Appendix A - How the Distribution Codes Work

 

Overview

The AddonSoftware Accounts Receivable Distribution Codes determine the general ledger account numbers used for accounts receivable processing. Processing may vary depending upon whether receivables are entered through the Simple Invoice, Conversion Invoice or the Order/Invoice Processing tasks.

 

The distribution codes will determine the accounts used for the following categories:

 

  • Accounts Receivable

  • Inventory Adjustment

  • Cash

  • COGS Adjustment

  • Sales

  • Purchase

  • Discount

  • Purchase Price Variance

  • Freight

  • Inventory

 

  • Cost of Goods Sold

 

A default distribution code is assigned to each customer. This code determines the accounts receivable account for the transaction. In each invoicing task, the customer default distribution code may be modified at entry time if necessary. The distribution code also will define the revenue postings for the transaction, although processing will vary depending upon which task is being used. Take note that the Codes for Inventory Adjustment, COGS Adjustment, Purchase and Purchase Price Variance will appear only if PO is installed and the Distribute by Item parameter on the AR Parameter Maintenance is marked

 

This appendix provides an explanation of the use of the distribution codes in each of the invoicing methods. It assumes that the reader has a basic understanding of double entry accounting.

 

Simple Invoice Processing

The Simple Invoice Processing task allows entry of multiple line items for an invoice. The default account number for each line item will be determined by the sales account in the distribution code selected. The operator may override the default sales account and enter any general ledger account number for the revenue side of the transaction. Each line item may have a different revenue (credit) account.

 

Simple Invoice Processing allows no discounts, freight, or sales tax entries, so these accounts are not used. Since multiple line items can be entered, a separate line item can be used to reflect freight, tax or discount, with the appropriate general ledger number. Simple Invoice Processing does not interface to Inventory Control so the inventory and cost of goods accounts are not automatically posted. Again, separate line items can be entered to credit (negative extension) an Inventory account and debit a Cost of Goods Sold account.

 

Conversion Invoice Processing

The Conversion Invoice Processing task determines the revenue account number directly from the distribution code entered for the invoice. You can only generate one revenue-posting for each invoice from this task. However, a series of distribution codes may be established to post to various revenue account numbers. Conversion Invoice Processing is not appropriate for tracking freight, discount or tax entries. Conversion Invoice Processing is also not appropriate for tracking inventory and cost of goods sold.

 

Order/Invoice Processing

The Order/Invoice Processing module interfaces to the Accounts Receivable and Inventory Control modules for those solutions that require a robust, full-featured invoicing function. The Order/Invoice Processing module uses the distribution codes defaulted from the customer to determine the general ledger postings for Accounts Receivable, Cash (for cash sales), Discounts and Freight. The sources of the accounts for Sales, Inventory, and Cost of Goods Sold vary depending upon how certain parameters are set. Please refer to the Appendix in the Order Processing User Guide for a discussion about how distribution codes affect general ledger posting.



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