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Debit & Credit Entries Created When Posting

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Overview

The purpose of this knowledge article is to outline the debits and credits made to the general ledger transactions table in Accounting Seed when source transactions are posted. Please note that many accountants will refer to entries made in the transactions table as "Journal Entries." At Accounting Seed, we prefer to use the term "general ledger transactions" in reference to recording debits and credits since the Journal Entry and Journal Entry Lines are sources of general ledger transactions. Below is a list of the possible debits and credits that can be made in Accounting Seed by their source object.

Records can be manually posted, or automatically posted if the Auto-Post setting is enabled in Post Settings. If  the daily Scheduled Post job has been created in Automated Jobs, all records that have a posting status of “Approved” will automatically posted based upon the Next Run Date and selected Preferred Start Time.

Billing Line

Important: The Billing Line information below is only applicable if Billing Line Level Posting (LLP) is enabled. If Billing Header Level Posting (HLP) is enabled, refer to the Billing Header Level Posting article.

The user creates a Billing in Accounting Seed and assigns the Revenue GL Account, for example, "4000-Revenue," on the Billing Line and posts the Billing. The AR Control GL Account is set in Account Settings. The following debits and credits will be inserted into the transactions table for each Billing Line.

Debit/(Credit) Amount Source Example GL Account
Debit $5,000 AR Control GL Account set in Account Settings 1200-Accounts Receivable
(Credit) ($5,000) Revenue GL Account set on Billing Line 4000-Revenue

Note: With the Hibiscus Fall 2019 release, the Cost of Goods Sold / Inventory GL transactions associated with a Billing are recorded on the Sale Order Inventory Movement for all customers using Accounting Seed’s Weighted-Average Cost Inventory feature (see below).
 
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Cash Receipt

A user receives $5,000 and posts a Cash Receipt. The following debits and credits will be inserted into the transactions table upon posting the record:
 
Debit/(Credit) Amount Source Example GL Account
Debit $5,000 Default cash account set in Default GL Accounts 1000-Cash
(Credit) ($5,000) Unapplied AR GL Account set in Default GL Accounts   1205-Unapplied A/R

Billing Cash Receipt (Cash Application to Billing)
A user applies a $5,000 Cash Receipt to an open Billing. Upon saving the application, the following debit and credit are inserted into the transactions table:
 
Debit/(Credit) Amount Source Example GL Account
Debit $5,000 Unapplied AR GL Account set in Default GL Accounts 1205-Unapplied A/R
(Credit) ($5,000) AR Control GL Account set in Default GL Accounts 1200-Accounts Receivable

Payable Line

Important: The Payable Line information below is only applicable if Payable Line Level Posting (LLP) is enabled. If Payable Header Level Posting (HLP) is enabled, refer to the Payable Header Level Posting article.

Non-Purchase Order Payable Lines: Payables for services and expenses not associated with Product related Purchase Orders, should use the appropriate 6000 Expense GL Account on each Payable Line. The AP Control GL Account that was set in Default GL Accounts, for example, 2000-Accounts Payable, is credited. In the following example, an invoice for $5,000 in marketing costs was received. For the Payable, the following debits and credits will be inserted into the transactions table for each Payable Line:

Debit/(Credit) Amount Source Example GL Account
Debit $5,000 Expense GL Account on the Payable Line 6000-Marketing Expense
(Credit) ($5,000) AP Control GL Account set in Default GL Accounts 2000-Accounts Payable

Purchase Order Payable Lines

Purchase Orders are typically associated with Inventoried Products. There are two (2) steps in processing these Purchase Orders: 

  1. The Receive Purchase Order process that creates the Purchase Order Inventory Movement; and 
  2. The Payable that records the liability to the vendor for monies owed. It is important to note that when a Payable is created for an inventoried product, the debit portion of the GL transaction will always be to Vouchers Payable (irrespective of what GL account is entered on the Expense GL Account field of the Payable Line).  The Vouchers Payable account serves as a temporary suspense account that is offset by the Purchase Order Receive process. Please note: It is a best practice that the Receive Purchase Order be completed prior to the creation of the Payable. See the Purchase Order Inventory Movement section below for details.  

