webERP Manual
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General Ledger

Overview

The general ledger is the accounting hub that is central to the "sub" ledgers for creditors (Accounts Payable), debtors (Accounts Receivable) and stock (inventory). All entries in the sub ledgers are also represented by entries in the general ledger. It is the integration set-up that determines how entries in the sub-ledgers are reflected in the general ledger. Most activity in the general ledger will be automatically created from the activity in the sub-ledgers with receivables, payables and stock administration.

However, there are also facilities to:

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Account Sections

The account section is the top level object for the General Ledger. It is the container for everything within the GL. They are created or amended from the Maintenance menu in the General Ledger module. There are two sections that cannot be removed or renamed, these are the Income and the Cost of Sales sections

Account Groups

The account group is the parent object of a general ledger account. Child accounts created inherit the properties of the account group - ie the account will be a profit and loss account if it belongs to an account group that is a profit and loss account, the child accounts will display in the trial balance (TB) together in the sequence determined by the account groups sequence in the trial balance (TB).

Using a numbering system inhibits the ability to manipulate the format of the trial balance ie you have to be able to change the account code to change where an account appears ie

10100 motor expense Copenhagen

10110 motor expenses The Hague

10120 motor expense Amsterdam

would be great but then if we wish to restructure so that Copenhagen expenses are all shown together and The Hague is now all shown together etc we will have to change the numbering. In web-erp all that is required is to change the account group. In the first situation we could have an account group for motor expenses and all these account numbers would be set up as belonging to the account group. We can decide whereabouts the account group should appear in the trial balance by changing the sequence in trial balance field. All accounts in the account group will show together. If we decided to change the trial balance to show The Hague expenses together as a separate group of costs, we could create an account group for the The Hague selling costs - or whatever, and change the motor expenses the Hague account no 10110 to be a member of that account group.

Account groups require the sequence in the trial balance to be specified and also whether the accounts in that group will be profit and loss accounts or balance sheet accounts.

A balance sheet account is one where only the balance at the end of the period concerned is of interest. A profit and loss is one where we are interested in the movement over the period. eg. Motor expenses we are not concerned with the balance at the end of the month so much as how much was spent over the period of the profit and loss. However, for a bank account we wish to know what we have now as a balance not the movements in the account. As noted accounts created as a member of an account group will inherit the properties of the account group ie if the account group is a balance sheet group then the accounts will be interpreted as balance sheet accounts.

Say we wish to report on "The Hague", "Compenhagen" and "Amsterdam" we can set up an account group for each, with a series of sub-account groups under each of these account groups.

General Ledger Accounts

Any number of general ledger accounts can be defined, the structure of the accounts is goverened by the Account Group - which defines whether an account is a balance sheet or profit and loss account and whereabouts it should appear in the trial balance. All accounts are displayed under the heading of the account group so the numbering of general ledger accounts has no bearing on the display of the trial balance or accounts (in contrast to legacy systems).

General ledger accounts are the cost holders for all accounting in webERP. Whilst it is possible to run webERP to keep track of just stock or debtors/accounts receivable or accounts payable, it is only when these functions are all integrated with the accounting hub that the real value of webERP's integrated design is fully realised. With all costs recorded in accounts payable, bank accounts, accounts receivable, stock, shipment costing, contract costing etc and with the correct configuration, the accounts almost drop out with minimal additional manual inputs required. Useful management information is therefore available in real time as the transactions are made. Next day reporting with accurate stock cut off and accruals all automatically made by the purchasing system is possible.

To create a general ledger account, click on:

Main Menu->Maintenance: GL Account

The list of existing general ledger accounts will display - together with the whether the account group of the account is a P & L. To enter a new account all that is required is to give it a number and a description and select an existing account group.

General Ledger Tags (Or Cost Centres)

General Ledger tags provide an alternative way of viewing General Ledger transactions. Each income or expenditure transaction can be given its own tag, and then reports acan be run based on tags.

