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
A/c Dr
To Inventory A/c Cr
Account Receivables module:
Event Accounting Entries
1. Creation of Invoice Receivables (Invoice)
A/c Dr
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
Invoice Cash Clearing A/c Dr
To Receivables (Invoice) A/c Cr
Receipts Accounting:
1. Unidentified
Receipt Cash A/c Dr
Receipt Cash A/c Dr
To Unidentified Receipt A/c Cr
2. Unapplied
Receipts Cash A/c Dr
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
Receipt A/c Dr
To On-Account Receipt A/c Cr
6. Create Receipt with
Remittance Confirmation A/c Dr
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
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
Charges A/c Dr
To Remittance A/c Cr
Factoring
Remittance Cash A/c Dr
Remittance Cash A/c Dr
Bank
Charges A/c Dr
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
Cash A/c Dr
Earned/Unearned
Discount A/c Dr
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
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
A/c Dr
To Write Off A/c Cr
14. Receipt combined with
Chargeback Cash/Bank A/c Dr
Chargeback Cash/Bank A/c Dr
To Receivables (Invoice) A/c Cr
Receivables (Chargeback)
A/c Dr
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
Receivable A/c Dr
To Unearned Revenue A/c Cr
2. When actual invoice is applied against commitment
Unearned
Revenue A/c Dr
Revenue A/c Dr
To Unbilled Receivable A/c Cr
3. When deposit is due Receivable (Deposits)
A/c Dr
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)
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
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
Receivable A/c Dr
To Revenue A/c Cr
b) When revenue is received in future,
Receivables (Invoice)
A/c Dr
A/c Dr
To Unbilled Receivable A/c Cr
Bills Receivables:
1. Completion of Bills Receivable
Bills Receivable A/c Dr
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 Dr
Bills Receivable A/c Cr
3. On Maturity of Remitted bills
Remittance A/c Dr
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
A/c Dr
To Revenue A/c Cr
3. Adjustment
Negative Write off
A/c Dr
A/c Dr
To Receivable (invoice) A/c Cr
Positive Receivable (invoice)
A/c Dr
A/c Dr
To Write Off A/c Cr
4. Miscellaneous
Receipts Cash Clearing A/c Dr
Receipts Cash Clearing A/c Dr
To Revenue (Misc) A/c Cr
5. On-Account Credit in
Credit Memo Revenue A/c Dr
Credit Memo Revenue A/c Dr
To Receivables (Invoice) A/c Cr
6. On Sale of Fixed Assets
Receivables A/c Dr
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.