There are various account settings in ERPNext to restrict and configure actions in the Accounting module.

Transactions Settings 

1. Over Billing Allowance (%) 

The percentage by which you can overbill transactions. For example, if the order value is $100 for an Item and percentage here is set as 10% then you are allowed to bill for $110.

2. Role Allowed to Over Bill 

Users with this role are allowed to over bill above the allowance percentage.

3. Role allowed to bypass Credit Limit 

Select the role that is allowed to submit transactions that exceed credit limits set. The credit limit can be set in the Customer form.

4. Check Supplier Invoice Number Uniqueness 

When checked, Purchase Invoices with same ‘Supplier Invoice No’ will not be allowed. This is useful to avoid duplicate entries.

5. Unlink Payment on Cancellation of Invoice 

If checked, system will unlink the payment against the respective invoice. By default, if a Payment Entry is submitted, the linked invoice cannot be canceled until the Payment Entry is also canceled. On unlinking, you can now cancel and amend the invoices. But the payments not be linked and considered as advance payments.

6. Automatically Fetch Payment Terms from Order 

Enabling this will automatically fetch the Payment Terms from a Purchase/Sales Order to its linked Purchase/Sales Invoice.

7. Delete Accounting and Stock Ledger Entries on deletion of Transaction 

Enabling this will allow the deletion of linked General Ledger and Stock Ledger Entries on deleting invoices and receipts. This can be checked if you don’t want to lose the document ID after cancelling the document. You can now cancel and delete the document to get the same document ID again.

8. Book Asset Depreciation Entry Automatically 

When checked, an automatic entry for an asset depreciation will be created based on the first date set. For example, yearly depreciation for an item will be scheduled for the next 3/4 years based on the Number of Depreciations Booked set in the Asset master. For more details, visit the Asset Depreciation page.

9. Unlink Advance Payment on Cancellation of Order 

Similar to the previous option, this unlinks any advance payments made against Purchase/Sales Orders.

10. Enable Common Party Accounting 

If checked, an adjustment Journal Entry will be posted automatically on creation of Sales/Purchase Invoices against common Customer & Supplier. For more details, visit Common Party Accounting

11. Create Ledger Entries for Change Amount 

If checked, for a Point of Sale invoice, the system will post ledger entries considering the change amount given.

12. Enable Discount Accounting 

If checked, Discount Accounts can be added in the Items table of Sales Invoices, which will allow you to account for Discounts applied on Items more efficiently. It also lets you add Defualt Discount Accounts for Items, which will be fetched automatically when the Item is added to a Sales Invoice.

Tax Settings 

1. Determine Address Tax Category From 

Tax category can be set on Addresses. An address can be Shipping or Billing address. Set which addres to select when applying Tax Category.

2. Automatically Add Taxes and Charges from Item Tax Template 

Enabling this will populate the Taxes table in transactions if an Item Tax Template is set for an Item and that Item is selected in the transaction.

3. Book Tax Loss on Early Payment Discount 

Enabling this will split the Payment Entry discount deductions into Income Loss and Tax Loss if the document against the Payment Entry has an Early Payment Discount set.

Period Closing Settings 

1. Accounts Frozen Till Date 

Freeze accounting transactions up to specified date, nobody can make/modify entry except the specified Role.

2. Role Allowed to Set Frozen Accounts and Edit Frozen Entries 

Users with this Role are allowed to set frozen accounts and create/modify accounting entries against frozen accounts.

Deferred Accounting Settings 

1. Book Deferred Entries Based On 

Deferred revenue amount can be booked based on two criteria. The default option here is “Days”. If “Days” is selected, the deferred revenue amount will be booked based on the number of days in each month and if “Months” is selected, then it will be booked based on number of months. For Eg: If “Days” is selected and $12000 revenue has to be deferred over a period of 12 months, then $986.30 will be for the month having 30 days and $1019.17 will be booked for the month having 31 days. If “Months” is selected, $1000 deferred revenue will booked each month irrespective of the number of days in a month.

2. Automatically Process Deferred Accounting Entry 

This setting is enabled by default. In case you don’t want the deferred accounting entries to be posted automatically you can disable this setting. If this setting is disabled deferred accounting will have to be processed manually using Process Deferred Accounting

3. Book Deferred Entries Via Journal Entry 

By default Ledger Entries are posted directly to book deferred revenue against an invoice. In order to book this deferred amount posting via Journal Entry, this option can be enabled.

4. Submit Journal Entries 

This option is applicable only if deferred accounting entries are posted via Journal Entry. By default, the Journal Entries for deferred posting are kept in Draft state and a user has to verify those entries and submit them manually. If this option is enabled, Journal Entries will be automatically submitted without any user intervention. This option will only be displayed if Book Deferred Entries Via Journal Entry is checked.

Print Settings 

1. Show Inclusive Tax In Print 

The applied taxes will be shown in the print view.

2. Show Payment Schedule in Print 

The Payment Schedule table is visible on using Payment Terms. Enabling this will show this table in print view.

Currency Exchange Settings 

1. Allow Stale Exchange Rates 

This should be unchecked if you want ERPNext to check the age of records fetched from Currency Exchange in foreign currency transactions. If it is unchecked, the exchange rate field will be read-only in documents.

Stale Days is the number of days to use when deciding if a Currency Exchange record is stale. This is valid when ‘Allow Stale Rates’ is disabled. So, if the Stale Days is set as 10, stale rates that are 10 days will be allowed. If Allow Stale Rates is enabled, there is no time limit on the age of stale rates.

If stale rates are enabled, the order of fetching is:

• Latest rate from Currency Exchange form
• If no Currency Exchange is found latest rate as per market is fetched automatically

If stale rates are disabled, the order of fetching is:

• Latest rate from Currency Exchange form upto number of days set in ‘Stale Days’
• If no Currency Exchange is found Latest rate as per market is fetched automatically

Report Settings 

1. Use Custom Cash Flow Format 

You may choose to use Custom Cash Flow Formats to customize what the Cash Flow report looks like. To know more, visit this page.

The Chart of Accounts is the blueprint of the accounts in your organization.

The overall structure of your Chart of Accounts is based on a system of double entry accounting that has become a standard all over the world to quantify how a company is doing financially.

Chart of Accounts is a tree view of the names of the Accounts (Ledgers and Groups) that a Company requires to manage its books of accounts. ERPNext sets up a simple chart of accounts for each Company you create, but you can modify it according to your needs and legal requirements.

For each company, Chart of Accounts signifies the way to classify the accounting entries, mostly based on statutory (tax, compliance to government regulations) requirements.

The Chart of Accounts helps you to answer questions like:

• What is your organization worth?
• How much debt have you taken?
• How much profit are you making (and hence paying tax)?
• How much are you selling?
• What is your expense break-up?

As someone managing a business, it is very valuable to see how well your business is doing.

Tip: If you can’t read a Balance Sheet it’s a good opportunity to start learning about this. It will be worth the effort. You can also take the help of your accountant to set up your Chart of Accounts.

To access the Chart of Accounts list, go to:

Home > Accounting > Accounting Masters > Chart of Accounts

1. How to Create/Edit Accounts 

ERPNext comes with a standard set Chart of Accounts. Instead of creating/modifying, you can also use the Chart of Accounts Importer tool. Note that the existing Chart of Accounts will be overwritten when this tool is used.

1. Go to the Chart of Accounts list.Here you can open group accounts which contain other accounts. There are options to “Add Child” in an account, Edit or Delete the account.
2. The option to create a child account will only appear if you click on a Group (folder) type Account.
3. Enter a name for the account.
4. Enter a number for the account.
5. Tick ‘Is Group’ if you want this to be a group account which can contain other accounts.
6. Select the Account Type. Selecting this is important as some fields allow selecting only specific type of accounts.
7. Change the currency if this account will be used for transactions with different currency. By default, it’s the Company’s currency. To know more, visit the Multi Currency Accounting page.
8. Click on Create New.

Typically, you might want to create Accounts for:

• Travel, salaries, telephone, etc. under Expenses.
• Value Added Tax (VAT), Sales Tax, Equity, etc. under Current Liabilities.
• Product Sales, Service Sales, etc. under Income.
• Building, machinery, furniture, etc. under Fixed Assets.

Tip: Accounts with different currencies are created when you receive or make payments to or from different currencies. For example if you are based in India and transact with USA, you may need to create accounts like ‘Debtors US’, ‘Creditors US’, etc.

Let us understand the main groups of the Chart of Accounts.