As an example consider an organisation with several vehicles and the organisation wishes to report on how much each vehicle costs to run. A tag can be setup for each vehicle, and then when there is any expense, such as fuel, maintenance, licensing, insurance etc then each transaction can be tagged to individual vehicles, and then a report be produced for the cost of each tag corresponding to each vehicle.

Tags effectively add another dimension to the general ledger - or "cost centre" functionality. There is a "tag" profit and loss account so you can produce a p & l for each "tag".

The tag is offered up each time you create a general ledger transaction or purchase invoice or stock adjustment so all general ledger transactions can be captured with the "tag" or "cost centre" they relate to and the P & L can be reported by "tag" (or "cost centre").

General Ledger Budgets

Each Profit and Loss General Ledger code can have a monthly budget set against it. To enter these budgets select GL Budgets from the maintenance menu in the General Ledger Module. From this first screen you can then select the GL account that you wish to enter the budget for.

The user is then presented with a screen split into 3 sections. The first section is for the previous financial years figures, and shows the actual figures, compared to the budget. The budget figures cannot be changed.

The next two sections are for this financial year, and next financial year respectively. For these two years you can amend the monthly budget for each year. If the amount is split evenly over the year, you can input a total budget figure and then click on the aportion budget button, which will distribute the budget evenly.

Bank Accounts

Certain general ledger accounts can be defined as bank accounts - as many bank accounts as needed can be defined. At the time of defining a general ledger account as bank account the currency of the bank account must also be specified. General ledger accounts defined as bank accounts can be reconciled to bank statements using the matching facilities - all receipts and payments show in the currency of the bank account for easy matching off statments. Entries made to bank accounts using receipts or payments, also create a total receipt or payment, which is retained for the purposes of matching off the bank statements. Using the bank payments page, general ledger payments can be analysed to any number of other general ledger accounts, but only one entry to the bank account is made. This page also allows payments to supplier accounts to be created. Similarly, using the receipt entry page, a series of receipts from customers which may all have been banked together can be deposited as one amount to a bank account. There is only one amount appearing on the statement as the total of all these receipts, this bank account transaction is created and available for matching deposits off the bank statements.

Bank accounts are defined from the setup tab from the link to Bank Accounts Maintenance. There is facility to enter the name of the account, the currency of the account, the bank account number and the address of the bank if required, as well as selecting the general ledger account to which it refers. There are links to edit existing bank account records and to delete them. However, once defined as referring to a particular general ledger code it is not possible to change the general ledger code of the bank account. This is because there would be entries made to this account. Similarly, if bank transactions have been created using this bank account it is not possible to delete it. The bank account transactions must be purged first (but currently no facility exists to purge bank transactions). It is not possible to change the currency of a bank account once there are transactions against it.

Once all receipts and payments are matched to bank statements, the bank reconciliation statement can be printed which should show how the current general ledger balance reconciles to the bank statement for this account. The reconciliation also has an option available for bank accounts set up in other than the functional currency of the business (local currency), to post differences in exchange. The balance of the account is maintained in local currency in the general ledger and for the purposes of the bank reconciliation this is converted to the bank account currency at the exchange rate in the currencies table (see Setup -> Currency Maintenance) - this rate can be changed manually to the rate of the day and the foreign currency balance on the account will change - to correct this balance an exchange difference needs to be recorded. Having worked through the matching of receipts and payments to the bank statements - the bank statment balance can be entered to compare against the system balance - a correcting entry is then made to the GL to post the difference on exchange. The posting to the general ledger is back dated to the end of the preceeding month - since it is assumed that the reconciliation may be a few days or a week behind the current date.

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Bank Account Payments

From the general ledger tab, the first link under transactions is Bank Account Payments.

