The accounting function in an organization comprises the following activities:
- Recording transactions that create assets, liabilities, income or expenses in the books of accounts.
- Accumulating balances pertaining to each type of account
- Measuring the impact of these transactions on the organization's profits and losses.
- Assessing the value of the company's assets and liabilities.
- Communicating financial information relating to the above activities using relevant reports.
Accounting for Purchases
Purchase and purchase returns may be accounted in any of the following ways:
a) Creating Goods Receipt transaction
b) Creating Purchase Invoice transactions
c) Creating Debit Notes
d) Through Manual entries in purchase journals
e) Through System purchase journals
System Purchase Journals are automatically created by the software:
To account for purchase receipts, purchase invoices or debit notes created.
When supplier balances are imported.
Manual purchase journals are created in the following instances:
- When you purchase items for which you do not want to track inventory-example:Low value items such as paper clips and photocopying charges.
- When you purchase items or services that you do not regularly deal with like assets that you purchase for your business.
- When the amount payable is fixed and is a recurring item or service like rent paid for your office or warehouse
- When you want to create debit notes to write off miscellaneous or small amounts outstanding to suppliers.
Accounting for Sales
Sales and sales return transactions may be accounted either through system sales journals (that are generated when sales invoices and credit notes are created) or by making a manual entry in the Sales Journal.
System sales journals are created:
- To account for sales invoices or credit notes created.
- When customer balances are imported.
- Manual sales journals are created to manually account for sales returns or credit notes.
Manual sales journals are created in the following instances:
- When you sell miscellaneous items that you do not need track inventory like recycled paper and used furniture.
- When you sell investments.
- When the amount received is recurring in nature like rent from Sub-letting your premises.
- When you create credit notes to write off miscellaneous or small amounts that are outstanding from miscellaneous customers.
- Manual sales transactions may be viewed in the Sales Invoices List by selecting View > Summary. When a manual sales journal is created, the status of the journal is by default closed. The transaction number is prefixed with an "M" to denote that it is a manual transaction.
To Know more:
Accounting Debit Transactions
Accounting in General Journals
Accounting Purchase Transactions
Accounting Sales Transactions
Accounting Credit Transactions