journal can either be from the standard journal file or specified at the time of input. During the processing of the journal the operator is prompted for the journal type. This signifies if the journal is a (N)ormal journal or a (R)eversing journal. If the journal is a normal journal it will be posted to the period specified. If the journal is to be a reversing journal the period that the reversal is to occur in is also specified. This will default to the next period but may be overridden to represent any future period. The reversing journal is created and posted at the update command. The operator is also prompt for a standard journal reference. The standard journal file is a file of journal templates. These can be recalled from within the journal entry process to save the operator keying in the posting account detail and the posting amounts. If necessary the detail can be maintained for the journal being processed. Note: any maintenance done at this point does not update the standard journal file. Standard journal templates should be established using the standard journal maintenance process (DD.STDJNLMAINT). Creation of this file does not create entries into the general ledger. Journals must balance before the journal update option is provided to the user. On update the journal is given a journal reference and held on file awaiting a general ledger update.


Standing journals are in effect general journals posted to a number of periods. The input process (DD.GLSTENTRY) allows for multiple periods to be specified at the time the entry is being processed. A journal is created and posted in the appropriate period to the general ledger in the next general ledger update. Journal audit reports should be run and retained for audit purposes. The report lists the journals posted and then clears the journal file. This report (DD.GJAUDIT) is normally included as an end of day job but can be run separately. A program parameter in DD.GLJNLENTRY allows shipment numbers to be mandatory (or optional) for shipment cost accounts.

Miscellaneous Cash Receipts The miscellaneous cash receipts process (DD.MISCASHREC) allows cash received that does not relate to trade debtors, to be banked and posted to the general ledger. The miscellaneous cash receipts entry process first requires specification of the bank account and the cheque detail (bank, branch, and account). This provides the detail necessary for the bank deposit schedule. The general ledger coding is then specified to complete the double entry. Note: By specifying the bank account and the amount, the debit entry to the bank account

is automatically created). As each cheque is entered a journal reference is given to the user. This prints on the general journal audit trail. As the screen is exit, a bank deposit schedule is automatically printed. This is posted to the bank file for reconciliation purposes. Miscellaneous cash receipts and accounts receivable cash receipts cannot be included on the same deposit schedule.


Branch recharges The branch recharge facility allows a branch to charge another branch for costs incurred on their behalf i.e. for freight costs incurred. Recharge codes define recharge items (DD.RECHARGEMAINT). Each code is given a General Ledger recovery account and a General Ledger charge account to direct the General Ledger entries to the General Ledger when recharges are done. The recharge process DD.RECHARGE allows the recharges required to be entered. Details entered include the branches, who the recharge is to the attention of, the recharge code, quantity, price and comments. A financial journal is done to generate the entries to the general ledger. Each recharge is given a reference number for docket reprint purposes. A recharge docket is printed for each recharge (the print format must be defined in the control file DD.RECHARGEPRINT). Recharge dockets can be reprinted using the reprint process DD.RECHARGEREPRINT. The recharge purge process DD.RECHARGEPURGE purges the file DD.BRANCHRECHARGE.


GENERAL LEDGER UPDATES As general ledger transactions are generated by the processing modules of order entry, purchasing, accounts receivable, etc they are held in a file awaiting update to the general ledger. Two processes must be run to post the transactions to the general ledger:

General ledger detail update DD.GLDETAILUPDATE General ledger update DD.GLUPDATE

The detail update process consolidates many of the transactions generated in the processing modules. These are consolidated by posting account. This limits the number of entries actually held in the general ledger. Transactions that are consolidated include detail from sales invoices and stock transactions e.g.:

a sales invoice would normally include posting detail for: • Trade debtors • Tax • Sales • Cost of sales • Inventory

In addition posting detail could be held for creditors, freight (G/L codes), surcharges and miscellaneous codes. For each general ledger code the posting detail is consolidated for the postings to the general ledger. The general ledger update process posts the consolidated entry, and the transactions that are to be posted direct, into the general ledger. This creates an interface journal that is printed for audit purposes. It is important that the journal entry or audit report that is printed balances to zero (double entry accounting) and is kept for audit trail purposes. Transactions that are posted individually to the general ledger include general journals and accounts payable entries (accounts payable entries can be consolidated through the use of the program parameters if required). A breakdown of the consolidated entry that is posted to the general ledger can be obtained using the detail transaction listing (DD.GLDETAILLIST facility). This report can be run by branch, by account over a specified date range. The report lists the detail of the entry showing source, reference, amount and a description of the transaction.


