Standard Accounting

MRPeasy has a built-in standard accounting module. 

It consists of:

• chart of accounts,
• general ledger,
• balance sheet,
• profit and loss statement.

All transactions that are made in manufacturing, stock, procurement, and CRM are automatically reflected in the accounting.

Jump to:

1. Demo video: Standard Accounting module.
2. Setting up accounting.
3. Chart of accounts.
   1. Principles.
   2. Categories of accounts.
   3. Default chart of accounts.
   4. Configuring accounts.
   5. Custom inventory accounts per product group.
4. Transactions.
   1. Automatic transactions.
   2. Inventory tracking principles in MRPeasy.
   3. Inventory tracking transactions step-by-step.
   4. Manual journal entries.
5. Locking previous financial periods.
6. Payroll.
   1. Payroll report.
   2. Processing payroll.
7. Tax calculations, rounding of tax.

Setting up accounting

To enable accounting, do the following:

1. Go to Settings -> System settings -> Software settings, and enable the Standard Accounting module.
2. Go to the "Accounting" section of the software. The software will create default accounts. If you do not see the menu point "Accounting", then check your user rights.
3. After the chart of accounts is created, the software will ask you for the accounts' start date.
4. When accounts are created and the start date is saved, the Standard accounting module is enabled.

To enter initial account values, please go to Accounting -> Settings -> Accounts -> Manual Journals and create a new journal.

Trialing the standard accounting

We understand that you may want to test the accounting module for a while and then discard testing transactions.

There are two options on how to do that:

1. If all your data (including orders and stock levels) is for testing, please delete it at Settings -> Database Maintenance -> Delete orders and stock only;
2. If you are already using MRPeasy and your data is valid, please go to Accounting -> Settings and change the "Accounts start date." All transactions that took place prior to that date will be ignored.

Chart of accounts

Principles

General principles:

1. The accounts are divided into different categories.
2. An account can be a sub-account to a parent account.
3. Initially, a default chart of accounts is loaded.
4. For every account, it is possible to choose which kind of automatic journal entries are posted to it.
5. Transactions are automatically generated when specific actions occur.

Categories of accounts

Default chart of accounts

In the default chart of accounts, automatic transaction types (configured with the Default account for setting) are pre-assigned for certain accounts.

The default chart of accounts:

Configuring an account

Accounts can be created and managed at Accounting -> Chart of accounts.

For creating a new account:

1. Go to Accounting -> Chart of accounts.
2. Click '+' to add a new account.
3. Choose the Category, and enter the Number, and the Name.
4. Optionally, choose the Parent account.
5. Optionally, under Default account for, select transaction types for which this account is used when journal entries are automatically made.

For configuring an existing account:

1. Go to Accounting -> Chart of accounts.
2. Click on the account to open its details for viewing and editing.

Different inventory accounts per product group

It is possible to set different inventory accounts per product group at Stock -> Stock settings -> Product groups -> Product group details -> Inventory account.

Changing the account of a product group when items are in stock

The change of the product group mapping to a general ledger account has no back-value effect. That is, parts accounted for in the previous account will still be reflected in that account after the configuration change.

If you need the product group inventory value reflected fully on the new account, you must calculate the inventory value of it on the old account for the date, when the setting was changed, and make a manual journal entry to transfer the amount from the old account to the new account.

Transactions

Automatic transactions

When some transaction happens in MRPeasy, a journal entry is automatically made.

Inventory tracking in MRPeasy

In MRPeasy, the principles of inventory tracking are the following:

1. All items in inventory are tracked using stock lot tracking within MRPeasy. I.e. each batch of physical items is accounted for separately.
   
   A stock lot is an internal business object in the MRPeasy software, used for providing the FIFO method of using goods, and also for specific functionality, like expiry date, or batch traceability. Without such specifics, you do not need to operate with stock lots in your daily business (MRPeasy does it in the background).
   
   
2. By default, MRPeasy uses FIFO (FEFO, when Expiry dates are used) principle when booking goods for consuming or shipping goods from inventory.
   
   It is possible to manually manage and override the bookings and consumption of inventory, e.g. for actual costing and/or for very detailed tracking and traceability.
   
   
3. Financial transactions are automatically made when specific events happen with the inventory.

Inventory tracking transactions step-by-step

In MRPeasy, together with all automatic accounting transactions, the inventory tracking and financial transactions work as follows:

1. All items in inventory are tracked using stock lot tracking within MRPeasy. I.e. each batch of physical items is accounted for separately.
   
   A stock lot is an internal business object in the MRPeasy software, used for providing the FIFO method of using goods, and also for specific functionality, like expiry date, or batch traceability. Without such specifics, you do not need to operate with stock lots in your daily business (MRPeasy does it in the background).
   
   
2. When a purchase order is ordered and a purchase invoice ID is entered, but items are not yet received, then the cost of items is posted on a purchases account:
   D Purchases (Current assets)
   C Accounts payable (Liabilities)
   
   
3. When purchased items are received, then items are transferred from purchases to materials on hand:
   D Materials on hand (Current assets)
   C Purchases (Current assets)
   
   
4. Additional expenses incurred with purchases (e.g. transport, customs) can be accounted into the cost of the procured items, by entering them as “Additional fees” on the Purchase Order (or Purchase Invoice).
   D Purchases (Current assets)
   C Accounts payable (Liabilities)
   
   Once the PO is received:
   D Materials on hand (Current assets)
   C Purchases (Current assets)
   
   
5. When a manufacturing order is planned, then according to the bill of materials, the materials are reserved for this job.
   