2. Account Types 

Account types are mainly classified as income, expense, asset, or liability.

2.1 Balance Sheet Accounts 

Balance Sheet accounts are ‘Application of Funds (Assets)’ and ‘Sources of Funds (Liabilities)’ that signifies the net-worth of your company at any given time. When you begin or end a financial period, all the Assets are equal to the Liabilities.

A note on Accounting: If you are new to accounting, you might be wondering, how can Assets be equal to Liabilities? That would mean the company has nothing of its own. That’s correct! All the “investments” made in the company to buy assets (like land, furniture, machines) is made by the owners. The owners are a liability to the company since the profits belong to the owners.

If a company were to shut down, it would need to sell all the assets and pay back all the liabilities (including profits) to the owners, leaving itself with nothing.

All the accounts under Balance Sheet accounts represent an asset owned by the company like “Bank Account”, “Land and Property”, “Furniture” or a liability (funds that the company owes to others) like “Owners funds”, “Debt” etc.

Two special accounts to note here are Accounts Receivable (money you have to collect from your Customers) and Accounts Payable (money you have to pay to your Suppliers) under Assets and Liabilities respectively.

2.2 Profit and Loss Accounts 

Profit and Loss is the group of ‘Income’ and ‘Expense’ accounts that represent your accounting transactions over a period.

Unlike Balance Sheet accounts, Profit and Loss accounts (or PL accounts) do not represent net worth (Assets), but rather represent the amount of money spent and collected in servicing customers during the period. Hence, at the beginning and end of your Fiscal Year, they become zero.

In ERPNext it is easy to keep track of Profit and Loss via the Profit and Loss chart.

Note that, on the first day of the year you have not made any profit or loss, but you still have assets, hence balance sheet accounts never become zero at the beginning or end of a period.

2.3 Groups and Ledgers 

There are two main kinds of Accounts in ERPNext – Group and Ledger. Groups can have sub-groups and ledgers within them, whereas ledgers are the leaf nodes of your chart and cannot contain more accounts in them.

Accounting Transactions can only be made against Ledger Accounts (not Groups)

Info: The term “Ledger” means a page in an accounting book where entries are made. There is usually one ledger for each account (like a Customer or a Supplier).

Note: An Account “Ledger” is also sometimes called as Account “Head”.

2.4 Other Account Types 

In ERPNext, you can also specify more information when you create a new Account, this is there to help you select that particular account in a scenario like ‘Bank Account’ or a ‘Tax Account’ and has no effect on the Chart itself.

Explanation of account types:

• Accumulated Depreciation: To store the total accumulated depreciation information of the Company Assets. Accumulated depreciation appears on the balance sheet.
• Asset Received But Not Billed: A temporary liability account which holds the value of Asset received but not billed yet.
• Bank: The account type under which bank accounts will be created. There must be at least one group account of type “Bank” in the CoA.
• Cash: The account type under which cash account will be created. There must be at least one group account of type “Cash” in the CoA.
• Chargeable: Additional charges applied to Items can be stored in accounts of this type. For example, “Freight and Forwarding Charges”.
• Capital Work in Progress: Current charges when creating Fixed Assets are stored in CWIP accounts. For example, construction costs when constructing a building. In ERPNext Assets are booked against CWIP accounts when they are not yet being used.
• Cost of Goods Sold: An account under this type is used to book the accumulated total of all costs incurred while manufacturing/purchasing a product or service, sold by a Company.
• Depreciation: The expense account to book the depreciation of the fixed assets. This appears on the Income statement.
• Equity: These type of accounts represent transactions with people that own the business, i.e. the shareholders/owners.
• Expenses Included In Asset Valuation: The account to book the expenses (apart from the direct material costs of Assets) included in the landed cost of an Asset.
• Expenses Included In Valuation: The account to book the expenses (apart from direct material costs) included in the landed cost of an item/product, used in Perpetual Inventory.
• Fixed Asset: The account to maintain the costs of fixed assets.
• Income Account: This type of accounts represents any source of income or revenue booked for the Company.
• Payable: The account type represents the amount owed by a company to its creditors (Suppliers).
• Receivable: The account type represents the amount owed to a company by its debtors (Customers).
• Round Off: In many Invoices there can be some rounding off in the final amount. For accurate tracking, those amounts can be booked to accounts of this type.
• Stock: The account group under which Warehouse accounts will be created.
• Stock Adjustment: An expense account to book any adjustment entry of stock/inventory. Generally comes at the same level of Cost of Goods Sold.
• Stock Received But Not Billed: A temporary liability account which holds the value of stock received but not billed yet and used in Perpetual Inventory.
• Tax: All tax accounts like VAT, TDS, GST, etc. come under this type.
• Temporary: A Temporary account is useful for balancing incomes, expenses and nullifying them when shifting to ERPNext mid-year with outstanding accounting entries.

Note: When making Payment Entries, the default bank account will be fetched in the following order if set:

  * Company form
  * Mode of Payment default account
  * Customer/Supplier default bank account
  * Select manually in Payment Entry

2.5 Financial statements 

Financial statements for your company are easily viewable in ERPNext. You can view financial statements such as Balance Sheet, Profit and Loss statement, and Cash flow statement.

An Example of various financial statement are given below:

1. Cash Flow Report:
2. Profit and Loss Report: 
3. Balance Sheet Report:

2.6 Account Number 

A standard Chart of Accounts is organized according to a numerical system. Each major category will begin with a certain number, and then the sub-categories within that major category will all begin with the same number. For example, if assets are classified by numbers starting with the digit 1000, then cash accounts might be labeled 1100, bank accounts might be labeled 1200, accounts receivable might be labeled 1300, and so on. A gap between account numbers is generally maintained for adding accounts in the future.

You can assign a number while creating an account from Chart of Accounts page. You can also edit a number from account record, by clicking Update Account Name / Number button. On updating account number, the system renames the account name automatically to embed the number in the account name.

The opening balance is the balance that is brought forward at the beginning of an accounting period from the end of a previous accounting period or when starting out.

This also applies when starting a new Company and would like your offline balances to be updated in ERPNext.

1. Introduction 

If you are a new company, you will have minimal opening balances to be imported. However, if you are migrating from a legacy accounting system like Tally or a Fox Pro based software you will have considerable data to be imported as opening balance.

We recommend that you start using ERPNext for accounting from a new financial year, but you could start midway too. To set up your accounts, you will need the following for the “day” you start using accounting in ERPNext:

Assets 

1. Stock assets (stock in hand).
2. Fixed assets like furnitures, computers, etc.
3. Accounts Receivables (AR) i.e. unpaid invoices which you have sent to your Customers.
4. Current assets like bank balances, cash in hand, deposits, etc.

Liabilities 

1. Capital accounts like your shareholder’s (or owner’s) capital
2. Current liabilities like loans, salary payables etc
3. Accounts Payables(AP) i.e. unpaid invoices which your suppliers have sent you

If you were using another accounting software before, you should close financial statements in that software first. The closing balance of the accounts should be updated as an opening balance in the ERPNext. Before starting to update opening balance, ensure that your Chart of Accounts has all the Accounts required.

Opening entries can be created using the Opening Invoice Creation Tool in ERPNext.

Opening entry is only for Balance Sheet accounts and not for Profit and Loss Accounts.

2. Opening Balance of Assets 

2.1 Fixed Assets

2.2 Stock Assets

2.3 Accounts Receivable

2.4 Current Assets

3. Opening Balance of Liabilities 

3.1 Capital Accounts

3.2 Current Liabilities

3.3 Accounts Payable

4. Verify the Opening Balance 

Once all assets and liabilities have been imported, the balance of Temporary Opening ledger should be zero.

A Cost Center is a part of an organization where costs or income can be charged.

In ERPNext you can use the Cost Center as a Profit Center.

Your Chart of Accounts is mainly designed to provide reports to the government and tax authorities.

Most businesses have multiple activities like different product lines, market segments, areas of business, etc that share some common overheads. They should ideally have their own structure to report whether they are profitable or not. For this purpose, there is an alternate structure called the Chart of Cost Centers.

A Cost Center acts like an Accounting Dimension which helps you track costing based on particular areas.

The Cost Center can be set at these levels:

• Company
• Item
• Order/Invoice

The Cost Center can be linked to the following transactions:

1. Sales Invoice
2. Purchase Invoice
3. Journal Entry
4. Payment Entry
5. Delivery Note

And other transactions which can be used for budgeting. You can also use Cost Center for Budgeting.