In the example below, an invoice is received for a $5,000 product purchased on a Purchase Order. The product was previously received and recorded to inventory via the Receive Purchase Order process (see Purchase Order Inventory Movement below). The Payable will insert the following debits and credits into the transactions table for each Payable Line:  

Debit/(Credit) Amount Source Example GL Account
Debit $5,000 Vouchers Payable set in Default GL Accounts 2010-Vouchers Payable
(Credit) ($5,000) AP Control GL Account set in Default GL Accounts 2000-Accounts Payable

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Cash Disbursement

A user pays a Payable for $500. Upon posting the cash disbursement, the debit and credit are as follows:
 
Debit/(Credit) Amount Source Example GL Account
Debit $500 AP Control GL Account set in Default GL Accounts 2000-Accounts Payable
(Credit) ($500) Cash Account on Cash Disbursements  1000-Cash

Alternatively, a user creates a manual Cash Disbursement for a prepayment of $600.  Upon posting the cash disbursement, the debit and credit are as follows:

Debit/(Credit) Amount Source Example GL Account
Debit $600 Prepaid Expense GL Account set in Default GL Accounts    1400-Prepaid Expenses
(Credit) ($600) Cash Account on Cash Disbursements  1000-Cash


AP Disbursement (Cash Application to Payable)

A user applies a $600 Cash Disbursement prepayment to an open Payable. Upon saving the application, the following debit and credit are inserted into the transactions table:

Debit/(Credit) Amount Source Example GL Account
Debit $600 AP Control GL Account set in Default GL Accounts 2000-Accounts Payable
(Credit) ($600) Prepaid Expense GL Account set in Default GL Accounts 1400-Prepaid Expenses


Journal Entry Line

The Journal Entry Line is simply a way to manually adjust or update your books. Examples of this are payroll, accruals, or corrections. In the example below, a user accrues a supply expense of $500 in the current month. The debit and credit are created as follows upon posting:

Debit/(Credit) Amount Source Example GL Account
Debit $500 Journal Entry Line 5000-Supplies Expense
(Credit) ($500) Journal Entry Line 2020-Accrued Expenses


Amortization Entry

The Amortization Entry is a way to amortize or depreciate various transactions such as Billings, Payables, and Fixed Assets to multiple accounting periods. In this example a user books a scheduled depreciation expense of $500 in the current month. Upon posting the amortization entry the following debits and credits will be entered:

Debit/(Credit) Amount Source< Example GL Account
Debit $500 Amortization Entry 6000-Depreciation Expense
(Credit) ($500) Amortization Entry 1800-Accumulated Depreciation

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Time Card Day
A time card day is an entry for a single days worth of work for a particular Time Card Line. In this example, Andrew books four hours of time on Project: Alpha Consulting / Project Task: Design. Let's also assume Andrew is paid $10 an hour and is set up as an hourly employee. Upon posting the Time Card the following debit and credit will be entered into the transaction table.
 
Debit/(Credit) Amount Source Example GL Account
Debit $40 Labor GL Account on Project Task 5000-Labor Expense
(Credit) ($40) Labor Clearing GL Account in Default GL Accounts 2030-Accrued Payroll

Special Note: The value for cost in a Time Card Day will vary depending on whether the employee’s cost is set up as hourly or salary. Please see the Labor Costing section of the Knowledge Base for more information about the value entered for a Time Card Day.

Inventory Movements

Sales Order Inventory Movement

Note: With the Hibiscus Fall 2019 release, the Cost of Goods Sold / Inventory GL transactions associated with a Billing are recorded on the Sale Order Inventory Movement for all customers using Accounting Seed’s Weighted-Average Cost Inventory feature. See Inventory Valuation - Weighted-Average Cost in the Knowledge Base for more details.) 

