Re: Purchasing Fixed Assets
Locked
 
|
David,
I think what should happen is this: When any fixed asset is created, if we know the ownerPartyId, then we can create: Debit Fixed Asset (or a specific FixedAsset GL account) Credit Uninvoiced Fixed Asset Receipt Then, when you have a purchase invoice with a fixed asset item created, you can do this: Debit Uninvoiced Fixed Asset Receipt Credit a Payable of some kind--Accounts Payable? I'm not sure - often fixed assets are bought with loans. Then we'd have to think about doing the depreciation calculations, that's what I think could be complicated. Best Regards, Si [hidden email] |
|
|
I know you want to want to link all of these into
automated actionable steps that make sense to your business processes but you must remember: General Ledger entries are ONLY for economic events. Receipt of an invoice is NOT an economic event. If you receive a fixed asset you: Debit: Fixed Asset Credit: Accounts Payable If you want to create a relationship between the fixed asset and an invoice, great. If you want to create a relationship between the invoice and a vendor's account, great. If you want to create a relationship between a general ledger entry and an invoice or a fixed asset, great. But under no circumstance should you record a non economic event in the general ledger. --- Si Chen <[hidden email]> wrote: > David, > > I think what should happen is this: > > When any fixed asset is created, if we know the > ownerPartyId, then we > can create: > > Debit Fixed Asset (or a specific FixedAsset GL > account) > Credit Uninvoiced Fixed Asset Receipt > > Then, when you have a purchase invoice with a fixed > asset item > created, you can do this: > > Debit Uninvoiced Fixed Asset Receipt > Credit a Payable of some kind--Accounts > Payable? I'm not sure - > often fixed assets are bought with loans. > > Then we'd have to think about doing the depreciation > calculations, > that's what I think could be complicated. > > Best Regards, > > Si > [hidden email] > > > > |
|
|
Hmmm... invoice are _definitely_ "economic events", or artifacts that have a direct financial impact on a company and therefore when finalized cause GL entries to be posted. That's the normal way of doing things. An order is received and there is generally no GL entry at that point. There are GL entries needed during fulfillment (inventory issuance), invoicing, receiving payments, etc. Maybe this isn't what you meant though. I agree that Si's use of a "Uninvoiced Fixed Asset Receipt" account seems a little funny. When a Fixed Asset is received you would get an invoice along with it from the vendor so it would be an unpaid invoice, or payables entry. -David On Dec 1, 2006, at 5:21 PM, Chris Howe wrote: > I know you want to want to link all of these into > automated actionable steps that make sense to your > business processes but you must remember: > > General Ledger entries are ONLY for economic events. > > Receipt of an invoice is NOT an economic event. If > you receive a fixed asset you: > > Debit: Fixed Asset > Credit: Accounts Payable > > If you want to create a relationship between the fixed > asset and an invoice, great. If you want to create a > relationship between the invoice and a vendor's > account, great. If you want to create a relationship > between a general ledger entry and an invoice or a > fixed asset, great. But under no circumstance should > you record a non economic event in the general ledger. > > > > --- Si Chen <[hidden email]> wrote: > >> David, >> >> I think what should happen is this: >> >> When any fixed asset is created, if we know the >> ownerPartyId, then we >> can create: >> >> Debit Fixed Asset (or a specific FixedAsset GL >> account) >> Credit Uninvoiced Fixed Asset Receipt >> >> Then, when you have a purchase invoice with a fixed >> asset item >> created, you can do this: >> >> Debit Uninvoiced Fixed Asset Receipt >> Credit a Payable of some kind--Accounts >> Payable? I'm not sure - >> often fixed assets are bought with loans. >> >> Then we'd have to think about doing the depreciation >> calculations, >> that's what I think could be complicated. >> >> Best Regards, >> >> Si >> [hidden email] >> >> >> >> > |
|
|
The economic event is the transfer of ownership of