1. Cost Center tree 

You can create a tree of Cost Centers to represent your business better. Each Income / Expense entry is also tagged against a Cost Center. If ‘Allow Cost Center In Entry of Balance Sheet Account’ is checked under Account Settings, the system will allow a User to tag entry in Balance Sheet Accounts against a Cost Center.

For example, if you have two types of sales:

• Walk-in Sales
• Online Sales

You may not have shipping expenses for your walk-in customers, and no shop- rent for your online customers. If you want to get the profitability of each of these separately, you should create the two as Cost Centers and mark all sales with either “Walk-in” or “Online” Cost Center. Mark all your purchases in the same way.

Thus when you do your analysis you get a better understanding as to which side of your business is doing better. Since ERPNext has an option to add multiple Companies, you can create Cost Centers for each Company and manage them separately.

To access the Chart of Cost Centers, go to:

Home > Accounting > Budget and Cost Center > Chart of Cost Centers

2. How to set up Chart of Cost Centers 

1. Go to the Chart of Cost Centers.
2. Add region-wise nodes.
3. Add other nodes as per your needs.

Selecting a different Company will display the Cost Centers for that Company.

Cost Center Allocation 

Cost Center Allocation is a feature using which the general ledger entry against a cost center can be split against multiple cost centers. In the Cost Center Allocation document, you can define allocation percentages of the child cost centers.

In a growing business, it becomes a necessity to analyse the income/expenses against each business unit of the organisation. And to do that, we need to treat each businees unit as a cost center and book income/expenses against the cost center. But if we need to split it every time at the transaction level manually, it becomes very difficult. That’s when this Cost Center Allocation feature comes to the rescue.

In ERPNext, we just need to define the allocation between multiple cost centers (business units) against a specific master/main cost center. Then whenever we book an invoice or expense transaction against the main cost center, the system automatically split it based on allocation and posts gl entries against each child cost center.

1. How to create a Cost Center Allocation? 

1. Go to Cost Center Allocation list view and create a new Cost Center Allocation.
2. Enter the Main Cost Center which will be used in the transaction.
3. Enter Valid From and Valid Upto to track the validity of the allocation.
4. In the child table, enter child cost centers and their percentage
5. Save and Submit the document.

2. GL Entries against Transaction 

While booking any transaction against the main cost center, the system automatically split the GL Entry against it and posts multiple gl entries based on the applicable cost center allocation record.

A Fiscal Year is used to record and report the transactions for the year.

It is also known as a financial year or a budget year. It is used for calculating financial statements in businesses and other organizations. The Fiscal Year may or may not be the same as a calendar year.

For tax purposes, companies can choose to be calendar-year taxpayers or fiscal-year taxpayers depending on the jurisdiction. In many jurisdictions, regulatory laws regarding accounting and taxation require such reports once per twelve months. However, it is not mandatory that the period should be a calendar year (that is, 1 January to 31 December).

A Fiscal Year usually starts at the beginning of a quarter, such as April 1, July 1 or October 1. However, most companies’ Fiscal Year also coincides with the calendar year, which starts at January 1. For the most part, it is simpler and easier that way. For some organizations, there are advantages in starting the Fiscal Year at a different time.

For example, businesses that are seasonal might start their Fiscal Year on July 1 or October 1. A business that has most of its income in the fall and most of its expenses in the spring might also choose to start its Fiscal Year on October 1. That way, they know what their income will be for that year, and can adjust their expenses to maintain their desired profit margins.

To access the Fiscal Year list, go to:

Home > Accounting > Setup > Fiscal Year

1. How to set up Fiscal Year 

1. Go to the Fiscal Year list.
2. To set the Fiscal Year as default, click on the Set as Default button.
3. In case you have multiple companies sharing the same Fiscal Year, you can add it as shown in the following screenshot: 

Note –

1.New Fiscal Year should be created each year, at the end of the current fiscal year. Creation of new Fiscal Year before its begining has been automated in ERPNext.

2.Three days prior to the end of the current Fiscal Year, system checks if new Fiscal Year for the incoming year is already created. If not, then system auto-creates new Fiscal Year.

Budgeting is a financial plan that helps controlling Company expenses.

In IONIC ERP, you can set and manage budgets against a Cost Center or a Project. This is useful in controlling your expenses. With version 12, you can also create separate Accounting Dimensions to tag transactions with different fields.

For example, if you are doing online sales, you can set a budget for search advertisements and configure IONIC ERP to stop or warn you from overspending beyond a set budget.

Budgets are also great for planning purposes. When you are making plans for the next Financial Year, you would typically target a revenue based on which you would set your expenses. Setting a budget will ensure that your expenses do not get out of hand at any point.

To access the Budget list, go to:

Home > Accounting > Cost Center and Budgeting > Budget

1. How to Create a new Budget 

1. Go to the Budget list and click on New.
2. Select what to budget against, Cost Center, Project, or an Accounting Dimensions.
3. In the accounts table, select an income/expense account for which a budget is to be set. Let’s set a budget for telephone expenses for the year. 
4. Enter the budget amount for that account.
5. Save and Submit.

2. Features 

2.1 Monthly Distribution 

You can also define a Monthly Distribution record to distribute the budget between months. If you don’t set the monthly distribution, IONIC ERP will calculate the budget yearly or in equal proportion for every month.

2.2 Control Actions (Alerts) 

Control actions can be triggered when:

• A Material Request is being submitted
• A Purchase Order is being submitted
• When an actual expense is being posted (through a journal entry or a purchase invoice).

You can set a control action in the Budget based on Material Requests, Purchase Orders, or on actual expenses. Further, you can set a control action for annual or monthly budgets.

There are three types of control actions.

• Stop: This will not allow users to submit the transaction.
• Warn: This will show a warning message but lets the user submit the transaction.
• Ignore: This will neither prevent the user from submitting transactions nor show an error message.

You can set separate actions for monthly and annual budgets. If you exceed the budget, a warning will be shown:

Note that a similar warning will be triggered for any type of transactions set in the budget for the particular Account heads.

3. Budget Variance Report 

At any point in time, you can check the Budget Variance Report to analyze the actual expense incurred vs budget allocated against a cost center or a project.

To check the Budget Variance report, go to:

Home > Accounting > Cost Center and Budgeting > Budget Variance Report

An Accounting Period defines a time period in which financial statements are recorded.

In ERPNext, Accounting Period is a timeframe outside which selected submittable transactions (like Sales/Purchase Invoice, Stock Entry, Payroll Entry, Journal Entry etc) are not allowed to be created. In other words, the selected transactions are only allowed to be created within the defined Accounting Period.

Why is Accounting Period needed?

When transactions are submitted, they affect the ledgers and the reports which process the ledger data. This can cause issues when financial reports have to be generated for audit by authorities or for closing the accounting books for the financial year.

Here Accounting Period can be used to limit the time period within which transactions can be submitted to preserve the integrity of the corresponding reports.

1. How to create an Accounting Period 

1.1 What is the “Closed” option for the selected transactions used for? 

The “Closed” option in the childtable for transaction doctypes is used to select which of them are to be restricted after the end of the Accounting Period.

Do note that if the Accounting Period ends and if any of the selected transactions in the child table don’t have “Closed” checked, then they won’t be restricted after the Accounting Period ends.

1. Enter a name for the Accounting Period.
2. Define a time frame by setting Start and End Dates.
3. Add or remove transactions from the table. Note that all transactions listed in the table with “Closed” option checked will be restricted after the accounting period ends.
4. Save and Submit. 

If you try to submit a closed transaction after its Accounting Period ends, you will see a validation error preventing you from doing so. 

Note: No role can submit transactions defined in the Accounting Period, even the Role set in ‘Role Allowed to Set Frozen Accounts & Edit Frozen Entries’ in Account Settings.

A Finance Book is a book against which all the accounting entries are booked.

You can have multiple finance books. For example, one book for tax authorities and another for stockholders. This is useful if you have to report depreciation and other values in different ways based on regulatory requirements. You can also use this to post alternate balance sheets for your internal reporting.

In order to use Finance Books, you need to check Enable Finance Books under the Fixed Asset Defaults section of the Company master.

Finance Book is not a mandatory setup. But if you choose to create multiple Finance Books, then you can make entries against a specific Finance Book by selecting that book in Journal Entry. If a Finance Book field is blank in a Journal Entry that means the entry will be available in all finance books.