The following data is required:

Payments can take two forms - either it is a general ledger payment or it is a payment to a supplier. General ledger payments require an analysis of how the payment should be posted to the general ledger. General ledger accounts can be specified either as the account code directly (if the account code is known) or by selecting from the select box. Any narrative applicable to the general ledger amount can be entered too - and the amount to be posted to the selected/entered account. The total payment is taken as being the sum of all the entries made. If the total of all entries made is negative then this is entered as a negative payment - these are accepted to allow for correction of data entry errors. Payments are always entered in the curreny of the payment - the conversions are handled by the system for general ledger postings etc.

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Import Bank Transactions

This script imports bank transactions. It works with bank accounts that have an import format already defined.

The file format used by your bank for statement exports is defined by system administrators in Main Menu > General Ledger > Maintenance > Bank Accounts.

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General Ledger Receipts

The system allows for the receipt of money into any of the bank accounts that have been set up and for the income to be credited to any GL account. Receipts can be entered in any currency, and webERP will track the exchange rates correctly

To initiate a receipt choose the 'Bank Account Receipts Entry' item from the Transactions menu within the General Ledger module.

Firstly, the receipt header information is required, the bank account - one of the previously defined bank accounts (see setup), the date the batch of receipts are banked, the currency and exchange rate of the banking and the type of receipt together with any narrative. The currency can be selected from the defined currencies (see setup). The receipt types can also be selected - they are defined in config.php. Once this information is entered it must be accepted before the receipts in the batch can be entered.

Secondly the details of each receipt line must be entered. This consists of the GL tag (if any is to be assigned to this line), the GL account code to post this line to, the amount of the receipt, in the currency selected in the header, details of the payees bank, and any narrative you wish to be entered against this receipt in the general ledger.

Once all the lines have been entered you you can click on the button to accept and process the batch. Once this has been done, the batch cannot be amended.

Matching of Bank Statements to webERP

When a bank statement arrives, the transactions that have cleared through the bank, must now be matched off against the transactions in webERP. THis can be done by selecting "Bank Account Receipts Matching" or "Bank Account Payments Matching" from the Transactions menu in the General Ledger module.

Next select the bank account that the statement is for, and use the different options available to filter how the transactions are shown. Then it is just a matter of ticking off the transaction on webERP and on the bank statement.

General Ledger Journals

Enter general ledger journals between any general ledger accounts - except bank accounts. These can also be made to reverse automatically in the following period. Further journals can be posted to any period future or previously - the period is determined by reference to the date entered.

General Ledger Integration Setup

Bank Accounts are automatically integrated with the general ledger and cannot exist separately without the GL being used. Every transaction is recorded in two places (double entry) eg. A bank account payment reflects in the bank account and also in the expense account that is was paid for - eg. stationery, fuel, entertaining, advertising or whatever. One entry goes as a debit on the left and the other as a credit on the right - when you look at the trial balance the debits should tie up with the credits ie the trial balance - a list of the general ledger balances should have balancing debit total and credit totals.

With respect to the sales (AR) and purchase (AP) ledgers, the integrated general ledger postings that are created automatically for transactions in these modules can be turned off in the company preferences screen by setting each of the integration flags to No.

Integrated general ledger postings do provide a good way of building up the business's accounts from activity in these sub ledgers.

You can choose between two levels of integration:

1. Integrate GL at the debtors and sales level only

This creates general ledger journals for each sale as follows:

DR the debtors control account - defined in the company preferences screen

CR the sales account - defined with reference to the customer sales area, stock category of the item being sold and the sales type (price list) of the customer. This provides great flexibility as to how sales should be posted

CR the tax to the taxgl account defined in the tax authorities (ie the general ledger code of the tax authority of the customer branch). It is also possible to have just one general ledger account for all sales by defaulting ANY sales area, ANY stock category and ANY sales type with a single general ledger code - see later section on sales general ledger codes.

the reverse takes place for a credit note.

When cash is received:

CR the debtors control - defined in company preferences DR the bank account - defined in the bank account setup.

There are also general ledger entries for discounts and differences on exchange which have been ignored for the purposes of this introduction.

This level of integration ensures that the list of balances of all customer accounts (in local currency) always ties up with the general ledger debtors control account.