goods for obligation (accounts payable) or cash. When they accepted ownership of the goods, they accepted the asset. Additionally, when they accepted the ownership of the goods, they accepted the liability. For simplicity, many small businesses hold off on recording this economic event until receiving an invoice. However, receipt of the invoice is not the economic event. This practice is grossly incorrect and may (will) cause major discrepancies in periodic financial reports. A piece of paper summarizing the transfer of ownership has no financial worth and therefore cannot be an economic event. There are two things (WHAT and WHEN[a])that are important for a general ledger entry. And two additional things (WHO and WHEN[b]) that are important for auditing WHAT - the economic event WHEN[a] - date the economic event took place WHO - who recorded the economic event WHEN[b] - date the economic event was recorded The distinction I am making is between WHAT the economic event is and WHEN[b] someone chooses to record it. WHEN[b] is not a part of the economic event. These small differences are some of the reasons why Accountants still get paid the big bucks even in companies that have complete ERP packages. The receipt of the order is not the economic event either. The economic event depends on the terms of shipping FOB shipping/FOB destination. The economic event is the transfer of ownership, not the receipt of goods. It is possible to contract in such a way to make these simultaneously the same moment in time, however generally they are not. --- David E Jones <[hidden email]> wrote: > > Hmmm... invoice are _definitely_ "economic events", > or artifacts that > have a direct financial impact on a company and > therefore when > finalized cause GL entries to be posted. That's the > normal way of > doing things. An order is received and there is > generally no GL entry > at that point. There are GL entries needed during > fulfillment > (inventory issuance), invoicing, receiving payments, > etc. > > Maybe this isn't what you meant though. I agree that > Si's use of a > "Uninvoiced Fixed Asset Receipt" account seems a > little funny. When a > Fixed Asset is received you would get an invoice > along with it from > the vendor so it would be an unpaid invoice, or > payables entry. > > -David > > > On Dec 1, 2006, at 5:21 PM, Chris Howe wrote: > > > I know you want to want to link all of these into > > automated actionable steps that make sense to your > > business processes but you must remember: > > > > General Ledger entries are ONLY for economic > events. > > > > Receipt of an invoice is NOT an economic event. > If > > you receive a fixed asset you: > > > > Debit: Fixed Asset > > Credit: Accounts Payable > > > > If you want to create a relationship between the > fixed > > asset and an invoice, great. If you want to > create a > > relationship between the invoice and a vendor's > > account, great. If you want to create a > relationship > > between a general ledger entry and an invoice or a > > fixed asset, great. But under no circumstance > should > > you record a non economic event in the general > ledger. > > > > > > > > --- Si Chen <[hidden email]> > wrote: > > > >> David, > >> > >> I think what should happen is this: > >> > >> When any fixed asset is created, if we know the > >> ownerPartyId, then we > >> can create: > >> > >> Debit Fixed Asset (or a specific FixedAsset GL > >> account) > >> Credit Uninvoiced Fixed Asset Receipt > >> > >> Then, when you have a purchase invoice with a > fixed > >> asset item > >> created, you can do this: > >> > >> Debit Uninvoiced Fixed Asset Receipt > >> Credit a Payable of some kind--Accounts > >> Payable? I'm not sure - > >> often fixed assets are bought with loans. > >> > >> Then we'd have to think about doing the > depreciation > >> calculations, > >> that's what I think could be complicated. > >> > >> Best Regards, > >> > >> Si > >> [hidden email] > >> > >> > >> > >> > > > > |
|
|
In reply to this post by David E Jones-2
David,