Many a times, for fixed asset depreciation, a Company may use different depreciation methods (Straight Line / Written Down Value / Double Declining Balance) for different finance books. You can set up different depreciation schedules for each Finance Book. Then, automatic depreciations will booked against that Finance Book according to the schedule.

Introduced in Version 12

Dimensional accounting means tagging each transaction with appropriate dimensions like Branch, Business Unit, etc. This allows you to maintain each segment separately, thereby limiting the overall maintenance on GL accounts and your Chart of Accounts remains pure.

Cost Center and Project are treated as dimensions by default in ERPNext. On setting a field in Accounting Dimension, that field will be added in transactions reports where applicable.

In ERPNext you can create configurable accounting dimensions and use them in transactions and reports.

To access the Accounting Dimension list, go to:

Home > Accounting > Settings > Accounting Dimensions

1. How to create Accounting Dimension in ERPNext. 

1. Go to the Accounting Dimension list and click on New.
2. Select the Reference Document which you want to use as a custom dimension. For example, if you select Department as Reference Document, the dimension will be based on Department.
3. Enter the name of the dimension (This name will appear in the transactions for which dimensions are created).
4. Inside the Dimension Defaults table you can mention company specific default dimensions as shown in the screenshot below. This dimension will be automatically fetched in the transaction against that specific company.
5. Check “Mandatory” checkbox if you want the dimension to be mandatory in the transactions.

2. Features 

As you create the dimension, custom fields will be created using a background job for that specific dimension. You can see them in Accounting Dimensions section inside the transactions which have an impact on Accounting entries (GL Entry).

2.1 Using dimensions in transactions 

To tag a transaction with a dimension you can select the specific dimension in Accounting Dimensions section as shown in the screenshot below.

2.2 Filtering Reports based on dimensions 

You can also filter various financial reports like Profit and Loss Statement, Balance Sheet, General Ledger based on these dimensions.

2.3 Making accounting dimensions mandatory for “Profit and Loss” and “Balance Sheet” Accounts 

Profit and Loss is the group of Income and Expense accounts that represent your accounting transactions over a period.

The Balance Sheet accounts are Application of Funds (Assets) and Sources of Funds (Liabilities) that signify the net-worth of your company at any given time.

By selecting the check boxes ‘Mandatory for Profit and Loss Account’ or ‘Mandatory for Balance Sheet’ you can configure your dimensions to be mandatory for ‘Profit and Loss’ and ‘Balance Sheet Accounts’.

2.4 Disabling accounting dimensions when no longer required 

You can also disable the dimensions if you don’t require them anymore. The old transactions having accounting dimensions will remain intact.

Introduced in Version 13

In ERPNext, you can control the tagging of various accounting dimensions against a specific account. You can either allow or restrict certain accounting dimensions against an account using the accounting dimension filters

To access the Accounting Dimension Filter list, go to:

Home > Accounting > Accounting Dimension Filters

1. How to create an Accounting Dimension Filter in ERPNext. 

1. Go to the Accounting Dimension Filter list and click on New.
2. Select the Accounting Dimension on which restriction has to be applied.
3. Select “Allow” or “Restrict” in the Allow Or Restrict field based on the type of restriction you want to apply.
4. Add accounts on which restriction will be applied in the Accounts table. Optionally you can also check the “Is Mandatory” checkbox if the accounting dimension has to be made mandatory for any specific account.
5. Add dimension values in the Dimensions table that will be allowed or restricted for the mentioned accounts.

2. Features 

2.1 Filtering accounting dimensions in transactions 

Based on the restrictions applied on the account, only allowed dimensions will be filtered and shown in the transactions.

2.2 Validations for Invalid and Mandatory Dimensions 

In case any mandatory dimension is missing or a restricted dimension is tagged against any applicable account, the system won’t allow submitting that transaction until the correct accounting dimension is selected.

In ERPNext, saving different banks lets you upload an excel sheet and map the transactions to the ledger. The transactions are created as Bank Transactions. These can then be used for reference and reports. This is done using Bank Reconciliation.

To access Bank, go to:

Home > Accounting > Bank Statement > Bank

1. How to create a Bank 

Creating a Bank is simple, go to the Bank list, click on New, and enter a name.

1.1 Configuring data import for a Bank 

1. Under ‘Field in Bank Transaction’ select the field to be updated in the ‘Bank Statement Transaction Entry’ form.
2. Under ‘Column in Bank File’, enter the column in the excel file exported from the bank.

On setting this up, Bank can be done smoothly.

In ERPNext, Bank Accounts can be created for a Company as well as other parties like Customers, Suppliers etc. Doing this lets you record all the bank transactions correctly for accounting accuracy.

You can add Bank Accounts in ERPNext for Company. Supplier, Customer, or any other party with whom transactions are carried out. Then the Bank Account can be chosen in Payment Entries as a Mode of Payment.

To access Bank Account, go to:

Home > Accounting > Bank Statement > Bank Account

1. Prerequisites 

Before creating and using Bank Account, it is advised to create the following first:

• Bank

2. How to create a Bank Account 

1. Enter an Account Name.
2. Link the General Ledger account set in ‘Bank Accounts’ in the Chart of Accounts.
3. Select a Bank.
4. Save.

2.1 Additional options when creating a Bank Account 

• Is the Default Account: Enabling this will use this as the default bank account for all journal transactions.
• Is Company Account: Enable if this Bank Account a Company account.
• An Account Type and Account Subtype can be set for further classification in reports etc.

3. Features 

3.1 Party Details 

• Party Type: If this is not a company account, set who this account belongs to. The available options are: Customer, Employee, Member, Shareholder, Student, and Supplier.
• Party: Select the specific Customer/Supplier, etc.

3.2 Account Details 

For reference, the following details about a Bank Account can be stored in ERPNext:

• IBAN
• Bank Account No
• Branch Code
• SWIFT number

3.3 Address and Contact 

• Address: A bank may have multiple in the same locality. The bank branch address can be set here.
• Contact: A Contact Person can be linked here. Banks usually provide a dedicated contact person for corporate accounts, you can add that person’s contact here.
• Website: You can add the bank’s website here.

3.4 Integration Details 

Last Integration Date: If your bank supports Plaid Integration, setting a date here will synchronize on the set date. This will create Bank Transactions entries.

A Bank Guarantee is a guarantee from a lending institution such as a bank ensuring the liabilities of a debtor will be met.

In other words, if the debtor fails to settle a debt, the bank covers it. A Bank Guarantee enables the customer, or debtor, to acquire goods, buy equipment or draw down loans, and thereby expand business activity.

A client may ask you to provide a Bank Guarantee from a third party such as a Bank. This guarantee is for a specified amount, which is usually a percentage of the total value of the contract. The Bank Guarantee is valid for a specified duration after which it expires.

In a transaction between a large organization and a small organization, the larger organization (Supplier) is at risk of not receiving the money owed for providing Items/Services so it will receive a Bank Guarantee from the smaller organization (Customer). A Bank Guarantee ensures that the larger organization gets money in case the smaller organization is not able to deliver.

To access the Bank Guarantee list, go to:

Home > Accounting > Banking and Payments > Bank Guarantee

1. How to create a Bank Guarantee 

1. Go to the Bank Guarantee list and click on New.
2. Select the type whether you’re Receiving a Bank Guarantee from a Customer or Providing it to a Supplier.
3. Set the Start Date and under ‘Validity in Days’ enter the number of days the guarantee is valid for.
4. Select the Sales Order or Purchase Order depending on step 2.
5. The Customer/Supplier and the Amount will be fetched automatically.
6. Select a Bank and the Bank Account.
7. Enter a Bank Guarantee number and name of the beneficiary.
8. Save and Submit. 

This document allows you to track Bank Guarantees given to Suppliers and received from Customers. You can set Email Alerts as the Bank Guarantee expiry date approaches to remind yourself to get the Bank Guarantee back from your client.

1.1 Additional Options when creating a Bank Guarantee 

• Margin Money: This is some percentage of money paid to the Bank to proceed with the Bank Guarantee.
• Charges Incurred: Handling charges charged by the Bank.
• Fixed Deposit Number: In case the providing party has any Fixed Deposits, they can use them for proceeding with the Bank Guarantee.

Deferred revenue refers to advance payments a Company receives for products or services that are to be delivered or performed in the future.

It is also known as unearned revenue.

