Why are accruals needed every month?

Accrual adjusting entries are needed monthly only if a company issues monthly financial statements. Two reasons for the monthly accrual adjusting entries are:


1. To report the revenues and receivables which were earned during the month, but the transactions had not been recorded in the accounts as of the end of the month, and

2. To record the expenses and liabilities which were incurred during the month, but the transactions had not been recorded in the accounts as of the end of the month.

Monthly accrual, deferral, and other adjusting entries must be recorded prior to issuing monthly financial statements in order to comply with the accrual basis of accounting.

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What data will be used for ERP training?

Ask: What data will be used for ERP training?

For best results, your ERP Partner should set up a test company for the purposes of training using your own company data. This will stay separate from the actual database you will use when you go live.

If your users get trained on fictitious sample company data, the impact will be diluted when they start to work with your own data and processes.

Customization & Custom Development:

Proceed with caution!

Minor customizations made by an experienced Partner can give you the one feature you need to make the software a perfect fit.


But major software customization should only be considered if you have a business critical process that cannot be changed.
 
To Save $ : To minimize customizations, take the time to fully define and review your internal processes. This exercise may uncover ways you can be more efficient using the software as it is.
 
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Chart Of Account Sample 4

Sample 4 - Chart of Account Structure
ABC Sporting Goods operates 5 stores in two states. They sell to commercial and retail buyers and classify their sales and expenses into five departments.

After consulting with their accountants, ABC Sporting Goods decided on the following account structure:
Sample Chart of Accounts

The 1st segment is refer to the Main Account
The 2nd segment 0001,0002,0003.0004,0005 refer to Stores
The 3rd segment AZ, NM refer to States
The 4th segment PHX, GLN,ALB,TEM refer to Department.

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Chart Of Account Sample 1,2,3

The account segment is your company's Account number structure, the segment design needs to meet the requirements of your company now and in the future.

We have done some following exmaple to help you in designing your account segment.

Sample 1
ABC Industries operates two locations and has four sales departments. They have the following accounts setup:

Base on the structure above, consists of 12 characters and 3 segments
500000 will be the main account,
100, 200 will be the location
001,002,003,004 will be the department  
 
 
Sample 2
The following account number consists of 12 characters and 4 segments:
Sample : 85000.125.ABC.1.
The breakdown of the account structure is:

85000 Main Account
125 Department
ABC Job
1 Company

Sample 3
The following account number consists of 8 characters and 4 segments,
sample : 3/780/12/09.
The break-down of the account structure is:

3 Store
780 Base Account
12 Profit Center
09 Region

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ERP Data Conversion

When you have figured out approximately how many records will need to be converted, the Partner can give you an estimate of the amount of time involved.

To Save $: Some companies find that hiring a temp worker or intern to manually enter information into the new system is a less expensive alternative.

Sample multiple segment GL

We provide the below sample of multiple segment Chart of Account on General Ledger Report.

General Ledger

GL Summary
GL Detail
GL with Running Balance

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Sample multiple segment COA

A company's organization structure can serve as the outline for its accounting chart of accounts.
For example, if a company divides its business into ten departments (production, marketing, human resources, etc.), each department will likely be accountable for its own expenses (salaries, supplies, phone, etc.). Each department will have its own phone expense account, its own salaries expense, etc.

Sample Chart of Accounts For a Large Corporation


Industry Considerations

1.Manufacturing/Services
XX- XXX-XXXX-XXX-XXX-XXX
Company-Cost Centre-Account -Product- Product Line- Sub Account

2.Distribution (News)
XX-XXXXXX-XX-XXX-XXXX
Division-Account-Region-Story-Distribution

3.Projects
XXX-XXXXX-XXX-XXXX-XX
Company-Account-Department-Project-Project Type

The reporting flexibility allows users to modify a number of control fields on standard reports allowing for quick customization to fit your organization’s needs.

Your organization can quickly produce presentation-quality financial statements and analysis reports for your board, auditors, management, and other users of financial information.hence this satisfy more complex reporting requirements.

We provide the report examples for your further understanding on the Chart of account segment.

Trial Balance
Summary Trial Balance
Detail Trial Balance Sorted by Fund
Detail Trial Balance Sorted by Cost Center 3

Statement of Revenue and Expenditures
P and L-Multiple Cost center.pdf
P and L-Multiple Cost center1.pdf


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ERP Data Conversion

Data Conversion: Moving a Rock versus a Mountain

The “X” factor (or big unknown) in any services quote is data conversion. Companies often overlook this and end up with a big, fat bill they didn’t expect.

The most obvious way to minimize your costs for data con-version is bring into the new system only data you need to use often. Remember, even if you choose not to convert some data, you’re not losing it forever.

If you’d like to refer back to historical information such as invoices and AP history, you can keep hard copies of reports, or you can choose to keep the old system “alive” even after you switch to the new system.

To Save $ : One way to save money is to convert data from the old system at a summary level instead of a detailed level. For example, convert a summarized open invoice as BF figure for an entire month’s activities instead of bringing over open invoice entry for the month.

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Advantages VS Disadvantages of ERP Systems

Advantages of ERP Systems
There are many advantages of implementing an EPR system; here are a few of them:

 

1. A totally integrated system
2. The ability to streamline different processes and workflows
3. The ability to easily share data across various departments in an organization
4. Improved efficiency and productivity levels
5. Better tracking and forecasting
6. Lower costs
7. Improved customer service

Disadvantages of ERP Systems

While advantages usually outweigh disadvantages for most organizations implementing an ERP system, here are some of the most common obstacles experienced:

 

Usually many obstacles can be prevented if adequate investment is made and adequate training is involved, however, success does depend on skills and the experience of the workforce to quickly adapt to the new system.

 

1. Customization in many situations is limited
2. The need to reengineer business processes
3. ERP systems can be cost prohibitive to install and run
4. Technical support can be shoddy
5. ERP's may be too rigid for specific organizations that are either new or want to move in a new direction in the near future.

What is the provision for bad debts?

The provision for bad debts might refer to the balance sheet account also known as the Allowance for Bad Debts, Allowance for Doubtful Accounts, or Allowance for Uncollectible Accounts. In this case Provision for Bad Debts is a contra asset account (an asset account with a credit balance). It is used along with the account Accounts Receivable in order to report the net realizable value of the accounts receivable

Provision for Bad Debts might also be an the income statement account also known as Bad Debt Expense or Uncollectible Account Expense. In this situation, the Provision for Bad Debts reports the credit losses that pertain to the period shown on the income statement

The Ideal ERP System

An ideal ERP system is when a single database is utilized and contains all data for various software modules. These software modules can include:

Manufacturing: Some of the functions include; engineering, capacity, workflow management, quality control, bills of material, manufacturing process, etc.

Financials: Accounts payable, accounts receivable, fixed assets, general ledger and cash management, etc.

Human Resources: Benefits, training, payroll, time and attendance, etc

Supply Chain Management: Inventory, supply chain planning, supplier scheduling, claim processing, order entry, purchasing, etc.

Projects: Costing, billing, activity management, time and expense, etc.

Customer Relationship Management: sales and marketing, service, commissions, customer contact, calls center support, etc.

Data Warehouse: Usually this is a module that can be accessed by an organizations customers, suppliers and employees.

What is the difference between accounts payable and accrued expenses payable?

I would use the liability account Accounts Payable for suppliers’ invoices that have been received and must be paid. As a result, the balance in Accounts Payable is likely to be a precise amount that agrees with supporting documents such as invoices, agreements, etc.

I would use the liability account Accrued Expenses Payable for the accrual type adjusting entries made at the end of the accounting period for items such as utilities, interest, wages, and so on. The balance in the Accrued Expenses Payable should be the total of the expenses that were incurred as of the date of the balance sheet, but were not entered into the accounts because an invoice has not been received or the payroll for the hourly wages has not yet been processed, etc. The amounts recorded in Accrued Expenses Payable will often be estimated amounts supported by logical calculations.

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What is the difference between Notes Payable and Accounts Payable?

While both of these are liabilities, Notes Payable involves a written promissory note. For example, if your company wishes to borrow $100,000 from its bank, the bank will require company officers to sign a formal loan agreement before the bank provides the money. (The bank might also require your company to pledge collateral and for the company owners to personally guarantee the loan.) Perhaps the loan paperwork will be a half inch high. Your company will record this loan in its general ledger account, Notes Payable. (The bank will record the loan in its general ledger account Notes Receivable.)

Contrast the bank loan with phoning one of your company’s suppliers and asking for a delivery of products or supplies. On the next day the products arrive and you sign the delivery receipt. A few days later your company receives an invoice from the supplier and it states that the payment for the products is due in 30 days. This transaction did not involve a promissory note. As a result, this transaction is recorded in your company’s general ledger account Accounts Payable. The supplier will record the transaction with a debit to its asset account Accounts Receivable (and a credit to its account Sales).

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Keypad mouse

Meet this keypad mouse ($19.99). The 19 Key USB Numeric Keypad and Optical Mouse offers desktop and notebook users an instant benefit of a full-sized, external numeric keypad in a compact form. It functions as a numeric keypad and as an optical mouse it features a wide flip top transparent cover for the keypad and additional scroll wheel for easy web navigation. It is innovative and portable, definitely designed for

mobile professionals.

How do you treat voided checks on the bank reconciliation?

If a voided check was written in a previous month, remove the voided check from the list of outstanding checks and write a journal entry to debit Cash and credit the account(s) that was debited when the check was originally recorded.

This entry restores the cash into the checking account and eliminates the debit entered at the time the check was recorded. If the check was written in the current month, you can simply write the journal entry I just described.

Some software will allow a person to go into a previous period’s activity (as well as the current period’s activity) and process the voided check transaction and posting. This too will increase the cash balance and will reverse the debit from the account originally debited when the check was recorded.

What entry is made when selling a fixed asset?

What entry is made when selling a fixed asset?

When a fixed asset or plant asset is sold, the asset’s depreciation expense must be recorded up to the date of the sale.
1) the asset’s cost and accumulated depreciation is removed,
2) the amount received is recorded
3) any difference is reported as a gain or loss.

Here’s an example. A company sells one of its machines on January 31 for $5,000. The last time depreciation was recorded was on December 31. Depreciation expense is $400 per month. The general ledger shows the machine’s cost was $50,000 and its accumulated depreciation at December 31 was $40,000.

On January 31 the company will debit Depreciation Expense for $400 and will credit Accumulated Depreciation for $400 in order to record the depreciation during January. In its next entry on January 31, the company will debit Cash for $5,000 (the amount received); debit Accumulated Depreciation for $40,400 (the balance at January 31); debit Loss of Disposal of Asset $4,600; and credit Machines for $50,000.

Let’s step back and review the disposal of the machine. As of January 31, the machine’s book value is $9,600 (cost of $50,000 minus its accumulated depreciation of $40,400). Because the asset is sold, the $9,600 of book value or carrying value is removed from the accounts. In its place, the company received and records the cash of $5,000.

Since the company received $4,600 less than the amount it removed, it will report a loss of $4,600.

If the company had received more cash than the asset’s book value, it would report the difference as a credit to Gain on Disposal of Asset.

How do I compute the product cost per unit?

How do I compute the product cost per unit?

In accounting, we define the product cost as the direct material, direct labor, and manufacturing overhead. Costs such as advertising, preparing invoices, delivery expense, office salaries, office rent and utilities, and interest on loans are examples of expenses that are not considered to be product costs. Rather, these costs are expensed immediately to the period instead of being assigned to a product.

To be profitable, a company must have its selling prices large enough to cover both the product costs of the units sold and the period expenses.

The product cost is used for valuing the inventory and for determining the cost of goods sold. Since some of the manufacturing overhead costs are fixed in total (factory rent, factory depreciation, factory managers’ salaries), the per unit cost of a product will depend upon the number of units manufactured during a given year. In other words, the cost of a product is not know with precision, even though accountants will compute the per unit cost to the nearest penny.

Chart Of Account

Why the need for an effective Chart of Accounts in the System ?

•It is the heart of the system into which all modules and interfaces flow.

A chart of account is a listing of the names of the account that a company has identified and made available for recording transactions in its general ledger. A company has the flexibility to tailor its chart of accounts to best suit its needs, including adding accounts as needed.

Within the categories of operating revenues and operating expenses, accounts might be further organized by business function (such as producing, selling, administrative, financing) and/or by company divisions, product lines, etc.

A company's organization structure can serve as the outline for its accounting chart of accounts. For example, if a company divides its business into ten departments (production, marketing, human resources, etc.), each department will likely be accountable for its own expenses (salaries, supplies, phone, etc.). Each department will have its own phone expense account, its own salaries expense, etc.

Sample Chart of Accounts For a Large Corporation

Industry Considerations

•Manufacturing/Services
XX XXX XXXX XXX XXX XXX
Company Cost Centre Account Product Product Line Sub Account

•Distribution (News)
XX XXXXXX XX XXX XXXX
Division Account Region Story Distribution

•Projects
XXX XXXXX XXX XXXX XX
Company Account Department Project Project Type