Invoices are definitely economic events, I agree. Here's the rationale for the "Uninvoiced Fixed Asset Receipt," and it is similar to the reasonable for the "Uninvoiced Item Receipt": it is to decouple of the value of the receipt or creation of a fixed asset from accounts payable invoices. To wit, you can have these scenarios which this account would solve better: 1. You buy a fixed asset worth $1 million, but the vendor's invoice also includes $50,000 of shipping and $150,000 for set up. So you can do this: DR Fixed Asset $1 million CR Uninvoiced Fixed Asset Receipt $1 million DR Uninvoiced Fixed Asset Receipt $1 million DR Shipping $50,000 DR Setup $150,000 CR Accounts Payable $1.2 million 2. You manufactured a fixed asset worth $1 million in house, so you can do this DR Fixed Asset $1 million CR Uninvoiced Fixed Asset Receipt $1 million DR Uninvoiced Fixed Asset Receipt $1 million CR WIP Inventory, Labor, expenses, etc. $1 million You can imagine there are some other scenarios where this would apply. On Dec 3, 2006, at 1:00 AM, David E Jones wrote: > > Hmmm... invoice are _definitely_ "economic events", or artifacts > that have a direct financial impact on a company and therefore when > finalized cause GL entries to be posted. That's the normal way of > doing things. An order is received and there is generally no GL > entry at that point. There are GL entries needed during fulfillment > (inventory issuance), invoicing, receiving payments, etc. > > Maybe this isn't what you meant though. I agree that Si's use of a > "Uninvoiced Fixed Asset Receipt" account seems a little funny. When > a Fixed Asset is received you would get an invoice along with it > from the vendor so it would be an unpaid invoice, or payables entry. > > -David > > > On Dec 1, 2006, at 5:21 PM, Chris Howe wrote: > >> I know you want to want to link all of these into >> automated actionable steps that make sense to your >> business processes but you must remember: >> >> General Ledger entries are ONLY for economic events. >> >> Receipt of an invoice is NOT an economic event. If >> you receive a fixed asset you: >> >> Debit: Fixed Asset >> Credit: Accounts Payable >> >> If you want to create a relationship between the fixed >> asset and an invoice, great. If you want to create a >> relationship between the invoice and a vendor's >> account, great. If you want to create a relationship >> between a general ledger entry and an invoice or a >> fixed asset, great. But under no circumstance should >> you record a non economic event in the general ledger. >> >> >> >> --- Si Chen <[hidden email]> wrote: >> >>> David, >>> >>> I think what should happen is this: >>> >>> When any fixed asset is created, if we know the >>> ownerPartyId, then we >>> can create: >>> >>> Debit Fixed Asset (or a specific FixedAsset GL >>> account) >>> Credit Uninvoiced Fixed Asset Receipt >>> >>> Then, when you have a purchase invoice with a fixed >>> asset item >>> created, you can do this: >>> >>> Debit Uninvoiced Fixed Asset Receipt >>> Credit a Payable of some kind--Accounts >>> Payable? I'm not sure - >>> often fixed assets are bought with loans. >>> >>> Then we'd have to think about doing the depreciation >>> calculations, >>> that's what I think could be complicated. >>> >>> Best Regards, >>> >>> Si >>> [hidden email] >>> >>> >>> >>> >> Best Regards, Si [hidden email] |
|
|
I'm no accountant, but it sounds fine to me as an intermediate step to make processes more flexible. -David On Dec 4, 2006, at 10:32 AM, Si Chen wrote: > David, > > Invoices are definitely economic events, I agree. > > Here's the rationale for the "Uninvoiced Fixed Asset Receipt," and > it is similar to the reasonable for the "Uninvoiced Item Receipt": > it is to decouple of the value of the receipt or creation of a > fixed asset from accounts payable invoices. To wit, you can have > these scenarios which this account would solve better: > > 1. You buy a fixed asset worth $1 million, but the vendor's > invoice also includes $50,000 of shipping and $150,000 for set up. > So you can do this: > > DR Fixed Asset $1 million > CR Uninvoiced Fixed Asset Receipt $1 million > > DR Uninvoiced Fixed Asset Receipt $1 million > DR Shipping $50,000 > DR Setup $150,000 > CR Accounts Payable $1.2 million > > 2. You manufactured a fixed asset worth $1 million in house, so > you can do this > > DR Fixed Asset $1 million > CR Uninvoiced Fixed Asset