The company that receives the prepayment records the amount as Deferred Revenue on their balance sheet as a liability. Deferred revenue is a liability because it refers to revenue that has not been earned and represents products or services that are owed to a Customer. As the product or service is delivered over time, it is recognized as revenue on the income statement.

1. Configuring Deferred Accounting 

Introduced in Version 13

Before you start using deferred accounting you should be aware of the below settings which will give you more control over how you manage your deferred accounting

1. Automatically Process Deferred Accounting Entry: This setting is enabled by default. In case you don’t want the deferred accounting entries to be posted automatically you can disable this setting. If this setting is disabled deferred accounting will have to be processed manually using Process Deferred Accounting
2. Book Deferred Entries Based On: Deferred revenue amount can be booked based on two criteria. The default option here is “Days”. If “Days” is selected, the deferred revenue amount will be booked based on the number of days in each month and if “Months” is selected, then it will be booked based on number of months. For Eg: If “Days” is selected and $12000 revenue has to be deferred over a period of 12 months, then $986.30 will be for the month having 30 days and $1019.17 will be booked for the month having 31 days. If “Months” is selected, $1000 deferred revenue will booked each month irrespective of the number of days in a month.
3. Book Deferred Entries Via Journal Entry: By default Ledger Entries are posted directly to book deferred revenue against an invoice. In order to book this deferred amount posting via Journal Entry, this option can be enabled.
4. Submit Journal Entries: This option is applicable only if deferred accounting entries are posted via Journal Entry. By default, the Journal Entries for deferred posting are kept in Draft state and a user has to verify those entries and submit them manually. If this option is enabled, Journal Entries will be automatically submitted without any user intervention.

2. How to use Deferred Revenue 

Internet and broadcasting service providers offer subscription plans on quarterly or yearly basis. They take complete payment in advance from the Customer for couple of months, but book income on monthly basis in their book of accounts. This is Deferred Revenue for the Supplier and Deferred Expense for the Customer. Following is how they should configure Deferred Revenue accounting in ERPNext to automate the process.

2.1 Item 

In the Item master created for the subscription plan, under Deferred Revenue section, check field Enable Deferred Revenue. You can also select a Deferred Revenue account for this particular item and number of months.

2.2 Sales Invoice 

On creation of Sales Invoice for the Deferred Revenue Item, instead of posting in the Income Account, Deferred Revenue account is Credited by the sale amount. If you had set the account and period in Item, then the account and service start, end dates will be fetched automatically.

2.3 Journal Entry 

Based on the From Date and To Date set in the Sales Invoice Item table, Journal Entries are created automatically at the end of each month. It debits the value from Deferred Revenue account and credits Income Account selected for an Item in the Sales Invoice.

Following is an example of Income for the Deferred Revenue Item booked via multiple Journal Entries.

Deferred expense is a cost that has already been incurred, but which has not yet been consumed.

The cost is recorded as an asset until such time as the underlying goods or services are consumed; at that point, the cost is charged to expense. A Deferred Expense is initially recorded as an asset, so that it appears on the balance sheet (usually as a Current Asset, since it is not used as of now and will probably be consumed within one year).

1. Configuring Deferred Accounting 

Introduced in Version 13

Before you start using deferred accounting you should be aware of the below settings which will give you more control over how you manage your deferred accounting

1. Automatically Process Deferred Accounting Entry: This setting is enabled by default. In case you don’t want the deferred accounting entries to be posted automatically, you can disable this setting. If this setting is disabled, deferred accounting will have to be processed manually using Process Deferred Accounting
2. Book Deferred Entries Based On: Deferred expense amount can be booked based on two criteria. The default option here is “Days”. If “Days” is selected, the deferred expense amount will be booked based on the number of days in each month and if “Months” is selected then it will be booked based on the number of months. For Eg: If “Days” is selected and $12000 expense has to be deferred over a period of 12 months, then $986.30 will be for the month having 30 days and $1019.17 will be booked for the month having 31 days. If “Months” is selected, $1000 deferred expense will be booked each month irrespective of the number of days in a month.
3. Book Deferred Entries Via Journal Entry: By default Ledger Entries are posted directly to book deferred expense against an invoice. In order to book this deferred amount posting via Journal Entry, this option can be enabled.
4. Submit Journal Entries: This option is applicable only if deferred accounting entries are posted via Journal Entry. By default, the Journal Entries for deferred posting are kept in Draft state and a user has to verify those entries and submit them manually. If this option is enabled, Journal Entries will be automatically submitted without any user intervention.

2. How to use Deferred Expense 

As an example of a Deferred Expense, Unico Plastics pays $10,000 in April for its May rent. It defers this cost at the point of payment (in April) in the prepaid rent asset account. In May, Unico Plastics has now consumed the prepaid asset, so it credits the prepaid rent asset account and debits the rent expense account.

Other examples of Deferred Expenses are:

• Interest costs that are capitalized as part of a fixed asset for which the costs were incurred
• Insurance paid in advance for coverage in future months
• The cost of a fixed asset that is charged to expense over its useful life in the form of depreciation
• The cost incurred to register the issuance of a debt instrument
• The cost of an intangible asset that is charged to expense over its useful life as amortization
• For an Internet Subscription, the amount is paid upfront and service is delivered every month. So it is Deferred Expense for the Customer.

Following is how you can configure Deferred Expense accounting in ERPNext to automate the process.

2.1 Item 

In the Item master, under Deferred Expense section, check field Enable Deferred Expense. In this section, you can also select a Deferred Expense account (Asset Account, preferably Current Asset) for this particular item and no. of months.

2.2 Purchase Invoice 

On creation of Purchase Invoice for the Deferred Expense Item, instead of posting in the Expense Account, Deferred Expense account (Asset account) is Credited by the purchase amount. Let’s consider a simple example of an Internet subscription here:

2.3 Journal Entry 

Based on the From Date and To Date set in the Purchase Invoice Item table, Journal Entries are created automatically at the end of each month. It debits the value from Deferred Expense account and credits Expense Account selected for an Item in the Purchase Invoice.

Process Deferred Accounting is a log which is created on every processing of deferred revenue or expense.

Process Deferred Accounting records are automatically created on booking Deferred Revenue or Expense. It is done via a background job but the user can also create a record for manual Deferred Revenue or Expense booking.

To access the Process Deferred Accounting list, go to:

Home > Accounting > General Ledger > Process Deferred Accounting

1. Prerequisites 

Before creating and using a Process Deferred Accounting, it is advised to create and understand the following first:

• Deferred Revenue
• Deferred Expense

2. How to create a Process Deferred Accounting 

1. Go to Process Deferred Accounting list, click on New.
2. Enter the Company.
3. Select the type of deferred accounting process. Select ‘Income’ for booking deferred revenue or select ‘Expense’ for booking deferred expense
4. Expand the posting date.
5. Enter service Start Date and End Date.
6. Save and Submit.

3. Features 

3.1 On Submitting 

On submitting a Process Deferred Accounting document, GL Entries for deferred revenue or expense booking will be created for all the invoices falling between the service Start Date and End Date.

Enter the account if Deferred Revenue or Expense has to be booked only for specific deferred income or expense account

3.2 Enabling automatic deferred accounting 

To enable automatic deferred accounting, enable the ‘Automatically Process Deferred Account Entry’ checkbox by navigating to Accounts Settings.

To access Accounts Settings go to:

Home > Accounting > Accounting Masters > Accounts Settings

The Currency Exchange form in ERPNext stores exchange rates manually stored by the User. By default, ERPNext automatically fetched the current exchange rates for currencies as per the market. However, you can store fixed exchange rates and use them. You need to enable ‘Allow Stale Exchange Rates’ in Accounts Settings for using the exchange rates stored in the Currency Exchange form.

To access the Currency Exchange list, go to:

Home > Accounting > Multi Currency > Currency Exchange

1. How to create a Currency Exchange 

1. Go to the Currency Exchange list and click on New.
2. Enter a date from which this exchange rate will be valid. New Currency Exchange forms saved with newer dates will be used in transactions.
3. Set the From and To currency.
4. Enter the Exchange Rate, for example, 1 USD = 65 INR.
5. Select whether the exchange rate applies to selling, buying, or both transactions.
6. Save.

Transacting in two different currencies is known as Multi Currency Accounting.

In IONIC ERP, you can make accounting entries in multiple currencies. For example, if you have a bank account in foreign currency, you can make transactions in that currency and the system will show bank balance in that specific currency only.

Bank accounts in foreign currencies can be for other branches of your own company or Debtors/Creditors account for foreign Customers/Suppliers.