The general ledger update processes can be run as often as required and is normally included within the EOD tasks to ensure it is done on a regular basis. If not done daily the consolidated entry is still posted on a daily basis based on the transaction date. General Ledger Updates in Foreign Currencies The general ledger update process allows both a native currency CA file (DD.CA) to be updated and a currency CA file (DD.CACURR) to be updated. This is dependent on the program parameter settings in DD.GLDEFINE:

• update foreign currency chart of accounts • update local chart of account (default)

It is essential that at least one chart of accounts file is updated in order that the posting entries are recorded. The base CA file holds the accounts as per the account definition eg. branch/account The currency CA file hold the currency on the account as well eg. branch/account/currency. If updates are made to the foreign currency chart of accounts entries are posted in the appropriate currency for each transaction for example, for a system operating in Australian dollars, if an invoice was raised in USA dollars for $100 from sales/supply branch 10 and cost $60 Australian, entries would be: debit 10 1401 USD Trade debtors 100 credit 10 3700 USD Sales 100 debit 10 4700 AUD Cost of sales 60 credit 10 1501 AUD Inventory 60 If the update was also made to the local currency chart of accounts entries would also be processed for: debit 10 1401 Trade debtors 125 credit 10 3700 Sales 125 debit 10 4700 Cost of sales 60 credit 10 1501 Inventory 60 This example assumes can exchange rate was held on file of 0.80 for USD. If only local currency processing is being done by the organisation it is normal not to process transactions to the foreign currency chart of accounts. This avoids the duplication of all the records (all held as AUD records as well as base file records). If transactions are being processed in foreign currency (ie. sales orders, accounts payable transactions) then it is usual to process the transactions to both ledgers. Balancing the control accounts ie. debtors, can then be done more readily.


REPORTING Financial Reports Percentage of Sales Reporting The report line that the percentages of sales is calculated on is defined when setting up the report layouts. This is done by taking the option "S" (sales line for percentage calculation) when detailing the report line i.e. putting the line on the report. The report line can be either a data line or a total line. The line is highlighted on the financial report layout lists as the percentage calculation line by a "%" at the end of the description of the line.

Base Reporting The base general ledger reports cover master file reports, processing reports and base financial reports. These can all be run as required. Master File Reports The master file reports include: General ledger account master list DD.GLACCOUNTLIST General ledger account list by report line DD.GLALIST Base financial report layouts DD.GLFINLIST Standard journal lists DD.STDJNLLIST Chart of accounts audit lists DD.CALISTING The account master list provides a listing of the general ledger accounts and their description. This list should be used by the operators for reference purposes when coding accounts payable vouchers, journals etc. The list should also be run to check that each account has a valid financial report line held against it. The general ledger account by report line list provides a listing of which accounts are included on each line of the base financial reports. It should be run during the set up process to ensure each financial report line includes only the accounts relevant to it. The base financial report layout report should be run to check the layout established for the base profit and loss report and the base balance sheet report. This report should be run to check the set up of the financial reports with particular reference to the addition of the report lines. The standard journal list displays the templates that are set up in the standard journal maintenance process. Full journal detail is provided including account, value and journal description. The chart of accounts audit list should be used in conjunction with the chart of accounts addition and chart of accounts deletion processes. It provides a record of all valid chart of accounts records.


The chart of accounts audit report is only required if the chart of accounts validation process is being used. This is driven through a program parameter in the program DD.GLCODENTRY. (For further information see chart of accounts validation). Processing Reports Processing reports cover detail lists of data posted to the general ledger. These reports vary from audit listings to transaction listings for reference purposes. Journal audit DD.GLAUDIT Journal history list DD.GLJNLLIST Detail transaction list DD.GLDETAILLIST Trial balance DD.GLTB Trial balance by branch DDBRGLTB Detail general ledger listing by branch DD.GLCALIST1 Detail general ledger listing by account DD.GLCALIST2 The journal audit report and the journal history report are the audit trails of the general journals posted to the general ledger. These reports should be kept for system audit purposes. It is important that the journal sequence is intact. The detail transaction list is the breakdown of the "detail updates" posted to the general ledger. “Detail updates” are the general ledger interface journals. The detail transaction list can be run for nominated branches and accounts for a nominated date range. The general ledger trial balance reports provide a summary of the general ledger at a nominated time. Only balances held in each account are displayed. The report should total to zero. If run in batch mode the current A/R period is used instead of nominating a from and to period. The detail general ledger listings provide a breakdown of each general ledger account for a nominated period. The report must equal zero if all branches are included. This report should be used to reconcile accounts and to provide the breakdown of values held in the general ledger and financial accounts. The report can be run in a branch sequence or in sequence of the general ledger accounts. For reconciliation purposes and as an accountants work tool it is best run in sequence of general ledger account. Base Financial Reports The base financial reports are: Profit and loss DD.GLPLPRINT Balance sheet DD.GLBSPRINT Financial report detail list DD.CALIST These reports can be run as required to show the financial position of the organisation. It is important however, that the profit and loss report is not run when the balance sheet is being run and that balance sheet options are not run simultaneously.


