Accounting entries created by the Production system
Handling different scenarios of invoicing
There can be various possible scenarios in the event of invoicing a client. The following are the scenarios and the subsequent entries that would be updated---
Scenario 1 (a) – What are the journal entries created when an estimate is invoiced and there is no PO on the job?
Journal type: Job Invoices/Credit Notes (INP) {the journal name might different at some client installations}
Client A/C DR (invoice amount taken from the estimate)
Income A/C CR (invoice amount taken from the estimate)
Scenario 1 (b) – What are the journal entries created when you add a PO to this job later?
Journal type: Job Purchase Invoices/Credit Notes (PUR) {the journal name might different at some client installations}
WIP A/c CR (cost taken from the PO)
Cost A/c DR (cost taken from the PO)
For information on what happens when you convert a PO to a PI, refer to point 2 (b)
Scenario 2 (a) - What are the journal entries created when an estimate is invoiced and there is a PO on the job?
Journal type: Job Invoices/Credit Notes (INP) {the journal name might different at some client installations}
Client A/c DR (invoice amount taken from the estimate)
Income A/c CR (invoice amount taken from the estimate)
Cost A/c DR (cost taken from the PO)
WIP A/C CR (cost taken from the PO)
Scenario 2 (b) - What are the journal entries created when you convert a PO to a PI?
Once you convert the PO to a PI i.e. by entering the supplier invoice details on the PO, and the following entries are created by NEOSYS (converting the PO to the PI means you record the supplier invoice in the supplier a/c and reverse the provision made earlier):
Journal type: Job Purchase Invoices/Credit Notes (PUR) {the journal name might different at some client installations}
WIP A/C DR (with the provision cost – reversed)
Cost A/C CR (with the provision cost – reversed)
Cost A/C DR (with the new/original cost)
Supplier A/C CR (with the new/original cost)
Note- The second scenario is the most common scenario and NEOSYS recommends the client to follow this as a rule.
Scenario 3 – What are the journal entries created when the PO is converted to a PI before the estimate is invoiced?
Journal type: Job Purchase Invoices/Credit Notes (PUR) {the journal name might different at some client installations}
WIP A/C DR
Supplier A/C CR
The following entries are then created when you invoice the estimate:
Journal type: Job Invoices/Credit Notes (INP) {the journal name might different at some client installations}
Client A/C DR (invoice amount taken from the estimate)
Income A/C CR (invoice amount taken from the estimate)
Cost A/C DR (cost taken from the PI) WIP A/C CR (reverses the provision entry created)
Scenario 4 - What are the entries created when a PO is converted to a PI and there is no estimate on the job?
Journal type: Job Purchase Invoices/Credit Notes (PUR) {the journal name might different at some client installations}
Cost A/C DR
Supplier A/C CR
Scenario 5 - What are the entries made when you modify a PO after the estimate is invoiced?
Journal type: Job Purchase Invoices/Credit Notes (PUR) {the journal name might different at some client installations}
WIP A/C DR (initial provisioned cost reversed)
Cost A/C CR (initial provisioned reversed)
Cost A/C DR (new amount taken from new PO) WIP A/C CR (new amount taken from new PO)
Scenario 6 - What are the entries made when a PO is cancelled after the estimate is invoiced?
Journal type: Job Purchase Invoices/Credit Notes (PUR) {the journal name might different at some client installations}
WIP A/C DR (reverses the provision entry created)
Cost A/C CR (reverses the provision entry created)
Scenario 7 - What are the entries made when the PO is converted to a PI but the amount of the PI is different from the PO (after the estimate is invoiced)?
Journal type: Job Purchase Invoices/Credit Notes (PUR) {the journal name might different at some client installations}
WIP A/C Dr (with the PO provisional cost – reversed)
Cost A/C Cr (with the PO provisional cost – reversed)
Cost A/C Dr (with the actual PI cost)
Supplier A/C Cr (with the actual PI cost)
The net effect on cost is that the cost is amended by the descrepancy between the purchase order and the purchase invoice IN THE MONTH OF THE PURCHASE INVOICE.
Handling receipt of purchase invoice (against purchase order) after invoicing the client
In addition to the notes above, you need to take understand the various scenarios in handling the receipts of purchase invoice against purchase orders after invoicing the client with reference to date of receipt.
Scenario 1 - What are the entries created when the purchase invoice is to be recorded after the invoice month?
Eg. Purchase invoice is recorded on 05/11/2008 and the client was invoiced on 05/10/2008:
Scenario 2 - What are the entries created when the purchase invoice is to be recorded before the invoice month?
Eg. Purchase invoice is recorded on 05/09/2008 and the client was invoiced on 05/10/2008:
Scenario 3 - What are the entries created when the purchase invoice is slightly more than the purchase order (after invoicing the client)?
Eg. Purchase order was for 5000 AED, but the Purchase invoice was received for 5500 AED:
Scenario 4 - What are the entries created when the purchase invoice is slightly less than the purchase order (after invoicing the client)?
Eg. Purchase order was for 5000 AED, but the Purchase invoice was received for 4500 AED:
Understanding how a date change on a PO or conversion from PO to PI after invoicing the client affect the period of automatic journal
Scenario: Job created in 2/2009 Estimate raised on 4/2/2009 for 1000 AED PO raised on 4/2/2009 for 900 AED Invoice issued on 4/2/2009
Journal entry created upon client invoicing:
Period: 2/2009 Date: 4/2/2009 Client A/c Dr Income A/c Cr Cost A/c Dr WIP A/c Cr
NOTE: The period/date of the journal which is automatically created incase of client invoicing will depend on the date you input on the New Invoice selection screen – the estimate in this case will not overrule the invoice date you put on the invoice screen.
Journal entry created upon updating the PO with order date 4/2/2009 (current date) – in Purchase Invoice Journal
Period: 2/2009 Date: 4/2/2009 WIP A/c Dr - reversal entry Cost A/c Cr Cost A/c Dr - actual entry WIP A/c Cr
Journal entry created upon updating the PO with order date 4/3/2009 (future date) – in Purchase Invoice Journal
Period: 2/2009 Date: 4/2/2009 - reversal entry WIP A/c Dr Cost A/c Cr Period 3/2009 Date: 4/3/2009 - actual entry Cost A/c Dr WIP A/c Cr
Journal entry created upon updating the PO with order date 4/1/2009 (past date) – in Purchase Invoice Journal
Period: 2/2009 Date: 4/2/2009 - reversal entry WIP A/c Dr Cost A/c Cr Period 1/2009 Date: 4/1/2009 - actual entry Cost A/c Dr WIP A/c Cr
Journal entry created upon converting the PO to a PI with order date 4/2/2009 and PI date 4/2/2009 (current date) – in Purchase Invoice Journal
Period: 2/2009 Date: 4/2/2009 WIP A/c Dr - reversal entry Cost A/c Cr Cost A/c Dr - actual entry Supplier A/c Cr
Journal entry created upon converting the PO to a PI with order date 4/2/2009 (current) and PI date 4/1/2009 (past date) – in Purchase Invoice Journal
Period: 1/2009 Date: 4/1/2009 WIP A/c Dr - reversal entry Cost A/c Cr Cost A/c Dr - actual entry Supplier A/c Cr
Journal entry created upon converting the PO to a PI with order date 4/3/2009 (future) and PI date 4/3/2009 (future date) – in Purchase Invoice Journal
Period: 3/2009 Date: 4/3/2009 WIP A/c Dr - reversal entry Cost A/c Cr Cost A/c Dr - actual entry Supplier A/c Cr
NOTE: The period/date of the journal which is automatically created incase of conversion from PO to PI always will depend on the supplier invoice date you input – the PO date has no effect in this case and can be anything.