1. Setup 

1.1 Set currency in Chart of Accounts 

To get started with multi-currency accounting, you need to assign accounting currency in the Account record. You can define Currency from Chart of Accounts while creating an Account.

1.2 New account with different currency 

You can also assign/modify the currency by opening specific Account records for existing Accounts.

1.3 Currency for Customer/Supplier 

For Customer/Supplier (Party), you can also define its billing currency in the party record. If the party’s accounting currency is different from Company Currency, you should mention Default Receivable/Payable Account in that currency.

1.4 After setup 

Once you define Currency in the required account(s) and select relevant accounts in the Party record, you are ready to make transactions against them. If party account currency is different from the Company currency, the system will restrict from making transactions with that party.

You need to change the currency to party currency in the transaction (Sales or Purchase Order/Invoice). If party account currency is the same as company currency, you can make transactions for that Party in any currency. But accounting entries (GL Entries) will always be in Party Account Currency.

Note: Ensure that the correct account with currency is set in the ‘Debit To’ field when making invoices/payments.

You can change accounting currency in Party/Account record before you make any transactions against them. After making accounting entries, the system will not allow you to change the currency for both Party/Account records. In case of multi-company setup, the accounting currency of the party must be the same for all the companies.

2. Exchange Rates 

When dealing with multiple currencies, IONIC ERP has the Currency Exchange page for managing exchange rates. It allows you to save the exchange rate quotes you require. To know more, visit the Currency Exchange page.

For foreign currency transactions, IONIC ERP checks exchange rates from:

1. From the Currency Exchange for any matching record (if created by a User).
2. If this fails, IONIC ERP will attempt to get the current market exchange rate from Frankfurter.
3. NOTE: Starting from IONIC ERP version 13.10.0, Frankfurter is replaced by a new service called exchangerate.host.
4. If this still fails, then the exchange rate will have to be entered manually.

The rates in the Currency Exchange master are fetched based on whether ‘Allow Stale Exchange Rate’ is enabled in Accounts Settings. To know more, visit the Accounts Settings page.

3. Transactions 

3.1 Sales Invoice 

In a Sales Invoice, transaction currency must be the same as the accounting currency of Customer if Customer’s accounting currency is different from Company currency. Otherwise, you can select any currency in a Sales Invoice. On selection of Customer, system will fetch a Receivable account from Customer/Company. The Currency of the receivable account must be the same as the Customer’s accounting currency.

Now, in Invoice, Paid Amount will be entered in transaction currency, instead of earlier Company Currency. Write Off Amount will also be entered in the transaction currency.

Outstanding Amount and Advance Amount will always be calculated and shown in Customer’s Account Currency. The paid amounts will be reflected in the Payment Entry:

3.2 Purchase Invoice 

Similarly, in a Purchase Invoice, accounting entries will be made based on Supplier’s accounting currency. Outstanding Amount and Advance Amount will also be shown in the supplier’s accounting currency. Write Off Amount will now be entered in the transaction currency.

3.3 Journal Entry 

In Journal Entry, you can make transactions in different currencies. There is a checkbox ‘Multi Currency’, to enable multi-currency entries. Only when ‘Multi Currency’ option selected, you will be able to select accounts which have different currencies.

In the Accounts table, on the selection of a foreign currency account, the system will show the Currency section and fetch Account Currency and Exchange Rate automatically. You can change/modify the Exchange Rate later manually. Debit/Credit amount should be entered in Account Currency, the system will calculate and show the Debit/Credit amount in Company Currency automatically.

4. Reports 

4.1 General Ledger 

In General Ledger, the system shows debit/credit amount in party currency if filtered by an Account and that Account Currency is different from Company Currency.

4.2 Accounts Receivable/Payable 

In Accounts Receivable/Payable report, the system shows all the amounts in Party/Account Currency.

A Shareholder is someone who owns shares of a Company.

A Shareholder is any person, company or other institution that owns at least one share of a company’s stock. Because shareholders are a company’s owners, they reap the benefits of the company’s successes in the form of increased stock valuation. If the company does poorly, shareholders can lose money if the price of company stock declines.

Any profit or loss made by a Company belongs to the Shareholders and hence the Shareholders are a liability to the Company.

IONIC ERP allows you to keep a track of all your Shareholders and maintain Share Transfers, Share Ledger and Share Balances. A shareholder is uniquely identified by the Shareholder ID. Normally this ID is a Naming Series starting with ‘ACC-SH-‘. Also as soon as the Shareholder makes even a single transaction, a Folio number is allocated to him. This also is unique to the Shareholder.

To access the Shareholder list, go to:

Home > Accounting > Share Management > Shareholder

1. How to create a Shareholder 

1. Go to the Shareholder list and click on New.
2. Enter the name of the Shareholder.
3. Add Address and Contact details.
4. Save.

A Shareholder can avail the features (operations) in the Share Transfer process. Only after shares are issued to them, a Folio Number and the shares will be visible.

1.1 Contacts and Addresses 

Contacts and Addresses in IONIC ERP are stored separately so that you can attach multiple Contacts or Addresses to Shareholders and other parties.

A Share Transfer is the Issue, Transfer, or Purchase of Company shares from one party to another.

There may be times when you want to change the share structure of your Company; either by adding new Shareholders or by changing the existing proportion of shares between Shareholders. A Share Transfer is the process of transferring existing shares from one person to another; either by sale or gift.

When creating a new Shareholder, they need to be issued shares first. Only then a Folio Number is visible and further transfer can be done using that Shareholder.

To access the Share Transfer list, go to:

Home > Accounting > Share Management > Share Transfer

1. How to create a Share Transfer 

1. Go to the Share Transfer list and click on New.
2. Select the Transfer Type, for first ever Shareholder transaction this will be ‘Issue’.
3. Set a date for the transfer.
4. Select the From and To Shareholders.
5. Select the from and to Folio Numbers.
6. Set the Liability and Asset accounts.
7. Select the share type whether Preference or Equity (more share types can be added if needed).
8. Select the number of shares to be transferred.
9. Select the From and To number of shares. For example 1 to 3,000.
10. Set the rate of one share, the amount will be calculated based on the number of shares.
11. Save and Submit.

After submitting, a Journal Entry can be created to update the ledger using the Create Journal Entry button.

Note: Before you can Purchase or Transfer shares between shareholders, shares need to be issued.

1.1 Terminology 

Transfer Types:

• Issue: Shares are being issued to an existing Shareholder by the Company.
• Purchase: The Company is purchasing back shares from an existing Shareholder.
• Transfer: Shares are being transferred from one Shareholder to another.

Folio Number: This is a number used to uniquely identify a Shareholder and their transaction.

Share Type: The two default options in ERPNext are Preference and Equity. This only indicates the type of share, more can be added as per your Company structure.

There are two types of reports in IONIC ERP for shares. Share Balance and Share ledger.

1. Share Balance 

This is a report view which gives the list of all the shares held by a given Shareholder and its value.

To access the Share Balance report, go to:

Home > Accounting > Share Management > Share Balance

2. Share Ledger 

This is a report view which gives the list of all the transactions made by a given Shareholder.

To access the Share Ledger report, go to:

Home > Accounting > Share Management > Share Ledger

A Journal Entry is an entry made in the general ledger and it indicates the affected accounts.

A Journal Entry is a multi purpose transaction where the debit and credit accounts can be selected.

All types of accounting entries other than Sales and Purchase transactions are made using the Journal Entry. A Journal Entry is a standard accounting transaction that affects multiple Accounts and the sum of debits is equal to the sum of credits. A Journal Entry Impacts the main ledger.

Journal Entries can be used for entering expenses, opening entries, contra entries, bank payments, excise entries, etc. For example, booking running expenses, direct expenses like petrol/transport, sundry expenses, adjustment entries, and adjusting invoice amount.

Note: From version-13 onwards we have introduced immutable ledger which changes the way cancellation of accounting entries works in ERPNext. Learn more here.

To access the Journal Entry list, go to:

Home > Accounting > General Ledger > Journal Entry

1. How to create a Journal Entry 

1. Go to the Journal Entry list, click on New.
2. The default Entry Type will be ‘Journal Entry’. This is a general purpose entry type. Visit section 3 to know more about entry types.
3. You can change the Posting Date.
4. Expand the table, select an Account from which amount is debited.
5. The above details can be added from a Journal Entry Template too with the ‘From Template’ field.
6. Select the Party Type and Party if it’s a Debtor entry.
7. Add a row where the amount will be credited.
8. Note that, in the end, total debit and credit amounts should add up to be the same.
9. Save and Submit.