Receipt $1 million > > DR Uninvoiced Fixed Asset Receipt $1 million > CR WIP Inventory, Labor, expenses, etc. $1 million > > You can imagine there are some other scenarios where this would apply. > > On Dec 3, 2006, at 1:00 AM, David E Jones wrote: > >> >> Hmmm... invoice are _definitely_ "economic events", or artifacts >> that have a direct financial impact on a company and therefore >> when finalized cause GL entries to be posted. That's the normal >> way of doing things. An order is received and there is generally >> no GL entry at that point. There are GL entries needed during >> fulfillment (inventory issuance), invoicing, receiving payments, etc. >> >> Maybe this isn't what you meant though. I agree that Si's use of a >> "Uninvoiced Fixed Asset Receipt" account seems a little funny. >> When a Fixed Asset is received you would get an invoice along with >> it from the vendor so it would be an unpaid invoice, or payables >> entry. >> >> -David >> >> >> On Dec 1, 2006, at 5:21 PM, Chris Howe wrote: >> >>> I know you want to want to link all of these into >>> automated actionable steps that make sense to your >>> business processes but you must remember: >>> >>> General Ledger entries are ONLY for economic events. >>> >>> Receipt of an invoice is NOT an economic event. If >>> you receive a fixed asset you: >>> >>> Debit: Fixed Asset >>> Credit: Accounts Payable >>> >>> If you want to create a relationship between the fixed >>> asset and an invoice, great. If you want to create a >>> relationship between the invoice and a vendor's >>> account, great. If you want to create a relationship >>> between a general ledger entry and an invoice or a >>> fixed asset, great. But under no circumstance should >>> you record a non economic event in the general ledger. >>> >>> >>> >>> --- Si Chen <[hidden email]> wrote: >>> >>>> David, >>>> >>>> I think what should happen is this: >>>> >>>> When any fixed asset is created, if we know the >>>> ownerPartyId, then we >>>> can create: >>>> >>>> Debit Fixed Asset (or a specific FixedAsset GL >>>> account) >>>> Credit Uninvoiced Fixed Asset Receipt >>>> >>>> Then, when you have a purchase invoice with a fixed >>>> asset item >>>> created, you can do this: >>>> >>>> Debit Uninvoiced Fixed Asset Receipt >>>> Credit a Payable of some kind--Accounts >>>> Payable? I'm not sure - >>>> often fixed assets are bought with loans. >>>> >>>> Then we'd have to think about doing the depreciation >>>> calculations, >>>> that's what I think could be complicated. >>>> >>>> Best Regards, >>>> >>>> Si >>>> [hidden email] >>>> >>>> >>>> >>>> >>> > > Best Regards, > > Si > [hidden email] > > > |
|
|
In reply to this post by Si Chen-2
Our accountant just reviewed this email and he said it looks good to him.
Si Chen wrote: > David, > > Invoices are definitely economic events, I agree. > > Here's the rationale for the "Uninvoiced Fixed Asset Receipt," and it > is similar to the reasonable for the "Uninvoiced Item Receipt": it is > to decouple of the value of the receipt or creation of a fixed asset > from accounts payable invoices. To wit, you can have these scenarios > which this account would solve better: > > 1. You buy a fixed asset worth $1 million, but the vendor's invoice > also includes $50,000 of shipping and $150,000 for set up. So you can > do this: > > DR Fixed Asset $1 million > CR Uninvoiced Fixed Asset Receipt $1 million > > DR Uninvoiced Fixed Asset Receipt $1 million > DR Shipping $50,000 > DR Setup $150,000 > CR Accounts Payable $1.2 million > > 2. You manufactured a fixed asset worth $1 million in house, so you > can do this > > DR Fixed Asset $1 million > CR Uninvoiced Fixed Asset Receipt $1 million > > DR Uninvoiced Fixed Asset Receipt $1 million > CR WIP Inventory, Labor, expenses, etc. $1 million > > You can imagine there are some other scenarios where this would apply. > > On Dec 3, 2006, at 1:00 AM, David E Jones wrote: > >> >> Hmmm... invoice are _definitely_ "economic events", or artifacts that >> have a direct financial impact on a company and therefore when >> finalized cause GL entries to be posted. That's the normal way of >> doing things. An order is received and there is generally no GL entry >> at that point. There