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Part 7 – Accounting - 5 -
Principles of Accounting
The accounts receivable module in Quantrac 2005 complies with Generally Accepted Accounting Principles.
Even though our financial accounting advisor informs us that companies, which have any inventory or stock, should
utilize Accrual-based accounting, this system is configured for either accrual-based or cash-based accounting
procedures, with reporting for both. We recommend accrual-based accounting, with its flexibility of recording
income and expenses that are unavailable with cash-based accounting. Also, a truer representation of the
profitability of a company is contemporaneously available using accrual accounting.
For those using Accrual-based accounting, the following rules apply:
1.
All invoices (when completed) result in the generation of revenue, and will cause the specified
revenue account to increase (credit). This will also cause your Accounts Receivable account to
increase (debit).
2.
Receipt of payments for invoices cause your Accounts Receivable GL account to decrease (credit) and
your Cash on Deposit GL account to increase (debit)
3.
Cancellation of payments for invoices cause your Accounts Receivable GL account to increase (debit)
and your Cash on Deposit GL account to decrease (credit)
4.
Finance charges cause your Accounts Receivable GL account to increase (debit) and your Finance
Charge Revenue GL account to increase (credit)
5.
Receipt of payments for finance charges cause your Accounts Receivable GL account to decrease
(credit) and your Cash on Deposit GL account to increase (debit)
6.
Invoice overpayments may be applied to any revenue account, causing an increase in that account.
7.
Invoice overpayments may alternately be applied to a Liability GL account causing an increase in that
account and simultaneously a customer Credit Balance which can be applied to a future invoice.
8.
Invoice underpayments may be written off to any expense account (i.e. Refunds, Allowances,
Uncollectable, etc.), increasing the selected account.
9.
Invoice underpayments can also leave an invoice partially paid.
10.
Prepayments for future services or installations may be entered, creating an increase in Cash on
Deposit and an increase in the Liability GL account. This will also result in a customer Credit
Balance, which may be used to settle a future invoice.
For companies utilizing Cash-based accounting, the system includes reports listing all receipts for sales and sales
taxes. Use these reports to update your cash accounting system.
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