Finance Book: You can post this entry to a specific Finance Book. On leaving this field blank, this Journal Entry will show up in all Finance Books. This field will only be visible if ‘Enable Finance Books’ under the Fixed Asset Defaults section of the Company master is checked.

1.1 Quick Entry 

When creating a Journal Entry, a Quick Entry button can be seen on the top right. This makes creating the Journal Entry a bit easier. Enter the amount, select the accounts, add a remark. This will populate the ‘Accounting Entries’ table with the selected details.

2. Features 

2.1 Accounting Entries 

1. Accounting Dimensions: A Project or Cost Center can be linked here to track the costing separately. To know more, visit this page. 
2. Bank Account No: If you’ve added a Bank Account, the number associated with that bank account will be fetched.
3. Reference Type: If this Accounting Entry is associated with another transaction, it can be referenced here. Select the Reference Type and select the specific document. For example, if you’re creating a Journal Entry against a specific Sales Invoice. Link this Journal Entry to the invoice. The “outstanding” amount of that invoice will be affected.
4. 

Following are the documents that can be selected in the Journal Entry under Reference Type:

1. Sales Invoice
2. Purchase Invoice
3. Journal Entry
4. Sales Order
5. Purchase Order
6. Expense Claim
7. Asset
8. Loan
9. Payroll Entry
10. Employee Advance
11. Exchange Rate Revaluation
12. Invoice Discounting
13. Is Advance: If this is an advance payment by a Customer, set this option to ‘Yes’. This is useful when you have linked a ‘Reference Type’ form to this Journal Entry. Selecting “Yes” will link this Journal Entry to the transaction selected in the ‘Reference Name’ field. To know more, visit the Advance Payment Entry page.
14. User Remark: Any additional remarks about the entry can be added in this field.

2.2 Reverse Journal Entry 

In any submitted Journal Entry, there is a dedicated button to reverse the Journal Entry. On clicking the ‘Reverse Journal Entry’ button, the system creates a new Journal Entry by reversing debit and credit amount against the respective accounts.

2.3 Difference Entry 

The “Difference” is the difference that remains after summing all debit and credit amounts.

As per double entry accounting system, the total debit should be equal to the total credit.

This should be zero if the Journal Entry is to be “Submitted”. If this number is not zero, you can click on “Make Difference Entry” and the system will automatically add a new row with the amount required to make the total as zero. Select the account to debit/credit and proceed.

2.4 Referencing 

A Reference Number can be entered manually and a Reference Date can be set. On entering a Reference Number here, a ‘Remark’ will be seen, for example:

Note: supplier

Reference #2321 dated 30-09-2019 ₹ 1,000.00 against Sales Invoice ACC-SINV-2019-00064

In th Reference section, the following fields can be entered manually if the bill was recorded offline and not in the ERPNext system. This is only for reference purposes.

1. Bill No
2. Bill Date
3. Due Date

2.5 Multi Currency entries 

If the accounts selected are in different currencies, tick the ‘Multi Currency’ checkbox. If this checkbox is not enabled, you will not be able to select any foreign currencies in the Journal Entry. This will show the different currency and fetch the ‘Exchange Rate’. To know more, visit the Multi Currency Accounting page.

2.6 Journal Entry Template 

From Template field: Selecting an option in this will load details from a Journal Entry Template.

It will fetch and add the following details to the entry:

1. Entry Type
2. Company
3. Series
4. Accounts in Accounting Entries
5. Is Opening

To learn more go to the Journal Entry Template page.

2.7 Print Settings 

Pay To / Recd From: The name entered here will show up in the Sales Invoice. This is useful for printing cheques. Go to the print view in the Journal Entry and select the ‘Cheque Printing Format’.

Letterhead 

You can print your Journal Entry on your company’s letterhead. Know more here.

Print Headings 

Journal Entries can also be titled differently for printing purposes. You can do this by selecting a Print Heading. To create new Print Headings go to:

Home > Settings > Printing > Print Heading

Read Print Headings to know more.

2.7 More Information 

1. Mode of Payment: Whether the payment was done using Wire Transfer, Bank Draft, Credit Card, Cheque, or Cash. New Modes of Payment can also be created. If a Bank Account is set in Mode of Payment, it will be fetched here when the Mode of Payment is selected.
2. Is Opening: If the Journal Entry is of type ‘Opening Entry’ this field will be set to ‘Yes’. To know more, visit the Opening Balance page.
3. From Template: When a template is selected, the ‘Accounting Entries’ table will be emptied first before loading the accounts from the template. You can add more account entries after that.

3. Journal Entry Types 

Let’s take a look at some of the common accounting entries that can be done via Journal Entry in ERPNext.

3.1 Journal Entry 

This is a general purpose entry type which can be used for different purposes. Let’s see a few examples.

Expenses (non accruing) 

Many times it may not be necessary to accrue an expense, but it can be directly booked against an expense Account on payment. For example, a travel allowance or a telephone bill. You can directly debit Telephone Expense (instead of your telephone company) and credit your Bank on payment.

1. Debit: Expense Account (like Telephone expense).
2. Credit: Bank or Cash Account.

Crediting Salaries 

For crediting employee salaries, ‘Journal Entry’ type is used. In this case,

1. Debit: The salary components.
2. Credit: The bank account.

3.2 Inter Company Journal Entry 

If a transaction occurs between a parent and child company, or sister companies, or two companies belonging to the same group, this option can be used to make an Inter Company Journal Entry.

To know more visit the Inter Company Journal Entry page.

3.3 Bank Entry 

Use this type when making or receiving a payment using a Bank Account. For example, paying for an entertainment charges etc using the Company’s bank account.

3.4 Cash Entry 

This is the same as ‘Bank Entry’ but the payment is made via Cash Account.

3.5 Credit Card Entry 

This is a type of entry to easily identify all credit card entries.

3.6 Debit Note 

This is a document sent by a customer (your Company) to a supplier (your Supplier) when returning goods/items.

You can also create a Debit Note directly from a Purchase Invoice.

“Debit Note” is made for a Supplier against a Purchase Invoice or accepted as a credit note from Supplier when a company returns goods. When a Debit Note is made, the Company can either receive a payment from the Supplier or adjust the amount in another invoice.

1. Debit: Supplier Account.
2. Credit: Purchase Return Account.

To know more, visit this page.

3.7 Credit Note 

This is a document sent by a supplier to a customer when returning goods/items.

“Credit Note” is made for a Customer against a Sales Invoice when the company needs to adjust a payment for returned goods. When a Credit Note is made, the seller can either make a payment to the customer or adjust the amount in another invoice.

1. Debit: Sales Return Account.
2. Credit: Customer Account.

To know more, visit this page.

A debit/credit note is usually issued for the value of the goods returned or lesser.

3.8 Contra Entry 

A Contra Entry is booked when the transaction is booked within the same Company of types:

1. Cash to Cash
2. Bank to Bank
3. Cash to Bank
4. Bank to Cash

This is used to record withdrawing or depositing money from a Bank Account. When this entry is used, the money does not leave the company unless it is again used to pay for something.

3.9 Excise Entry 

When a Company buys goods from a Supplier, company pays excise duty on these goods to Supplier. And when a company sells these goods to Customers, it receives excise duty. Company will deduct payable excise duty and deposit balance in Govt. account.

When a Company buys goods with Excise duty:

1. Debit: Purchase Account, Excise Duty Account.
2. Credit: Supplier Account.

When a Company sells goods with Excise duty:

1. Debit: Customer Account.
2. Credit: Sales Account, Excise Duty Account.

Note: Applicable in India, might not be applicable for your country. Please check your country regulations.

3.10 Write Offs or Bad Debts 

If you are writing off an Invoice as a bad debt, you can create a Journal Voucher similar to a Payment, except instead of debiting your Bank, you can debit an Expense Account called Bad Debts.

1. Debit: Bad Debts Written Off
2. Credit: Customer

Note: There may be regulations in your country before you can write off bad debts.

3.11 Opening Entry 

This entry is useful when moving from an another software to ERPNext during any time of the year. Your outstanding bills, equities etc. can be recorded to ERPNext using this entry type. Selecting type will fetch the Balance Sheet accounts.

3.12 Depreciation 

Depreciation is when you write off certain value of your assets as an expense. For example if you have a computer that you will use for say 5 years, you can distribute its expense over the period and pass a Journal Entry at the end of each year reducing its value by a certain percentage.

