ORDER ENTRY GENERAL LEDGER POSTING LOGIC

When goods are brought into stock either by purchase of the item or manufacture of the item the value of the inventory is increased. When the goods are being sold the inventories of the items must be reduced and the Accounts Receivable updated. This is done by the Invoice Update (OE4100) and the general ledger (G/L) transactions created.

The following is a summary of General Ledger (G/L) postings that occur in the Order Entry Cycle. Each Sales Order consists of a journal entry with two equal and offsetting postings.

For prepayments see Sales Orders and Prepayments below.

When entering a Sales order:

OE2100 (Order Entry)
Order amount =
Price of item (OE1700) * calculated or entered quantity issued

/ price per of item (OE1700)
+
taxes and any other charges (ie. Freight) based upon the
Customer for which the order is placed.

The corresponding G/L transactions are done when the Invoice update (OE4100) is run.

For each order the postings are as follows (General Ledger account based upon … with amount):

Debit -	Account Receivable (AR) ‘Regular’ account, based upon the currency/branch combination (GB0700) for the total invoice amount (Taxes and any Freight included).
Debit -	Cost of Goods Sold (COGS), based upon the reason code (GB4300) for the warehouse of the inventory item, with the standard cost (IN0200) of the item.
Credit -	Sales, based upon the reason code (GB4300) for the warehouse of the inventory item, with the price of the item (OE1700).
Credit -	Inventory control account based upon the reason code (GB4300) for the warehouse of the inventory item, with the standard cost (IN0200) of the item. Note. If the ‘Customer Default Reason code’ system flag on GB2800 is set then the reason code field in Customer Maintenance (gb0900) is mandatory. This will cause the reason code for order entry detail lines to default to the reason code for the ship to customer. If this flag is not set the reason code for order entry detail lines will default to the reason code entered in Product Group Maintenance (in1000) for the product entered.
Credit -	Taxes if applicable: Provincial Tax: Based upon Province/State and branch (GB1300) or if no branch/account combination then the currency/branch combination (GB0700) of the order, with the percentage of tax (GB1300) calculated on the invoiced amount Federal/VAT Tax: Based upon the currency/branch (GB0700) of the order, with the percentage of tax of the country (GB2200) calculated on the invoiced amount.
Credit -	Freight if applicable, based upon the currency/branch (GB0700) of the order or the reason code if the System Flags Maintenance (GB2800) has the ‘Freight By Reason Code’ under Order Entry Flags selected (Note. this is the system default), with the Freight amount for the order (Total of all charges including Freight Amount in the ‘Additional Charges’ on the Order Header).

Sales Order and Prepayments

In the case of prepayments an order can be entered and a payment made prior to invoicing. This can be for the full amount of the order or for a portion of the order amount. The general ledger accounts used for prepayments are defined to the payment method used. This is done in the Payment Method Maintenance - gb5200.

Each payment type has for each branch and bank defined to the system a Credit and Debit account. It is these accounts that the amount of the prepayment (captured at order entry) is posted to.

The following is a summary of General Ledger (G/L) postings that occur in the Order Entry Cycle when there are prepayments involved. Each Sales Order consists of a journal entry with equal and offsetting postings.

When entering a Sales order:

OE2100 (Order Entry)
Order amount =
Price of item (OE1700) * calculated or entered quantity issued

/ price per of item (OE1700)
+
taxes and any other charges (ie. Freight) based upon the
Customer for which the order is placed.

If there is a prepayment for the order then the amount of the prepayment is posted to the credit and debit accounts defined to the payment method used directly upon order entry. An ‘oe21‘ journal is created with the following postings with “Prepayment” as the explanation.

Credit -	Credit account, based upon the branch/bank combination (GB5200) for the prepayment amount.
Debit -	Debit account, based upon the branch/bank combination (GB5200) for the prepayment amount.

Invoicing of the sales order occurs as per normal processing. If the Prepayment is for the full amount of the order then the balance of the invoice printed is 0. If the Prepayment is for a portion then the balance of the order amount outstanding is invoiced.

NOTE. In either case the A/R posting is for the full amount of the order without the Prepayment. All prepayments are reflected as payments in the customer’s outstanding receivables.

The corresponding G/L transactions are done when the Invoice update (OE4100) is run.
For each order the postings are as follows (General Ledger account based upon … with amount):

Debit -	Account Receivable (AR) ‘Regular’ account, based upon the currency/branch combination (GB0700) for the total invoice amount (Taxes and any Freight included).
Debit -	Cost of Goods Sold (COGS), based upon the reason code (GB4300) for the warehouse of the inventory item, with the standard cost (IN0200) of the item.
Credit -	Sales, based upon the reason code (GB4300) for the warehouse of the inventory item, with the price of the item (OE1700).
Credit -	Inventory control account based upon the reason code (GB4300) for the warehouse of the inventory item, with the standard cost (IN0200) of the item. Note. If the ‘Customer Default Reason code’ system flag on GB2800 is set then the reason code field in Customer Maintenance (gb0900) is mandatory. This will cause the reason code for order entry detail lines to default to the reason code for the ship to customer. If this flag is not set the reason code for order entry detail lines will default to the reason code entered in Product Group Maintenance (in1000) for the product entered.
Credit -	Taxes if applicable: Provincial Tax: Based upon Province/State and branch (GB1300) or if no branch/account combination then the currency/branch combination (GB0700) of the order, with the percentage of tax (GB1300) calculated on the invoiced amount Federal/VAT Tax: Based upon the currency/branch (GB0700) of the order, with the percentage of tax of the country (GB2200) calculated on the invoiced amount.
Credit -	Freight if applicable, based upon the currency/branch (GB0700) of the order or the reason code if the System Flags Maintenance (GB2800) has the ‘Freight By Reason Code’ under Order Entry Flags selected (Note. this is the system default), with the Freight amount for the order (Total of all charges including Freight Amount in the ‘Additional Charges’ on the Order Header).

Reason Codes are defined to the product groups that the product belongs to and can have different accounts based upon the warehouse location.

See Product Group Master Maintenance (IN1000), Reason Code Master Maintenance (GB4300)

Final processing of any prepayments occurs within the Accounts Receivable Module. To update the general ledger to reflect the pre-payments to the bank and A/R accounts respectively the Prepayments - Transaction Journal (AR5700) and Update (AR5800) must be run. This process is similar to the invoice update (OE4100) and processes only the ‘oe21’ journals created at order entry when the prepayment was entered.

The corresponding G/L transactions are done when the Transaction Update (AR5800) is run.
For each prepayment of an order/invoice the postings are as follows (General Ledger account based upon … with amount):

Credit -	Account Receivable (AR) ‘Regular’ account, based upon the currency/branch combination (GB0700) with the prepayment amount.
Debit -	Payment Method – Credit account based upon branch/bank payment method (GB5200) with the prepayment amount.