The report layouts are as defined in the financial report layout maintenance facility. The data that is included in the reports is defined when the reports are being run (budget figures, prior year figures, sales %) including the period the reports are for. Both month data and YTD data are displayed for the options selected. The financial report detail list provides a breakdown of the data included on a report line. This breakdown covers which accounts are included on the report line and the balances held in each account. The base financial reports can be put into a process to automatically run various options of the reports. This saves re-keying the report parameters each time the set of financial reports are required. These processes are: Auto profit and loss DD.GLPLAUTOMAINT Auto balance sheet DD.GLBSAUTOMAINT The processes are used to both maintain the report options that are required and to run the reports. These options are provided each time the programs are selected.

User Defined Financial Reporting The user defined financial reporting options provide the means to set up different formats of the profit and loss and balance sheet reports and to run them when required. The maintenance facilities cover: • Setting up the report code and name • Defining the layout of each report • Defining the composition for each layout As the maintenance facilities are being used, the maintenance reporting options should be used to ensure that the reports established are correct. These cover: • Report definition audit • Report layout lists Reports can then be run as required using the options: • Print profit and loss • Print balance sheet In addition, budget reports can be printed in the user-defined formats showing the monthly budgets established.


The user defined reporting facilities have two options: 1. Where the composition of the reports is defined using the full chart of accounts code. 2. Where the composition of the reports is defined using just the general ledger account

code. The option where just the general ledger account code is defined on the report line is the easier of the two options to use. However, it does not have the flexibility of the option where each chart of accounts record is specified on the report lines. For each option the report name and its layout must be defined. Setting up the report layout for one option does not mean it is a valid layout for the other option. The facility to set up the report codes and names allows up to 99 report identities to be established for each option. The layout facilities are the same as the layout maintenance facilities for the base financial reports. Care should be taken to ensure the reports are presented correctly and that they are mathematically correct. The report layout lists should be used to ensure the report layouts are correct. The report definition facilities vary only in that the specification of the line composition is either the full chart of accounts code or just the general ledger account code. If the full chart of accounts code is entered a great deal of specification is required but the flexibility is provided in that accounts from different cost centres can be added into one financial report line e.g.: A report format could be structured to show expenses under cost categories rather than by location: • Sales • Cost of sales • Gross profit • Fixed expenses • Semi variable expenses • Variable expenses • Total expenses • Nett profit In both processes accounts can be added or deleted from the report lines.


The report definition audits should be run to ensure that all accounts have been linked or linked only once. Note: It is important to link new accounts raised and to continually review the report

definition audits if the integrity of the report is to be kept. If the reports do not balance it is usually because new accounts have not been added to the report.

The printing of the user-defined reports is done in a similar manner to the printing of the base financial reports. The data that is to be included in the report is specified. This covers the period the report is for and comparative data (budgets and prior year figures) required. Reports include both period detail and YTD detail. Both user defined report options can be put in automatic run processes. These processes are similar to the automatic run processes under base financial reports.

User Defined General Ledger Lists The user defined general ledger list facility allows a simple form of financial reporting. Each list required is given a name and its composition. The lists can then be printed as required. The composition of the lists is simply which general ledger accounts are to be included on the list. As the lists are printed the data that is to be included is specified including which period the data is for and the comparative figures required. No audit reports on the composition of the lists is provided except for the list enquiry facility which details which accounts are included on the report. The lists should be used to detail specific expense categories i.e.:

A personnel cost list might include: Salaries and wages Superannuation Medical insurance costs Staff telephone costs Canteen costs


CONSOLIDATE SYSTEM ACCOUNTS System accounts can be consolidated using a data account reserved for the consolidation i.e.:

System accounts TRADING CO – 1 TRADING CO – 2 TRADING CO – 3 CONSOL ACCOUNT

Trading companies 1, 2 and 3 can be consolidated into the CONSOL ACCOUNT. The process to consolidate the system accounts DD.GLCACON must be run in the consolidation account. The accounts to be consolidated must be defined in the program parameters (DD.GLCACON) of the consolidation account. The accounts to be consolidated can be in different currencies. The exchange rates held for the currencies in the CONSOL account are used to convert the CA records into the currency of the CONSOL account. Set up Requirements The CONSOL account must be set up as a data account with the relevant files. Master files must be established for: -

Company DD.COMAINT Company parameters DD.COPARAMAINT General ledger code definition DD.GLDEFNMAINT Branch DD.BRANCHMAINT Departments DD.GLDEPTMAINT General ledger account DD.GLACCTMAINT General ledger suffix DD.GLSUFMAINT Currencies DD.CURRENCYMAINT Exchange rates DD.EXRATEMAINT Multiple period definition DD.GLPDEF Financial reports/layouts as required


It is important that the detail parallels the detail in the accounts to be consolidated i.e.:

GL code structure G/L accounts Branches etc.


