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9.1 - Costing and ADempiere
9.1 - Costing and ADempiere
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Accounting, Costing
and ERP
By Wipawii Jaraswarapan
Business Consultant, ecosoft™
wipawii@gmail.com
ADempiere|ERP
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Module Objectives
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Module 9.1
Accounting Concept
ADempiere|ERP
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Accounting Concept or GAAP
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Accounting Assumptions (continue)
Example:
As an accountant you must always assume or suppose that every
asset is going to be used in the future, weather it will or not. Therefore,
those assets have to be depreciated.
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Accounting Principles
Input-Oriented Output-Oriented
Operating principles Stakeholders
• Recognition (การรับรู้) • Comparability (เปรี ยบเทียบได้)
• Matching (การจับคู่)
Limitation principles Preparation
• Conservative (ระมัดระวัง) • Consistency (สม่าเสมอ)
• Disclosure (เปิ ดเผย) • Unity (เป็ นหนึ่งเดียว)
• Materiality (นัยสาคัญ)
• Objectivity (หลักฐานเที่ยงธรรม)
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Accounting Principles (continue)
The cash basis does not work for most businesses because:
– The financial statements for any given period are not as accurate,
since events are not recorded as they occur.
– Taxing authorities do not allow it on tax forms.
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Accounting Principles (continue)
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Accounting Principles (continue)
Income Stmt
Product Cost
Sales 100
COGS (90)
Merchandise GP 10
Inventory
(Asset) Costing Method
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Accounting Principles (continue)
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Get the Feeling and Understanding
ILLUSTRATION NO.1
March 14: The company received inventory 100 Units ($10,000).
April 13: Paid to Vendor in full amount $10,000
May 11: The company sold all 100 Units of such inventory for $
15,000
June 10: Customer paid $15,000 to the company.
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Get the Feeling and Understanding
ILLUSTRATION NO.2
March 14: The company received inventory 100 Units ($10,000).
April 13: Paid to Vendor in full amount $10,000
May 11: The company sold 80 Units of such inventory for $12,000 ($150 each)
June 10: Customer paid $12,000 to the company.
Question:
1. When and How much the inventory become an expense? and
2. How much Profit does the company make?
Answer: In the month of May as the inventory was sold.
The income of $12,000, which we need to match it with
The cost of goods sold $ 8,000.
The profit is $ 4,000 (80 units x ($150 - $100))
What about the remaining, 20 Units?
It will be Merchandise Inventory presented in Balance sheet $2,000.
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Module 9.2
Inventory and Costing
ADempiere|ERP
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Inventory
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Inventory
A physical count of the inventory is still required at the end of the accounting period
to assure accurate inventory records in case of errors or theft.
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Inventory Accounting Systems
Available
SOLD
for Sale
Capitalised Expense
Average Cost
The first unit purchased is the cost of the first unit sold; therefore the ending
inventory will be made up of the most recently purchased units.
The last unit purchased is the cost of the first unit sold; therefore the ending
inventory with this method is made up of the earliest units purchased.
Average Cost
Effect: Cost of goods sold and Profit in between FIFO and LIFO
Ending inventory balance in between FIFO and LIFO
Specific identification
Identify each unit of merchandise with the unit's cost and retain that
identification until the inventory is sold. Once a specific inventory item is
sold, the cost of the unit is assigned to cost of goods sold.
Effect: Require tedious record keeping.
• Usually used for inventory of uniquely identifiable goods or
• Having a fairly high per-unit cost e.g. fine jewelry
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Costing Method
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Inventory system + Costing method
Perpetual Perodic
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FIFO: PERPETUAL vs PERIODIC
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LIFO: PERPETUAL vs PERIODIC
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Moving average - PERPETUAL vs
Weighted average - PERIODIC
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The Choice of Inventory Method
Survey 600 firms in US, FIFO is the most frequently used method,
followed by LIFO, with the average cost method a distant third
Also, LIFO is not widely used outside the United States.
Taxes: LIFO offers substantial tax savings because of lower
gross profit.
Loan: LIFO results in a lower inventory figure, current assets will
also be lower. This results in a lower current ratio and a greater
likelihood of loan agreement violations.
Management Compensation: If the company has bonuses
based on reported income, FIFO and LIFO may effect it.
Stock Prices: LIFO results in lower reported net income, stock
market may react negatively to a lower income stream.
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Who decides what method to use?
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Module 9.4
Set up new Client in AD
(Accounting view)
ADempiere|ERP
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Set Up new Company – Client set up
Set up
• Client
• Organization
• Warehouse
Accounting Assumption
‘Business entity’
Set up
• Roles
• Users
• Security
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Set up new Company
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Set Up new Company – Client Policy
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Set Up new Company – Client Policy
Delivery Policy
No hold:
• No items are held for a specific
customer and orders
• Shipped as soon as they are
fulfilled.
• The risk is some orders might
never be fulfilled and starvation
increases the bigger the more
items there are on the order.
Strict order:
• Material must be allocated to the
order before it is shipped.
• Only material on hand can be
allocated.
• Material is allocated in the order
defined by the orders which are:
• Priority of the order
• Date of the order line
(i.e. when it was created)
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Calendar Year and Period
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Exploring Chart of Account Template
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Chart of Account
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Account Element - Chart of Account
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Accounting Schema
A combination of
Accounting standard
(GAAP)
Recognition => Accrual
or Cash basis
A Costing Method
Posting
Default accounts
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Accounting Schema
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Accounting Schema
History days
• Defines the number of days prior to the
current date you can post to.
Future days
• Defines the number of days following
the current date that you can post to.
Example: The current date, which is
based on the system date, is May 10 and
History days is set to 20 and future days
is set to 30, posting can occur for
transactions dated between April 20 and
June 9. If left unselected, each period
must be opened manually for the
appropriate document types.
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Accounting Schema
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Accounting Schema
Tax Correction
• To indicate if the tax should be adjusted
if a Discount is taken or a Write Off is
allowed for an Invoice where tax is
imposed.
Post Services Separately check box
• If checked, product type Service and
Resource will use a separate account
when posting documentL.
• If not, it will use the same account as
used for posting Item Product Types.
Explicit Cost Adjustment check box
• If checked, when posting Vendor
Invoices for Landed Costs, the selected
Debit-Credit to the Cost Element will be
displayed.
• If not, the transactions will include the
Cost Adjustment Account, Tax, and
Accounts Payable.
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Accounting Schema
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Accounting Schema
Example:
If this client has 2 Organisations, one in Thailand and another one in US. For the second
one, US organisation, it need to generate financial reports in USD, which this report is
required for Thai organisation, which Primary Accounting Schema is in THB; therefore,
define a second Accounting Schema in USD and select the US Organization in the Only
Organization field. When a document posts for Thai Organizations, transactions for the
Primary Accounting Schema in THB will be created. When a document posts for the US
Organization, transactions will be created for both the Primary Accounting Schema in THB
and the second Accounting Schema in USD.
Note: Any elements used in a alternate accounting schema must be enabled on the primary
accounting schema. For example, if you want to use Project as an element in an alternate
accounting schema, it must be enabled in your primary accounting schema
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Accounting Schema Element
.
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Accounting Schema – General
. ledger
Type: Item
It is existing product Shipment – MM Receipt
e.g. Plum tree
Type: Service
It is Expense Shipment – MM Receipt
e.g. Plum tree
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Chart of Account
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WORKSHOP
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