Accounting is a measure of financial statistics of an organization. Every organization needs to maintain it’s assets, liabilities, revenues, expenses and equity.
Where it is maintained :-
Ofcourse, in a register and that register is called ‘General Ledger’ or GL. A GL is maintained for each organization and all the accounts for an organization comes under this GL.
What is in a GL :-
For a proper organization of information we categorize the accounts under following:
a) Asset b) Liability c) Revenue d) Expense e) Owners Equity
Understanding accounts under GL
We can create any number of accounts to accomodate our organization’s need. To maintain the total amount dues to be received we configure ‘Accounts Receivable’, to maintain the total amount to be paid we configure ‘Accounts Payable’, an interest over income can be put under ‘Interest Income’. A basic setup is shown below:
Each account can be valid from and through on date and therefore we have creation and through date in ofbiz for every account.
Understanding ‘Organization GL Settings’ in ofbiz :-
Though the above explanation generalizes the accounts used in most of the organizations, there is no restriction to create for our specific needs. For example we might need to maintain an account for a particular product and we want to be able to track all the transaction for that product in that account only or we have subsidiaries in organizations and we want to be able to maintain separate accounts for each subsidiary. In such scenarios we can create specialized entities relating to GL.
Product GL Account: When you have a need to maintain an account for particular product
Party GL Account: When you have a need to maintain an account for an individual subsidiary
Product Category GL Account: When you have a need to maintain an account for a special product category
Credit Card GL Account: When you have a need to maintain an account for credit card separately
Tax Authority GL Account: Define an account for tax for an organization of store so that all the taxes go into it
An example of setting up individual subsidiary accounts using ‘Party GL Accounts’
It is a neat approach to maintain all the accounts and we must not get confused among them. Basically, Ofbiz has configured all the accounts you need. By default all the transactions go under a single GL Account, so you must setup your accounting if you want to maintain it with more refined structure.
An accounting transaction is a result of a business flow. For example when we generate an invoice, it is a business transaction but it also results in an accounting transaction so that reports can be generated and a history can maintained. An invoice results in two accounting sections, one is payment is expected and liability to deliver the good:
- A revenue is identified (cash is expected for invoice) — Accounts Receivable
- A liability is identified (for the delivery of goods)
Therefore a business flow of an invoice posts an accounting transaction. In double entry mechanism one will be debited and other will be credited.
Each transaction is broken down into many transaction details that represents debit and credit entries for the transaction. Each debit or credit entry will affect one of the organization accounts and therefore related to an organization GL a/c.
In business term each accounting detail instance is equal to a journal entry line item.
Multiple Retail Store Setup