   
6. When materials are reported consumed in production, they are moved to work in progress (WIP):
   D Work in progress (Current assets)
   C Materials on hand (Current assets)
   
   
7. When an operation is finished, then the performed direct labor and the applied manufacturing overhead costs are posted to WIP according to recorded start-stop times:
   D Work in progress (Current assets)
   C Accrued payroll (Liabilities)
   D Work in progress (Current assets)
   C Applied manufacturing overhead (Liabilities)
   
   
8. Once a manufacturing order is finished, WIP is cleared and posted to finished goods:
   D Finished Goods (Current assets)
   C Work in progress (Current assets)
   
   
9. When additional fees are posted to transfer orders, these increase the cost of the transferred items:
   D Materials on hand / Finished goods (Current assets)
   C Transfer Orders liability (Liabilities)
   
   
10. When products are shipped to the customer, then the cost of the products is posted to the cost of goods sold account:
    D Cost of goods sold (Expenses)
    C Finished Goods (Current assets)
    
    
11. When a manual inventory adjustment is made:
    D Materials on hand / Finished goods (Current assets)
    C Inventory adjustments (Expense)
    
    or
    D Inventory adjustments (Expense)
    C Materials on hand / Finished goods (Current assets)
    

Manual journal entries

To make a manual journal entry:

1. Go to Accounting -> Settings -> Accounts -> Manual Journals.
2. Click "+" to create a new manual journal entry.

Locking historical financial records

To prevent modification of historical financial records, the books closing date should be set at Accounting -> Settings -> Books closing date.

The date is inclusive. Any action in the system, that would affect accounts on that day or earlier, will be blocked, excluding actions that get logged in the "Adjustments to books closed period" report.

How can previous financial records change, when books are not closed

1. Primarily, stock history and the cost of items can change if old documents are changed.
   • E.g. a modification or deletion of a Purchase Order will have cascading effects through the system, as the cost of materials changes.
2. If planned goods are used, initially the cost of all used goods is considered as 0.
   • By default, the software allows using (consume, ship, transfer) goods that are not received, i.e. goods that are planned.
   • Read more: software setting "Use planned goods".
3. When adding "Additional fees" to Purchase Orders, the cost of all items on that PO will be updated, incl. items that were received in the earlier periods.
4. When using the function "Finish production as planned" to finish Manufacturing Orders.

Adjustments to books closed period

To avoid disrupting a normal business process, the software allows some actions in the closed financial period which it additionaly logs in the report Accounting -> Reports -> Report: Adjustments to Books Closed Period:

1. When the Software setting MO partial completion is enabled, in progress (not finished) MOs that were started before the Books closing date can be updated freely without any restriction.
   • All actions with such MOs are allowed. Once the MO is finished, all further actions that affect the closed period will get blocked.
   • All financial adjustments in the closed period get logged: showing the reason for this adjustment, the old lot cost, and the new cost.
   • All existing financial transactions (relating to the MO) in the closed period can be updated, meaning that related inventory, work in progress, applied manufacturing overhead, and accrued payroll, COGS, etc. balances can all change. For example:
     • If the MO was partially completed in a now-closed period, the cost of the earlier completed products can be updated, when further actions are performed with the MO.
     • If any input (materials, overhead, or labor) or output (final quantity of products, additional products) changes, then the product cost will change, because manufacturing costs in the MO are divided equally among all produced items (the unit cost is the same in all target lots).
     • If an operation was finished in the now-closed period, it can be updated.
     • Materials that were consumed in the now-closed period can be returned to stock.
     • Etc.

Payroll

Payroll report

This report shows the performance pay per employee during the period.

When the Professional function Piece Payment is enabled, then it is possible to choose how employees are paid:

• Time-payment - Operation duration x Hourly rate
• Piece-payment – Price per piece x Quantity
• or both.

When the Piece Payment function is disabled, then only time-payment can be applied, when an hourly rate is set in employees’ details.

If you have a right to view users, it is possible to click on the user’s name and see the list of operations that were performed by the employee during the period.

Processing payroll

It is possible to process payroll with manual journal entries.

When you are making payroll, you should:

1. Use manual journal entries to enter the payroll and payments at Accounting -> Manual journals.
2. Use manual journal entries to zero the accrued payroll account periodically.

A simplified example with numbers:

• The following automatic journals happen:
  1. When work is reported in a Manufacturing Order (MO) (Assumption: materials costs and applied manufacturing overhead costs are 0.)
  D Work in progress (Current assets) 100
  C Accrued payroll (Current liability) 100
  
  2. When the MO is finished
  D Finished goods (Current assets) 100
  C Work in progress (Current assets)100
  
  3. When the product is shipped
  D Cost of goods sold (Expense) 100
  C Finished goods (Current assets) 100
  
  
• When payroll is made, the following manual journals could be made:
  4. When payroll is calculated:
  D Wages and salaries (Expense) 1000
  C Payroll (Current liability) 1000
  
  5. When payroll is paid:
  D Payroll (Current liability) 1000
  C Bank (Current assets) 1000
  
  6. Periodically accrued payroll account is zeroed:
  D Accrued payroll (Current liability) 100
  C Wages and salaries (Expense) 100 (This expense will be reported in the COGS account, in the same period when the product is sold.)

As the above is only a generic simplified example, please always consult your accountant and be sure to follow local laws and regulations.

Tax calculations, rounding of tax

MRPeasy calculates tax on documents as follows:

1. The tax amount is calculated for each line separately.
2. The line's tax amount is rounded to the number of decimal places defined by the software setting “Decimal places: Subtotal”.
3. The rounded tax amounts of each line are added up.

Example: