Hi, the question here is how ERPNext accounting module can tackle accounting of stock brokerage company. Need help from accounting experts who can give some pointers on how to setup ERPNext for this type of business, maybe with some modification to the accounts doctype
Use case is as follow.
Let say company ABC is is a stock broker firm.
company ABC registers customers who want to buy and sell securities online from various markets across the globe.
company ABC has an online trading platform through which customers can do the task themselves.
Customer gives company ABC $100 as deposit which would become opening balance of Customer for making online trades.
The opening balance becomes company ABC liability as they need to return this amount when customer demands it.
Customer buys $50 of stock IBM from NYSE from the $100 deposit.
company ABC charges x% commission rate plus tax. In this case 5% charges & 5% tax on commission rate.
company ABC deducts $2.5 commission + 0.125 VAT + $50 for the purchased stock.
$50 has been converted into security so customer balance amount now is $47.375 (100-52.625). company ABC liability is now $47.375.
Customer sell the $50 stock for $60 ($10 profit)
company ABC charges commission + tax on sale. Customer account is debited for 56.850. commission of $3 plus tax 0.150 is deducted from $60 sell transaction.
Customer balance is $104.225 (47.375 + 56.850)
Issue we face is that the security (stock/bond etc.) is not company ABC product. It cannot be recorded as revenue. Only the commission charged on the buy/sell transaction is to be recorded as revenue. However, there needs to be proper tracking of customer balance. Invoice per transaction needs to be made and statement of account on a set frequency needs to be sent to customer outlining all the trades and charges incurred on it.
To ensure authentic information the security name and its relative value has to be recorded but kept off company ABC financial.
Customer accounts needs to be debited and credited which is not possible in ERPNext as it defines Supplier and Customer separately.
Came across this by Grant Thorton. Use case of Futures and options broker on page 7 is similar to company ABC.
Any pointers/help would be highly appreciated.