are GL entries needed during fulfillment >> (inventory issuance), invoicing, receiving payments, etc. >> >> Maybe this isn't what you meant though. I agree that Si's use of a >> "Uninvoiced Fixed Asset Receipt" account seems a little funny. When a >> Fixed Asset is received you would get an invoice along with it from >> the vendor so it would be an unpaid invoice, or payables entry. >> >> -David >> >> >> On Dec 1, 2006, at 5:21 PM, Chris Howe wrote: >> >>> I know you want to want to link all of these into >>> automated actionable steps that make sense to your >>> business processes but you must remember: >>> >>> General Ledger entries are ONLY for economic events. >>> >>> Receipt of an invoice is NOT an economic event. If >>> you receive a fixed asset you: >>> >>> Debit: Fixed Asset >>> Credit: Accounts Payable >>> >>> If you want to create a relationship between the fixed >>> asset and an invoice, great. If you want to create a >>> relationship between the invoice and a vendor's >>> account, great. If you want to create a relationship >>> between a general ledger entry and an invoice or a >>> fixed asset, great. But under no circumstance should >>> you record a non economic event in the general ledger. >>> >>> >>> >>> --- Si Chen <[hidden email]> wrote: >>> >>>> David, >>>> >>>> I think what should happen is this: >>>> >>>> When any fixed asset is created, if we know the >>>> ownerPartyId, then we >>>> can create: >>>> >>>> Debit Fixed Asset (or a specific FixedAsset GL >>>> account) >>>> Credit Uninvoiced Fixed Asset Receipt >>>> >>>> Then, when you have a purchase invoice with a fixed >>>> asset item >>>> created, you can do this: >>>> >>>> Debit Uninvoiced Fixed Asset Receipt >>>> Credit a Payable of some kind--Accounts >>>> Payable? I'm not sure - >>>> often fixed assets are bought with loans. >>>> >>>> Then we'd have to think about doing the depreciation >>>> calculations, >>>> that's what I think could be complicated. >>>> >>>> Best Regards, >>>> >>>> Si >>>> [hidden email] >>>> >>>> >>>> >>>> >>> > > Best Regards, > > Si > [hidden email] > > > > |
|
|
Not to call your accountant out, but WOW!
If the transfer of ownership of the fixed asset occurred when the setup services were performed, there is only ONE economic event that is occurring and should be recorded as such: Dr Fixed Assets - $1,000,000 Dr Shipping Expense - $50,000 Dr Professional Services expense (or something similar) - $150,000 Cr Accounts Payable $1,200,000 However, if the transfer of ownership of the fixed asset occurred when the item was shipped, and then at a later date the item was setup, then there are TWO economic events. Dr Fixed Assets - $1,000,000 Dr Shipping Expense - $50,000 Cr Accounts Payable - $1,050,000 Dr Professional Services expense (or something similar) - $150,000 Cr Accounts Payable - $150,000 An invoice is a request for payment. Stop making it out to be something that it is not. A company's account of their assets and liabilities has changed regardless of whether a request for payment has been made. Their assets and liabilities do not change because a request has been made (or an even more absurd assertion, that the request has been received). This is why we have separate entities for invoices and gL. Please use the correct entities. ** Disclaimer: I am not an accountant and should not be construed as specific accounting advice. Even though I do hold an MBA, please do your own diligence. --- Adrian Crum <[hidden email]> wrote: > Our accountant just reviewed this email and he said > it looks good to him. > > > Si Chen wrote: > > David, > > > > Invoices are definitely economic events, I agree. > > > > Here's the rationale for the "Uninvoiced Fixed > Asset Receipt," and it > > is similar to the reasonable for the "Uninvoiced > Item Receipt": it is > > to decouple of the value of the receipt or > creation of a fixed asset > > from accounts payable invoices. To wit, you can > have these scenarios > > which this account would solve better: > > > > 1. You buy a fixed asset worth $1 million, but > the vendor's invoice > > also includes $50,000 of shipping and $150,000 for > set up. So you can > > do this: > > > > DR Fixed Asset $1 million > > CR Uninvoiced Fixed Asset Receipt $1 million > > > > DR Uninvoiced Fixed Asset Receipt $1 million > > DR Shipping $50,000 > > DR Setup $150,000 > > CR Accounts Payable $1.2 million > > > > 2. You manufactured a fixed asset worth $1 > million in house, so you > > can do this > > > > DR Fixed Asset $1 million > > CR Uninvoiced Fixed Asset Receipt $1 million > > > > DR Uninvoiced Fixed Asset Receipt $1 million > > CR WIP Inventory, Labor, expenses, etc. $1 > million > > > > You can imagine there are some other scenarios > where this would apply. > > > > On Dec 3, 2006, at 1:00 AM, David E Jones wrote: > > > >> > >> Hmmm... invoice are _definitely_ "economic > events", or artifacts that > >> have a direct financial impact on a company and > therefore when > >> finalized cause GL entries to be posted. That's > the normal way of > >> doing things. An order is received and there is > generally no GL entry > >> at that point. There are GL entries needed during > fulfillment > >> (inventory issuance), invoicing, receiving > payments, etc. > >> > >> Maybe this isn't what you meant though. I agree > that Si's use of a > >> "Uninvoiced Fixed Asset Receipt" account seems a > little funny. When a > >> Fixed Asset is received you would get an invoice > along with it from > >> the vendor so it would be an unpaid invoice, or > payables entry. > >> > >> -David > >> > >> > >> On Dec 1, 2006, at 5:21 PM, Chris Howe wrote: > >> > >>> I know you want to want to link all of these > into > >>> automated actionable steps that make sense to > your > >>> business processes but you must remember: > >>> > >>> General Ledger entries are ONLY for economic > events. > >>> > >>> Receipt of an invoice is NOT an economic event. > If > >>> you receive a fixed asset you: > >>> > >>> Debit: Fixed Asset > >>> Credit: Accounts Payable > >>> > >>> If you want to create a relationship between the > fixed > >>> asset and an invoice, great. If you want to > create a > >>> relationship between the invoice and a vendor's > >>> account, great. If you want to create a > relationship > >>> between a general ledger entry and an invoice or > a > >>> fixed asset, great. But under no circumstance > should > >>> you record a non economic event in the general > ledger. > >>> > >>> > >>> > >>> --- Si Chen <[hidden email]> > wrote: > >>> > >>>> David, > >>>> > >>>> I think what should happen is this: > >>>> > >>>> When any fixed asset is created, if we know the > >>>> ownerPartyId, then we > >>>> can create: > >>>> > >>>> Debit Fixed Asset (or a specific FixedAsset GL > >>>> account) > >>>> Credit Uninvoiced Fixed Asset Receipt > >>>> > >>>> Then, when you have a purchase invoice with a > fixed > >>>> asset item > >>>> created, you can do this: > >>>> > >>>> Debit Uninvoiced Fixed Asset Receipt > >>>> Credit a Payable of some kind--Accounts > >>>> Payable? I'm not sure - > >>>> often fixed assets are bought with loans. > >>>> > >>>> Then we'd have to think about doing the > depreciation > >>>> calculations, > >>>> that's what I think could be complicated. > >>>> > >>>> Best Regards, > >>>> > >>>> Si > >>>> [hidden email] > >>>> > >>>> > >>>> > >>>> > >>> > > > > Best Regards, > > > > Si > > [hidden email] > > > > > > > > > |
|
|
Chris,
Just for the record, I don't think what you're saying is correct. On Dec 4, 2006, at 10:27 AM, Chris Howe wrote: > Not to call your accountant out, but WOW! > > If the transfer of ownership of the fixed asset > occurred when the setup services were performed, there > is only ONE economic event that is occurring and > should be recorded as such: > > Dr Fixed Assets - $1,000,000 > Dr Shipping Expense - $50,000 > Dr Professional Services expense (or something > similar) - $150,000 > Cr Accounts Payable $1,200,000 > > However, if the transfer of ownership of the fixed > asset occurred when the item was shipped, and then at > a later date the item was setup, then there are TWO > economic events. > > Dr Fixed Assets - $1,000,000 > Dr Shipping Expense - $50,000 > Cr Accounts Payable - $1,050,000 > > Dr Professional Services expense (or something > similar) - $150,000 > Cr Accounts Payable - $150,000 > > An invoice is a request for payment. Stop making it > out to be something that it is not. A company's > account of their assets and liabilities has changed > regardless of whether a request for payment has been > made. Their assets and liabilities do not change > because a request has been made (or an even more > absurd assertion, that the request has been received). > This is why we have separate entities for invoices > and gL. Please use the correct entities. Best Regards, Si [hidden email] |
