Accounting Entries for Order to Cash (O2C) cycle is as follows:

Order Management module:

Event                                                              Accounting Entries

1. Booking the Sales Order (SO)               No accounting entries

2. Pick Release the SO                            No accounting entries

3. Ship Confirm the SO                           Cost of Goods Sold (COGS)

A/c Dr

                                                          To Inventory A/c Cr

Account Receivables module:

Event                                                              Accounting Entries

1. Creation of Invoice                             Receivables (Invoice)

A/c Dr

                                                          To Revenue A/c Cr

                                                          To Tax A/c Cr

                                                          To Freight A/c Cr

2. Receipt fully applied against

Invoice      Cash Clearing A/c Dr

                                                          To Receivables (Invoice) A/c Cr

Receipts Accounting:

                                                           

1. Unidentified

Receipt                            Cash A/c Dr

                                                          To Unidentified Receipt A/c Cr

2. Unapplied

Receipts                    Cash A/c Dr

                                                          To Unapplied Receipt A/c Cr

3. When Unidentified receipts changed to Unapplied Receipts

                                                         Unidentified Receipt A/c

                                                          To Unapplied Receipt A/c Cr

4. On-Account Receipt                           Cash A/c Dr

                                                          To On-Account Receipt A/c Cr

5. When unapplied Receipt changed to On-Account Receipt

                                                          Unapplied

Receipt A/c Dr

                                                          To On-Account Receipt A/c Cr

6. Create Receipt with

Remittance            Confirmation A/c Dr

                                                          To Receivables (Invoice) A/c Cr

7. Remit the Receipt                              

          Standard Remittance                    Remittance A/c Dr

                                                          To Confirmation A/c Cr

          Factoring

Remittance                    Factor A/c Dr

                                                          To Confirmation A/c Cr

8. Clear the Receipt                              

Standard Remittance                    Cash A/c Dr

                                                          Bank

Charges A/c Dr

                                                          To Remittance A/c Cr

Factoring

Remittance                    Cash A/c Dr

                                                          Bank

Charges A/c Dr

                                                          To Short Term Debt A/c Cr

9. Maturity of Factoring Remittance          Short Term Debt A/c Dr

                                                          To Factor A/c Cr

10. Receipt with a discount                    

Cash A/c Dr

                                                          Earned/Unearned

Discount A/c Dr

                                                          To Receivables (Invoice) A/c Cr

11. Receipt combined with On-Account Credit      Cash/Bank A/c Dr

                                                                    On-Account A/c Dr

                                                                    To Receivables (Invoice) A/c Cr

12. Receipt combined with negative adjustment    Cash/Bank A/c Dr

                                                                   Write Off

A/c Dr

                                                                   To Receivables (Invoice) A/c Cr

13. Receipt combined with positive adjustment     Cash/Bank A/c Dr

                                                                   To Receivables (Invoice)

A/c Dr

                                                                   To Write Off A/c Cr

14. Receipt combined with

Chargeback                Cash/Bank A/c Dr

                                                                   To Receivables (Invoice) A/c Cr

                                                                  

Receivables (Chargeback)

A/c Dr

To Receivables (Invoice) A/ Cr

                                                                  

Chargeback A/c Dr

                                                                    To Receivables (Chargeback) A/c Cr

Deosit and Guarantees:

1. Guarantee (Customer is giving commitment)

                                                          Unbilled

Receivable A/c Dr

                                                          To Unearned Revenue A/c Cr

2. When actual invoice is applied against commitment

                                                           Unearned

Revenue A/c Dr

                                                          To Unbilled Receivable A/c Cr

3. When deposit is due                           Receivable (Deposits)

A/c Dr

                                                          To Advance A/c Cr

4. When Deposit is received           Cash/Bank A/c Dr

                                                          To Receivable (Deposits) A/c Cr

5. When Invoice is applied against Deposit

                                                          Advance A/c Dr

                                                          To Receivable (Invoice) A/c Cr

Revenue Recoginition:

1. Treatment of Billing in Advance   (Income is received in full but services will be rendered in future)         

     a) On Receipt                                  Receivables (Invoice)

A/c Dr

(full Amount)

                                                          To Unearned Revenue A/c Cr (full Amount)

      b) Recognizing revenue for part for which service is rendered,

                                                          Unearned

Revenue A/c Dr

                                                          To Revenue A/c Cr

2. Treatment of Bills in Arrear (Income is received in future but services are rendered now)

a)     Recognizing the revenue for due period,

                                                          Unbilled

Receivable A/c Dr

                                                          To Revenue A/c Cr

                b) When revenue is received in future,

Receivables (Invoice)

A/c Dr

                                                          To Unbilled Receivable A/c Cr

Bills Receivables:

1. Completion of Bills Receivable              

Bills Receivable A/c Dr

                                                          To Receivables (Invoice) A/c Cr

2. Remittance of Bills Receivable (Standard Method),

                                                          Remitted

Bills Receivable A/c Dr

                                                          Bills Receivable A/c Cr

3. On Maturity of Remitted bills               

Remittance A/c Dr

                                                          To Remitted Bills Receivable A/c Cr

4. Receipts against remitted bills when cleared

                                                          Cash/Bank A/c Dr

                                                          To Remittance A/c Cr

Other Entries:

1. Credit Memo                                      Revenue A/c Dr

                                                          To Receivables (Invoice) A/c Cr

Note: If the profile option Use Invoice Accounting for Credit Memos is set to Yes, Receivables credits the accounts of the original transaction. If this profile option is set to No, Receivables uses Auto Accounting to determine the Freight, Receivables Revenue, and Tax accounts.

