Transactions in FirstOffice - Sales Invoices
Invoices are demands for payment sent to Customers. They are created ('raised') in the Sales Ledger, which is also used to keep a record of how much is owed to your business by whom. The raising of an Invoice causes a Nominal Ledger Transaction to be created which debits the Debtor Account (which keeps a tally of how much your company is owed), credits a Sales Account (it is normal practice to maintain more than one Sales Account to keep a record of the sales of different types of product) and, in most cases, credits a VAT Account. Once Invoices have been raised in the Sales Ledger, the creation of the Nominal Ledger Transaction is handled automatically in FirstOffice. Below is shown a typical such Transaction.
FirstOffice has a number of methods whereby the Accounts used in this Transaction can be chosen to reflect the accounting needs of different situations. The Debtor Account can be set according to the Customer or Customer Category, different Sales Accounts can be used for the various Item Groups or individual Items, and the VAT Account can be controlled through the VAT Code. In addition, FirstOffice can post to the Stock and Cost Accounts. The number of options is great, and they are described in detail in this section.
Each individual Invoice, when approved, determines how the consequent Nominal Ledger Transaction is to be structured. The Accounts used are chosen as follows:
Sales Account
The Sales Accounts in the Nominal Ledger are used to record the levels of sales of different types of Items. To determine which Account is to be used, click flip B when you enter an Invoice. This reveals that you can specify a Sales Account for each row (in the column marked 'A/C'). Different Invoice rows can have different Sales Accounts.
When you add rows to an Invoice, FirstOffice places a default Sales Account in the A/C field. You can overwrite this default if necessary. It is chosen as follows:
- When you enter an Item Code, if there is a Price List applying to the Invoice and there is a record in the Price register for that Item/Price List combination, FirstOffice takes the Sales Account from there. If this Sales Account is blank, or there is no appropriate record in the Price register:
- FirstOffice uses the Sales Account for the relevant Item (taken from the Item register). If this is blank:
- FirstOffice uses the Sales Account from the Item Group specified for the Item. If this is blank, or if no Item Group has been specified for the Item, or if no Item Code has been entered to the Invoice row:
- FirstOffice uses the Sales Account entered in the Account Usage S/L setting for the zone to which the Customer belongs. There are three zones (Domestic, EU and Export), and each can have a different Sales Account.
If the selected Account is missing from the Chart of Accounts, FirstOffice will display the error message: "Sales Account missing, check Account Usage S/L".
VAT Account
When you enter an Invoice, you must specify a VAT Code in each row. This code refers to a specific VAT Code record, which will determine the Output VAT Account in the subsequent Nominal Ledger Transaction and the rate at which VAT will be charged. VAT Code records are set up using the VAT Codes setting in the Nominal Ledger.
When you enter Invoice rows, you cannot leave the VAT Code field (marked 'V-Cd', visible on flip B) blank. FirstOffice places a default in the field, chosen as follows:
- The VAT Code is taken from the Sales VAT Code field in the Customer register. Usually, you should only specify a VAT Code for an individual Customer if for some reason your usual VAT accounting method does not apply to them. If this is blank:
- When you enter an Item Code, FirstOffice uses the VAT Code entered for the relevant Item in the Item register. If this is blank:
- FirstOffice uses the VAT Code from the Item Group specified for the Item. If this is blank, or if no Item Group has been specified for the Item, or if no Item Code has been entered to the Invoice row:
- FirstOffice uses the VAT Code entered in the Account Usage S/L setting for the zone to which the Customer belongs.
If the selected VAT Code is missing from the
VAT Codes setting, or if the VAT Code record refers to a non-existent Account, FirstOffice will display the error message: "Code not registered".
Debtor Control Account
When a Nominal Ledger Transaction is generated from an Invoice, the Debtor Account is not determined from the Invoice itself (unlike the Sales and VAT Accounts described above). Instead, it is determined as follows:
- You can specify a Debtor Account for the Customer Category to which the Customer belongs. If this is blank, or if no Customer Category has been specified:
- FirstOffice uses the Debtor (or, if the Invoice is a cash Invoice, the Cash) Account entered in the Account Usage S/L setting.
- If the Customer is marked as an "On Account" Customer and the Invoice has been allocated to an "On Account" Receipt, the On Account A/C entered in the Account Usage S/L setting will be used.
If any of the Account Numbers refers to a non-existing Account, FirstOffice will display the error message: "Debtor Account missing, check Account Usage S/L".
Stock Account and Cost Account
When goods are sold from stock, FirstOffice can generate Nominal Ledger postings for the cost of goods, and for the stock outtake ('Cost Accounting'). This can be determined to occur when Invoices are approved or when Delivery Notes are approved.
For cost accounting transactions to take place, the Items concerned must be Stocked Items. If cost accounting transactions are set to be created when Invoices are approved, this will mean that, in addition to posting to the Sales, VAT and Debtor Accounts, Nominal Ledger Transactions generated from Invoices will debit the specified Cost Account and credit the specified Stock Account. Further settings controlling the operation of cost accounting are discussed here and here.
The Cost of Goods Account debited by such transactions is determined as follows:
- If you are using the Use Item Groups for Cost Accounts option in the Cost Accounting setting in the Stock module, the Cost Account specified on the 'A/C' card of the Item Group to which the Item belongs is used. If this is blank, you are not using the Use Item Groups for Cost Accounts option or the Item does not belong to an Item Group:
- The Stock Cost Account specified in the Account Usage Stock setting is used.
The Stock Account credited by such transactions is determined as follows:
- If you are using the Use Item Groups for Cost Accounts option, the Stock Account specified on the 'A/C' card of the Item Group record is used.
- In all other circumstances, the Stock Account specified in the Account Usage Stock setting is used.
Various models are available by which the value of the cost accounting transaction can be calculated (for example, cost price, FIFO price, weighted average cost price). You can use a different cost model for each
Item Group, or you can use a single default cost model. Full details can be found on the page describing the
Cost Model setting.
If any of the Account Numbers refers to a non-existent Account, FirstOffice, in attempting to generate the Nominal Ledger Transaction, will display the error message: "Transaction could not be generated. Check settings".
Round-off Account
If you are using FirstOffice's option for rounding the Invoice amount to the nearest monetary unit (Euro, Pounds etc.), you must specify a Round-off Account in the Account Usage S/L setting. To switch this option on, use the Round Off setting in the System module.