The Sales Order Inventory Movement (“SIM”) is used to allocate available inventory to a specific sale/opportunity. Allocating the inventory reserves the available units by removing them from the inventory stock that is available-for-sale (Inventory Quantity Available object). 

In addition to capturing the inventory quantity movement, the SIM records GL transactions to Cost of Goods Sold and Inventory. The Cost of Goods Sold calculation utilizes the weighted-average cost of the inventory item at that time. The weighted-average unit cost of the Product is pulled from the Inventory Cost object which stores the weighted-average cost calculated for that product. (The weighted-average cost is calculated when new units are purchased and added to the inventory. See Inventory Valuation - Weighted-Average Cost in the Knowledge Base for more details.)

Product Sale Example: A product is sold for $5,000. The product has been set up as a Salesforce product. The weighted-average cost per unit is $2,000. When the Inventory is allocated to the Sales Order Line, the Cost of Goods Sold Expense GL Account is debited and the Inventory GL Account is credited. The following debits and credits will be inserted into the transactions table for each allocated Product with the following conditions:

  • Product Costing is enabled AND
  • The product field is populated AND
  • Inventory Type on Product is set to "Purchased" OR "Manufactured."
Debit/(Credit) Amount Source Example GL Account
Debit $2,000 Expense GL Account on Product 5000-Cost of Goods Sold
(Credit) ($2,000) Inventory GL Account on Product 1500-Inventory

Kit Sale Example: A kit product is sold for $5,000. The kit product has been set up as a Salesforce product with two product parts: part A and part B. The weighted-average cost of part A calculated is $1,000. The weighted-average cost of part B calculated is $750. When the kit product’s component parts are allocated to the Sales Order Line, the Cost of Goods Sold Expense GL Account is debited and the Inventory GL Account is credited for each of the inventory parts included in the kit. 

The Cost of Goods Sold calculation utilizes the weighted-average cost of the inventory item at that time. The weighted-average unit cost of the Product is pulled from the Inventory Cost object which stores the weighted-average cost calculated for that product. (The weighted-average cost is calculated when new units are purchased and added to the inventory. See Inventory Valuation - Weighted-Average Cost in the Knowledge Base for more details.) The kit itself does not record Cost of Goods Sold, as it is simply a grouping of specific product part items. The following debits and credits will be inserted into the transactions table for each allocated product part with the following conditions:

  • Product Costing is enabled AND
  • The product field is populated AND
  • Inventory Type on the Product is set to "Kit."
Debit/(Credit) Amount Source Example GL Account
Debit $1,000 Expense GL Account on Product Part A< 5000-Cost of Goods Sold
(Credit) ($1,000) Inventory GL Account on Product Part A 1500-Inventory
Debit $750 Expense GL Account on Product Part B 5000-Cost of Goods Sold
(Credit) ($750) nventory GL Account on Product Part B 1500-Inventory


Purchase Order Inventory Movement

A Purchase Order Inventory Movement is created by the Receive Purchase Order in the Inventory process. This process does three (3) specific actions: 
  1. The Inventory Quantity Available is incremented by the quantity on the Purchase Order. 
  2. GL transactions are generated that will Debit the Inventory GL Account that is on the Product and Credit the Vouchers Payable Account set in Default GL Accounts. 
  3. The weighted-average cost calculation is triggered to recalculate the weighted-average cost for that Product.  

In this example, 1 unit of Product A was received. The Inventory Quantity Available of Product A is incremented by 1, the GL transactions below are generated, and the weighted-average cost is recalculated.  

Debit/(Credit) Amount Source Example GL Account
Debit $10 Inventory GL Account on Product 1500-Inventory
(Credit) ($10) Vouchers Payable on Default GL Accounts 2010-Vouchers Payable

Inbound/Outbound Inventory Movements

There are two types of Inbound/Outbound Inventory Movements: Non-Accounting and Accounting. 