2. Debit Memo                                       Receivables (Invoice)

A/c Dr

                                                          To Revenue A/c Cr

3. Adjustment                                      

Negative                                    Write off

A/c Dr

                                                          To Receivable (invoice) A/c Cr

Positive                                      Receivable (invoice)

A/c Dr

                                                To Write Off A/c Cr

4. Miscellaneous

Receipts                        Cash Clearing A/c Dr

                                                          To Revenue (Misc) A/c Cr

5. On-Account Credit in

Credit Memo         Revenue A/c Dr

                                                          To Receivables (Invoice) A/c Cr

6. On Sale of Fixed Assets                      

Receivables A/c Dr

                                                          To Proceeds of Sale Clearing A/c Cr

Inventory module:

Event                                                              Accounting Entries

1. RMA                                                Inventory A/c Dr

                                                          To Cost of Goods Sold A/c Cr*

* This uses the same account as the original cost of goods sold transaction.

Attention: You do not create any accounting entries when you receive material for an RMA for an expense item or expense sub inventory.

Accounting Entries for Procure to Pay (P2P) cycle

Accounting Entries for Procure to Pay (P2P) cycle is as follows:

Purchasing/PO module:

Event                                                              Accounting Entries

1. Creation of Requisition                        No accounting entries

2. Creation of Purchase Order (PO)           No accounting entries

Inventory Destination Receipts

3. Receipt of Inventory

Items                  Receiving Inspection A/c Dr

                                                          Inventory AP Accrual A/c Cr

Note: Accounting Entries for Inventory Items can be created at Receipts only where as for Expense Items it can be done at Period End OR Receipts as applicable.

Expense Destination Receipts

4. Receipt of Expense

Items                    Receiving Inspection A/c Dr

                                                          Expense AP Accrual A/c Cr

Expense Items with Receipts at Period End

5. When Receipts at Period End set up is done for Expense items,

                                                                   PO Charge A/c

                                                                   To Expense AP Accrual A/c Cr

6.  When next PO period is opened, reversal entry for point 7 is created,

                                               

                                                                   Expense AP Accrual A/c

                                                                   To PO Charge A/c Cr

Inventory module:

Event                                                  Accounting Entries

1. Delivery of Inventory

Items                  Material/Inventory A/c Dr

(Standard Cost)

                                                          To Receiving Inspection A/c Cr (PO Price)

                                                          Purchase Price Variance A/c Dr/Cr# (as applicable)

#Purchase Price Variance (PPV) is the difference between PO price and Standard Cost.

2. Delivery of Expense

Items          PO Distribution Charge A/c Dr

                                                          To Receiving Inspection A/c Cr

3. Purchase Return                                Inventory AP Accrual A/c Dr

                                                          To Inventory A/c Cr

Payables/AP module:

Event                                                              Accounting Entries

1. Creation of

Inventory Item Invoice        Inventory AP Accrual A/c Dr

                                                          To Liability A/c Cr

                                                          Invoice Price Variance* A/c Dr/Cr (if any)

* Invoice Price Variance=Invoice Price-PO Price

2. Creation of

Expense Item Invoice Expense AP Accrual A/c Dr

                                                          To Liability A/c Cr

3. Payment of Invoice (Inventory/Exp)     

Liability A/c Dr

                                                          To Cash Clearing* A/c Cr

                                                          To Discount A/c Cr (If any)

                                                          To Gain/Loss A/c Cr (Foreign Exchange G/L if any)

* Cash Clearing is used where Cash Management module is in place else it will directly hit Cash/Bank Account for payment.

Other Entries:

4. Good return to

Supplier                       Liability A/c Dr

                                                          To Inventory/Expense AP Accrual A/c Cr

5. Refund through

Credit Memo                Liability A/c Dr

                                                          To AP Accrual/Charge A/c Cr

6. Creation of Prepayment Invoice            Prepaid

Expense A/c Dr

                                                          To Liability A/c Cr

7. Payment of

Prepayment Invoice            Liability A/c Dr

                                                          To Cash Clearing A/c Cr

8. Apply prepayment with

Standard Invoice          Liability A/c Dr

                                                                   To Prepayment A/c Cr

9. Creation of

Credit Memo                      Liability A/c Dr

                                                          To AP Accrual A/c/ Expense A/c Cr