Accounting for purchases

Brightpearl will automatically create all accounting for purchases. This article explains the how each accounting journal is created to represent each purchase made in the orders module.

There are several key points at which accounting is automatically generated for a purchase - you can learn more about how the accounting journals are created later in this article:

Purchase order:

  1. Receiving the invoice against the purchase order
  2. Receiving the inventory on the purchase order
  3. Unreceiving inventory on the purchase order
  4. Recording a payment

Purchase credit:

  1. Receiving the crediting against the purchase credit
  2. Returning inventory - this must be done as a stock correction
  3. Entering a refund

Accounting journals - purchase invoice

Invoices are received against purchase orders. At the point of receiving the invoice an accounting journal will be automatically created to record the purchase cost, tax and accounts payable values.

Before multi-currency

All accounting is recorded only in base currency. A foreign currency purchase invoice will be converted to base currency for accounting purposes and the supplier account balance will also be in base currency.

With multi-currency

These types of journals will always record the transaction currency and the base currency, converted using the transaction exchange rate. The supplier account balance will display the foreign currency balance and financial reports will display the base currency value.

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Accounting journals - purchase invoice with price corrections

If a purchase invoice is received after the goods have been received into stock and item prices corrections are made to the order, Brightpearl will make accounting corrections. These corrections will balance the difference in value between the asset value of the goods recorded at the time they were received (at the old price) and the asset value they have now using the new price.

Note that these balancing entries are posted directly to cost of sales and will not update the asset value of the in stock goods, or the individual cost of sales values for any of the items already sold.

Learn more about purchase price corrections in the accounting for inventory article

Accounting journals - receiving inventory on a purchase

Each time items are marked as received they will be added into stock ad the accounting journal will be created.

These types of journals are always in base currency.

Learn all about accounting for inventory

Accounting journals - unreceiving inventory on a purchase

Each time items are marked as unreceived they will be removed from stock ad the accounting journal will be created.

These types of journals are always in base currency.

Learn all about accounting for inventory

Accounting journals - supplier payment

When a payment journal is recorded it will automatically update the supplier account balance and mark any related invoices and orders as paid.

Before multi-currency

Payments can only be entered in your base currency and therefore all payment journals are recorded in base currency.

With multi-currency

These types of journals will always record the transaction currency and the base currency converted using the transaction exchange rate. A base currency transaction will show an exchange rate of 1.000000 and therefore the same values for the transaction debit and credits as the base debit and credit. 

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Accounting journals - exchange rate gains & losses

Before multi-currency

Exchange rate gains and losses must be manually entered as an adjustment. This is done via the supplier account payment allocation screen and writing off any remaining balance against an invoice to the gains and losses account code.

With multi-currency

If a payment is made to clear the balance of a foreign currency invoice, but the payment has a different exchange rate from the invoice it is paying, Brightpearl will automatically create an adjustment for exchange rate gains/losses. This ensures that the invoice balance is cleared in both the foreign currency and the base currency. This is important since the supplier account balance is calculated using the transaction (foreign) currency figures but financial reporting reads the base currency figures.

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Adjustment journal

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Accounting journals - purchase credit

Credits are raised against sales credits (returns). At the point of crediting an accounting journal will be automatically created to record the decrease in sales revenue, tax and accounts receivable values.

Before multi-currency

All accounting is recorded only in base currency. A foreign currency sales credit will be converted to base currency for accounting purposes and the customer account balance will also be in base currency.

With multi-currency

These types of journals will always record the transaction currency and the base currency, converted using the transaction exchange rate.

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Accounting journals - returned stock

Each time items are marked as shipped they will be removed from stock and the cost of goods sold accounting journal will be created.

These types of journals are always in base currency.

Learn all about cost of sales accounting in the accounting for inventory article

Accounting journals - supplier refund

When a refund journal is recorded it will automatically update the customer account balance and mark any related credits and returns as refunded.

Before multi-currency

Refunds can only be entered in your base currency and therefore all refund journals are recorded in base currency.

With multi-currency

These types of journals will always record the transaction currency and the base currency converted using the transaction exchange rate. A base currency transaction will show an exchange rate of 1.000000 and therefore the same values for the transaction debit and credits as the base debit and credit.

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Accounting journals - supplier account allocations

Allocation is the process of matching on account payments, sales invoices and credits on the customer account to mark them as cleared without necessarily changing the customer account balance with an additional payment or refund.

When an allocation is made, an accounting journal will be created which matches up all the invoice credit and payment references.

Before multi-currency

Any exchange rate gains and losses must be manually entered as an adjustment. This is done via the customer account payment allocation screen and writing off any remaining balance against an invoice or credit to the gains and losses account code.

With multi-currency

If allocations clear the balance of a foreign currency invoice, credit and/or payment, but each transaction was entered with a different exchange rate, Brightpearl will automatically create an additional journal which creates an adjustment for exchange rate gains/losses. This ensures that the customer balance is cleared in both the foreign currency and the base currency. This is important since the customer account balance is calculated using the transaction (foreign) currency figures but financial reporting reads the base currency figures.

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Adjustment journal

Note: The system exchange rate will be applied to the allocation. If this is different from both an invoice and credit being allocated it will result in an adjustment journal for each.

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Accounts payable account code

Brightpearl currently only allows a single account code to be used for accounts payable (creditors control). This is always account code 2100.

Purchases account code

Purchases, stock and expenses can be recognized in multiple account codes to help segregate financial reporting. The account code used for recognizing a purchase depends on:

  • Purchase or stock code assigned to the product

    Product records are assigned a stock code and a purchases code. If the product is stock tracked then the stock code will be used for recording the inventory assets (when the goods are received), so when the invoice is received the "stock received not invoice" account code is used, set this code at Settings > Company > Accounting: Account codes. If the product is non-stock tracked then the product purchases code will be used.

  • Purchase/expense code manually assigned to the order row

    Before the invoice is received on the order the stock/purchases code can be manually assigned directly against an order row. This will override the default code assigned to the product. To ensure inventory assets are always recorded in the product assigned stock account go to Settings > Purchases > Purchase settings and select Yes for "Always use asset nominal code for inventory items on Purchase Orders?", this will prevent the account code from being manually edited on the order. 

Purchase tax account code

Brightpearl currently only allows a single account code to be used for purchase or input tax. This is always account code 2201.

Purchase discounts account code

Discounts can be applied to an order in several ways. The account code used in each case may be different:

  • Row discount - percentage

    If a discount is applied to a line item using the discount percentage column, the sales revenue amount accounted for this row will simply be reduced.

  • Row discount - amount (manual price entered)

    If a discount is applied to a line item using the discount percentage column, the sales revenue amount accounted for this row will simply be reduced.

  • Order discount - amount (negative order row)

    If a discount is added as a line item the account code can be manually set to a specific code for discounts.

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