2. Integrate GL at the stock level as well

For every sale:

CR stock value at the standard cost of each item sold - the stock GL account being defined in the stock categories record.

DR Cost of Goods Sales (COGS - or COS) with the same cost. - the COGS GL accounts are defined with similar flexibility as descibed for the Sales GL accounts under the setup menu under AR/AP options

the reverse happens for credits.

This enables the stock value to be continuously updated in the general ledger and always be equal to the stock valuation at standard cost.

This level of integration also has ramifications for stock adjustments, stock deliveries and stock cost changes.

For stock adjustments the quantity adjusted is extended by the standard cost and it is written on (CR) or off (DR) to the stock adjustment GL account as specified in the stock category record for that item.

For receipts of stock - the stock coming in is extended by the standard cost and the entry is to:

DR stock at standard cost x number received - the stock account being defined in the stock category record for the item being received.

CR GRN suspense at standard cost x number received - this account is specified again in the company preferences screen.

The two levels of general ledger integration are:

The level of general ledger integration is determined by reference to the flags in the company preferences page.

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Sales Journals

The general ledger accounts that are used in this level of integration are determined from several inputs.

A table of sales general ledger accounts is maintained and can be modified from the setup tab. When an invoice is created from the ConfirmDispatch_Invoice.php script the system uses a function defined in GetSalesTransGLCode.inc to look up the general ledger codes that are appropriate. By default this function uses the following logic:

Since the logic of how the general ledger account is determined is defined in this function it is relatively simple to change this to what is most appropriate for the business.

The freight recovery and the debtors control account used are those defined in the company preferences page.

The tax account used is the account defined in the tax authorities definition used for the customer being invoiced.

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Stock Journals

The general ledger accounts that are used for posting sales transactions are determined using the sales area, the sales type of the customer being invoiced/credited and the stock category of the item being invoiced/credited. A table of general ledger accounts is maintained and can be modified from the set up tab from the link "COGS GL Interface Postings". The same logic as above is applied and the function is defined in the same GetSalesTransGLCode.inc script to look up the appropriate GL codes. Again, since the logic of how the general ledger account is determined is defined in the function GetCOGSGLAccount, it is relatively simple to change this to suit the business.

The account to credit stock with for the cost of goods sold is determined by reference to the stock item being sold. The stock category of the item is retrieved and the general ledger codes applicable to the stock category are used.

The profit and loss accounts used for stock adjustments are also determined by reference to the stock category record.

The profit and loss account used for posting the variance between standard cost of a purchased item and its actual cost as invoiced is also determined from the stock category record.

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General Ledger Inquiries and Reports

The webERP General Ledger module has the following reports:

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Maintenance

GL Account Authorised Users

This software has methods to assign permissions or access rights to specific users and groups of users. The system controls the ability of the users to view or make changes to the contents of the GL accounts.

With this script, you can change a specific GL account access permissions for users:

If you need to copy the access rights to general ledger accounts from one user to another, you can use an utility. See: Copy Authority of GL Accounts from one user to another.

User Authorised GL Accounts

This software has methods to assign permissions or access rights to specific users and groups of users. The system controls the ability of the users to view or make changes to the contents of the GL accounts.

With this script, you can change a specific user access permissions to GL accounts:

If you need to copy the access rights to general ledger accounts from one user to another, you can use an utility. See: Copy Authority of GL Accounts from one user to another.

Bank Account Authorised Users

This software has methods to assign permissions or access rights to specific users and groups of users. The system controls the ability of the users to view and make changes to the contents of the bank accounts.

With this script, you can add or remove the access permission for each user that grants or denies his ability to view or update that bank account.

User Authorised Bank Accounts

This software has methods to assign permissions or access rights to specific users and groups of users. The system controls the ability of the users to view and make changes to the contents of the bank accounts.

With this script, you can add or remove the access permission for each bank account that grants or denies the ability of that user to view or update it.

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