Type=Non-Accounting

The first type of inventory movement has no financial impact to the general ledger, the inventory account is not changing, the values are not changing, nor is ownership (it is not being purchased or sold). Instead, these are indicative of activities like warehouse or location changes, e.g. moving from warehouse A to warehouse B. These inventory movements, with a Type of Non-Accounting, only affect the Inventory Quantity Available balance and do not record any general ledger transactions. 

Note: With the Hibiscus Fall 2019 release, Inventory Movements (Type=Non-Accounting) can only be used to record warehouse transfers for all customers using Accounting Seed’s Weighted-Average Cost Inventory feature.

Type=Accounting

The second type of inventory movements do have a financial impact and require general ledger transactions. There are many examples of this type of transaction such as:

  • Recording opening balances
  • Product Returns
  • Recording scrapping inventory or inventory shrinkage

Furthermore,outbound and inbound inventory movements (Type=Accounting) have the following characteristics:

  • Outbound inventory movements populates the unit cost field from the weighted-average cost of the product at that time.
  • Inbound inventory movements triggers a weighted-average cost calculation for all customers using Accounting Seed’s Weighted-Average Cost Inventory feature.

In the example below the user is scrapping one unit of inventory at a cost of $10. Here, the inventory quantity would be reduced through an Outbound Inventory Movement. Since the Outbound Inventory Movement is a Type=Accounting, then GL transactions would be recorded to reduce the inventory GL balance and the recognition of the expense. 

Debit/(Credit) Amount Source Example GL Account
Debit $10 Debit GL Account on Outbound inventory movement 5000-Cost of Goods Sold
(Credit) ($10) Credit GL Account on Outbound inventory movement 1500-Inventory

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Build Process

Inbound and Outbound Inventory Movements (Type=Accounting) are central to Accounting Seed’s build/manufacturing process.  In the Build process, product parts are moved from their respective inventory account to work-in-process and allocated to the creation of a manufactured product. The removal of parts from raw material inventory to work-in-process is through an Outbound Inventory Movement. < Outbound inventory movements populates the unit cost field from the weighted-average cost of the product part at that time. 

The creation of the finished good product from work-in-process to finished goods inventory is through an Inbound Inventory Movement. The Inbound Inventory Movement for a manufactured product will calculate its unit cost as the sum of the product parts quantities multiplied by product parts’ weighted-average cost. 

IIM Unit Cost = [(PP1 Qty * PP1 Avg Cost) + (PP2 Qty *PP2 Avg Cost) + (PPn Qty * PPn Avg Cost)] 

Furthermore, Inbound Inventory Movements triggers a weighted-average cost calculation for all customers using Accounting Seed’s Weighted-Average Cost Inventory feature. Each of these movements has an accounting impact and will generate GL transactions. 

In this example, the initial build step moves raw material inventory out of the Inventory GL Account for Product A and Product B and into a Work-In-Process Inventory GL Account (an Outbound Inventory Movement). In addition to moving the quantities, the GL transactions below would record the movement of the inventory costs. 

Debit/(Credit) Amount Source Example GL Account
Debit $10 Work-in-Process GL Account set in Default GL Accounts 1600-Work In Process
(Credit) ($10) Inventory GL Account on Product A 1510-Inventory Parts
Debit $10 Work-in-Process GL Account set in Default GL Accounts 1600-Work In Process
(Credit) ($10) Inventory GL Account on Product B 1510-Inventory Parts

The final build step moves the built item out of Work-in-Progress and into the Inventory GL Account for Manufactured Product C (an Inbound Inventory Movement).  In addition to moving the quantities, the GL transactions below would record the movement of the inventory costs.

Debit/(Credit) Amount Source Example GL Account
Debit $20 Inventory GL Account on Manufactured Product C 1520-Finished Inventory
(Credit) ($20) Work-in-Process GL Account set in Default GL Accounts 1600-Work In Process

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