BANK RECONCILIATION The bank reconciliation facility allows the balances held in the general ledger bank accounts to be reconciled with the balances held on the bank statements. The bank reconciliation files should contain the items that make up the difference between the two balances. For the bank reconciliation files to contain only the items that make up the differences between the two balances, each item that appears on the bank statement must be matched with the corresponding item on the bank file, thereby eliminating it from the bank file. This will then leave on the bank file only those items that have not appeared on the bank statement. The matching of the items on the bank file with the entries on the bank statements is the critical element and must be done with 100% accuracy if the bank file is to represent the difference between the general ledger balance and the bank statement balance.

Set Up Multiple bank files can be established on the system (DD.BANKMAINT). Each bank file is given a reference code and its description. It is also given a general ledger account code. A bank file should be set up for each bank account held. Each file should be represented in the general ledger by a unique general ledger code. The bank files are referenced and posting entries generated in the processes: • Accounts receivable cash receipts • Miscellaneous cash receipts • Accounts payable cheque print • Accounts payable entry - manual cheque entry • Bank adjustments These entries are matched with entries on the bank statements in the bank reconciliation processes. The general ledger account codes given to each bank file will receive all posting entries. The balance held on the accounts will represent the cash book balance at all times. It is very important that each bank file is given a unique general ledger code. Note: The general ledger code defined on the bank files is the full chart of accounts code.


Reconciliation Procedure Two processes are available to match items on the bank files with the entries on the bank statements. Bank statement entry DD.BANKRECENTRY Bank statement entry by line DD.BANKSTATENTRY As bank statements are received the transactions should be matched with transactions held in the bank files. This should be done on a regular basis to ensure that the bank file only contains transactions that have not appeared on a bank statement. If the matching process is left, the bank file will not represent just outstanding transactions and will also become unmanageable. The two bank statement processes achieve the same result but in different ways. The bank statement entry process displays all items held on the bank file and allows the bank statement amounts to be entered along side the transactions. The amount entered can vary from the bank file amount. It is important that the bank statement amount is entered and differences left as outstanding. The bank statement entry by line process requires each bank statement line to be keyed as a transaction. This involves keying the transaction type, the reference (deposit schedule number or cheque number) and the statement amount. The bank file amount is displayed for reference purposes. The amount is automatically matched to the bank file transaction. On exit from the bank statement entry by line process a bank statement entry audit report is produced. This should be balanced to the bank statement to ensure all items have been keyed correctly. Note: To ensure the bank statement has been entered correctly the total of the audit report

should represent the difference between the opening balance and the closing balance on the bank statement entered.

After all transactions on the bank statements have been entered and matched against the bank file transactions, the reconciliation reports can be run and the bank reconciliation done. The reconciliation reports will provide the detail on the difference between the general ledger balance and the balance on the bank statement. The reconciliation reports are run from the bank enquiry process (DD.BANKRECLIST). All outstanding transactions can be put on one report or separate reports can be run for outstanding deposits, outstanding cheques and outstanding adjustments.


The bank reconciliation should incorporate the reconciliation lists.

IN FUNDS OVERDRAWN Balance as per bank statement Cheques not presented - + Deposits not lodged + -

__________ __________ Balance as per General Ledger ========== ==========

Bank File Adjustments It may be necessary from time to time to do adjustments to the bank file. These arise from amounts appearing on the bank statements that have not been processed to the general ledger. These will normally represent miscellaneous charges like bank fees, interest etc. Processing a bank adjustment will update both the bank file and the general ledger. The transaction will appear as a separate entry on the bank file and must ultimately be matched with an entry entered through the bank statement entry processes. Bank adjustments take the form of a journal entry. Each adjustment is given a reference number that is also the general journal reference number. It is important not to process vendor payments, customer deposits etc via bank adjustments. These should be processed using the appropriate process in order that the subsidiary file updates are done correctly and the history records updated.


Documents

GENERAL LEDGER/BANK RECONCILIATION - Citadel · PDF fileCITADEL BUSINESS SYSTEMS DOCUMENTATION GENERAL LEDGER/BANK RECONCILIATION OVERVIEW ... 26/03/2004 General Ledger