Background Accounting Entries

ERPNext Accounting
1

Can someone explain the background accounting entries that ERPNext does on following transactions. Plz do not take into account the GST incidence:

  1. Purchase Receipts
  2. POS Sales
  3. Purchase Invoice
2

Purpose of Stock Received but not Billed

When purchased items are received, an accounts posting is done based on the value of the purchased items in the Stock-in-hand / fixed-assets account. When you sell and deliver those items, an expense (cost-of-goods-sold) is booked, equal to the buying cost of the items.

As stock balance increases through Purchase Receipt, Warehouse account is debited and an adjustment account called Stock Received But Not Billed account is credited. At the same time, the negative expense is booked in account head having category as “Valuation” or “Total and Valuation” in taxes and charges table for the amount added for valuation purpose, to avoid double expense booking.

On receiving Bill from the supplier, you will make Purchase Invoice against a Purchase Receipt. Here Stock Received But Not Billed account is debited, hence nullifies the balance in the Stock Received but not Billed Account.

The balance in the Stock Received but not Billed account indicates the value of items for which Purchase Receipt has been made, but billing is pending.

Debits:

  • Customer (grand total)
  • Bank/Cash (payment)

Credits:

  • Income (net total, minus taxes for each Item)
  • Taxes (liabilities to be paid to the government)
  • Customer (payment)
  • Write Off (optional)
  • Account for Change Amount (optional)
  • Debits:
    • Expense or Asset (net totals, excluding taxes)
    • Taxes (/assets if VAT-type or expense again)
  • Credits:
    • Supplier
3

Thank you so much Suresh, for a comprehensive reply. Let me digest it for now. But I am not sure what do you mean by negative expense.

“At the same time, the negative expense is booked in account head having category as “Valuation” or “Total and Valuation” in taxes and charges table for the amount added for valuation purpose, to avoid double expense booking”.

What does this mean? Which account is this in the COA?