Generate Great Item Code

Great Item Code will Make Your Life Much Easier!

Tips on Creating Item Number Schemes

• Unless you are forced to do so by something out of your control, never start an item number with a zero. Just trust us on this.
• Avoid using letters that can be confused with numbers.  The main culprits are O,I, and L. 
• DO NOT use a manufacturer's serial number or part number for your part number. These numbers are often too long and cryptic. Plus, if you switch suppliers, or the manufacturer changes their number it becomes meaningless to your organization. 
• Keep item numbers short - but not so short that they could be mistaken for other numbers (i.e. quantities). 4 - 8 characters will suffice for most organizations.
• Do not load item numbers with meaning - do not try to use the item number to describe your product. This will only make your numbers longer, and more complicated. Save this information for the item description.
• Consider using a few letters. Letters will help further distinguish your item numbers from other numbers, and they will greatly increase the number of possible item numbers you can have while keeping the overall item number length as short as possible.
• Using a few letters from the beginning of your item description at the beginning of your part numbers will make it much easier to look up items in pick lists. For example, if you were creating an item number for “Sauce, Chocolate” you might create the number “SAU101” , “Sauce, Caramel” “SAU102” etc...
• Avoid loading inventory item descriptions with more information than absolutely necessary. Information such as vendor names, manufacturer, country of origin, expiration dates, and so on belongs in the "item details", or" transaction details", areas where it can be used more effectively.
• Do not use characters that might confuse people or software. For example, using a comma in your item number might make it look like a quantity or price. Using a "/" can result in Excel formatting your part number as a date. Symbols such as "<", ">", and "*" can have unintended consequences when moving data between Clearly Inventory and your spreadsheet program. Try to keep your item numbers simple and alpha-numeric where possible.

What is minimum stock level ?

The minimum stock level is that level of stock below which stock should not be allowed to fall. In case of any item falling below this level, Production or Purchase needed to replenish the stock. 


Some system have the ability to assist user to generate a list of stock needed for their production planning or planned purchase order to take place from supplier. 


Do you have any system in place to assist you or you are still using excel for the control ? 


vivienne @ www.mrp.com.my

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.

Vivienna from erp2u.com

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

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.

vivienna from erp2u.com

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).

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