|
|
How is what I'm saying incorrect? An invoice is
evidence of an economic event, it is not itself an economic event. --- Si Chen <[hidden email]> wrote: > Chris, > > Just for the record, I don't think what you're > saying is correct. > > On Dec 4, 2006, at 10:27 AM, Chris Howe wrote: > > > Not to call your accountant out, but WOW! > > > > If the transfer of ownership of the fixed asset > > occurred when the setup services were performed, > there > > is only ONE economic event that is occurring and > > should be recorded as such: > > > > Dr Fixed Assets - $1,000,000 > > Dr Shipping Expense - $50,000 > > Dr Professional Services expense (or something > > similar) - $150,000 > > Cr Accounts Payable $1,200,000 > > > > However, if the transfer of ownership of the fixed > > asset occurred when the item was shipped, and then > at > > a later date the item was setup, then there are > TWO > > economic events. > > > > Dr Fixed Assets - $1,000,000 > > Dr Shipping Expense - $50,000 > > Cr Accounts Payable - $1,050,000 > > > > Dr Professional Services expense (or something > > similar) - $150,000 > > Cr Accounts Payable - $150,000 > > > > An invoice is a request for payment. Stop making > it > > out to be something that it is not. A company's > > account of their assets and liabilities has > changed > > regardless of whether a request for payment has > been > > made. Their assets and liabilities do not change > > because a request has been made (or an even more > > absurd assertion, that the request has been > received). > > This is why we have separate entities for > invoices > > and gL. Please use the correct entities. > > Best Regards, > > Si > [hidden email] > > > > |
|
|
In reply to this post by Si Chen-2
Si, others,
If I cannot convince you that an "Uninvoiced Fixed Asset Receipt" (UFAR) account is flat wrong, perhaps I can at least sway your opinion that the approach is not desirable; or that it causes more problems than it solves. First, I'm going by the assumption that UFAR is a sub-account to Accounts Payable (AP). If my assumption is incorrect, you are understating your liabilities. 1) So, if UFAR is a sub-account of AP, then the journal entry: Dr: UFAR - $1,000,000 Cr: AP - $1,000,000 is redundant. This redundancy causes a problem in the event of an audit (internal or external). The transaction that debits UFAR has evidence by way of invoice. However, the transaction that credited UFAR has no evidence to support the transaction occurring (as this usage is unorthodox to say the least, the invoice may actually instead be evidence of the transaction that credited UFAR, or may not be sufficient as evidence of either transaction. But certainly, the invoice is cannot be evidence for both). This lack of evidence provides ample opportunity for someone to defraud a company. 2) Being two seperate transactions that deal with monetary numbers, how do you reconcile the following scenario? Purchase a fixed asset for what you believed to be $1,000,000 Dr: Fixed Assets - $1,000,000 Cr: UFAR - $1,000,000 Invoice shows up with the cost of the asset being $950,000. Dr: UFAR - $950,000 Cr: AP - $950,000 UFAR has a remaining balance of $50,000 The correct journal entry for a misunderstanding of price is: Dr: AP - $50,000 Cr: Fixed Asset - $50,000 The sanest possible journal entry in a UFAR world would instead be: Dr: UFAR - $1,000,000 Cr: Fixed Asset - $ 50,000 Cr: AP - $ 950,000 If all you're ever going to do is debit UFAR the same amount that you previously credited it, there is no point in maintaining it; it provides no additional information to decision makers above and beyond providing a status Id to the projected invoice. Which, can be accomplished much easier by simply providing a status id to the projected invoice. |
«
Return to OFBiz - Dev
|
1 view|%1 views
| Free forum by Nabble | Edit this page |