1. Debit: Depreciation (Expense).
2. Credit: Asset (the Account under which you had booked the asset to be depreciated).

To know more, visit the Asset Depreciation page.

Note: There may be regulations in your country that define by how much amount you can depreciate a class of Assets.

3.13 Exchange Rate Revaluation 

If your Chart of Accounts has accounts with multiple currencies, a Journal Entry of type ‘Exchange Rate Revaluation’ helps in dealing with this situation. This entry is intended to be created from an Exchange Rate Revaluation form. To know more visit the Exchange Rate Revaluation page.

A Journal Entry Template lets you set and select a predetermined list of accounts and options while making a Journal Entry.

To access the Journal Entry Template, go to:

Home > Accounting > General Ledger > Journal Entry Template

1. How to Create and use a Journal Entry Template: 

1. Go to the Journal Entry Template List and click on New.
2. Add the following details:
   • Template Title: This will be used to select the template from Journal Entry.
   • Company: By default the company defined in Global Defaults is selected. You can select any another company too.
   • Entry Type: You can select from the entry types available in Journal Entry here. Default value is Journal Entry.
     • There are 3 special ‘Entry Types’ in this:
       • Opening Entry: This will get all the accounts and load them into the “Accounting Entries” table. To learn more visit Opening Balance page.
       • Bank Entry: This will get and load the default Bank Account if set.
       • Cash Entry: This will get and load the default Cash Account if set.
   • Is Opening: This will be autoset to ‘Yes’ if ‘Opening Entry’ is selected as Entry Type.
   • Series: You can select from a list of naming series available to Journal Entry.
   • Accounting Entries: Here you can select a list of accounts to add to the entry.
3. Save and go to Journal Entry and click on new.
4. In the ‘From Template’ field when you select the template, it will load the accounts and other options set in it. Please note it will clear the Accounting Entries table first, but you can add more accounts to the table apart from those fetched from the template.

A Payment Entry is a record indicating that payment has been made for an invoice.

Payment Entry can be made against the following transactions.

• Sales Invoice
• Purchase Invoice
• Sales Order (Advance Payment)
• Purchase Order (Advance Payment)
• Expense Claim
• Internal Transfer

In ERPNext, there are two options through which User can capture the payment:

• Payment Entry (Default)
• Journal Entry

Here are diagrams to understand the flow:

In Sales: 

In Purchase: 

To access the Payment Entry list, go to:

Home > Accounting > Accounts Receivable/Payable > Payment Entry

1. Prerequisites 

A Payment Entry can also be created directly then linked to an order/invoice later. Before creating and using Payment Entry, it is advised to create the following first:

1. Customer
2. Supplier
3. Bank Account

If you’re following the Sales/Purchase Cycle, you’d need the following:

1. Sales Order (Advance Payment)
2. Purchase Order (Advance Payment)
3. Sales Invoice
4. Purchase Invoice

Set up:

1. Chart Of Accounts
2. Company (for default accounts)

2. How to create a Payment Entry 

On submitting a document against which Payment Entry can be made, you will find the Payment option under the Create button.

1. Change the posting date.
2. The Payment Type will be set based on the transaction you’re coming from. The types are ‘Receive’, ‘Pay’, and ‘Internal Transfer’.
3. The Party Type, Party, Party Name will be fetched automatically.
4. The Account Paid To and Account Paid From will be fetched as set in the Company form.
5. The Amount Paid will be fetched from the Invoice.
6. Save and Submit. 

2.1 Creating a Payment Manually 

A Payment Entry created manually will have no order/invoice linked to it. Payments made this will be recorded in the Customer’s/Supplier’s account and can be reconciled later using the Payment Reconciliation Tool.

1. Go to the Payment Entry list and click on New.
2. Select the Party Type and the respective Customer/Supplier.
3. Select the Bank Account/Cash Account Paid To and Paid From. Enter the Cheque Number and date if bank transfer.
4. Enter the Amount Paid.
5. Save and Submit.

3. Features 

3.1 Setting Mode of Payment 

Mode of Payment: Entering this helps classify Payment Entries based on the payment mode used. Modes of Payment can be Bank, Cash, Wire Transfer, etc.

Tip: In the Mode of Payment master, default Account can be set. This default payment Account will be fetched into Payment Entries.

3.2 Payment From/To 

• Party Type: Whether Customer, Supplier, Employee, Shareholder, Student, or NGO Member.
• Party: The specific party for which the Payment Entry is made.
• Party Name: The name of the party, this is fetched automatically.
• Company Bank Account: Your Company’s Bank Account.
• Party Bank Account: The Party’s Bank Account.
• Contact: If the Party is an organization, a Contact person can be stored here.

3.3 Accounts 

• Party Balance: The overall amount receivable or payable from Customer or Supplier from Invoices set in the current Payment Entry. Paid amounts will be positive and if advance payments are made, they will be negative.
• Account Paid From: The Account from which the amount will be deducted when Payment is submitted.
• Account Paid To: The COA account from which the amount will be added when Payment Entry is submitted.
• Account Currency: The Currencies of these accounts will be fetched as set in the Account and cannot be edited here. To know about more about transactions in multiple currencies, visit this page.
• Account Balance: The total amount balance from all the invoices of the selected accounts.

Paid Amount: The total amount paid for the current Payment Entry is shown in this field.

Note: When making Payment Entries, the default bank account will be fetched in the following order if set:

• Company form
• Mode of Payment default account
• Customer/Supplier default bank account
• Select manually in Payment Entry

3.4 Reference 

Fetching outstanding Invoices 

This can be used to make payments to multiple Sales Invoices using one Payment Entry. When creating a new Payment Entry, on clicking the Get Outstanding Invoice button all the outstanding Invoices and open Orders will be fetched for the party. You need to enter the ‘Paid Amount’ to see this button. From here a date range and invoices to be fetched can be selected.

If the Party has not made full payment, enter the amount paid in the ‘Allocated’ field.

If creating Payment Entry for a Customer, the Payment Amount will be allocated against a Sales Invoice. On the same lines, when creating Payment Entry for a Supplier, Payment Amount will be allocated against a Purchase Invoice.

Payment References table 

• Type: Whether the payment is being made against a Sales Order, Sales Invoice, or a Journal Entry.
• Name: The particular transaction ID is fetched/selected here.
• Total Amount: The total amount of one Invoice/Journal Entry in the row.
• Outstanding: The amount to receive/to pay for this invoice.
• Allocated: If the Paid Amount is less than the invoice amount only the paid amount will be allocated to the invoice(s) fetched in the Payment Entry. The payment may be made in parts, for example, if there are three invoices of amounts 20, 20, 20, the Paid Amount is 60 then this Paid Amount will be distributed equally. Payment Terms may also be involved.

What is Unallocated Amount? 

When a Payment Entry is made in ERPNext and the Paid Amount is more than the total invoice amount, it is stored in the Customer’s/Supplier’s account. This amount is hence currently ‘Unallocated’. Unallocated amount can be used against future invoices.

For example, you create a Sales Invoice totaling 1,000 and the Customer paid 1,500. When another invoice is created for this Customer in the future for 1,000 again, the previously paid 500 can be used.

3.5 Deductions or Loss 

When a Payment Entry is created against an invoice, there could be some difference in the actual Paid Amount and the invoice outstanding amount. This difference could be due to rounding errors or changes in the currency exchange rate. You can set an Account here where this difference amount will be booked.

The loss/deductions can be written off. Let’s see an example here where the paid amount is 25 but the allocated amount is 30 since 30 is the amount to be collected as per the invoice. The ‘Difference Amount’ will be 5 in this case. This difference amount can occur due to discounts or Currency Exchange. The Difference Amount needs to be 0 in order to submit the Payment Entry. This can be adjusted using the Make Difference Entry button. The amount will be adjusted in the Write Off account.

3.6 Write Off 

Write off happens when the paid amount is less than the allocated amount. I.e. the remaining amount is considered as lost in miscellaneous charges or that amount isn’t going to be paid. This is considered as loss.

3.5 After Submitting 

Save and Submit Payment Entry. On submission, outstanding will be updated in the Invoices.

If payment entry was created against Sales Order or Purchase Order, the field ‘Advance Paid’ will be updated in them. When creating Invoice against those transactions, Payment Entry will be auto-updated in that Invoice so that you can allocate invoice amount against advance payment entry.

For incoming payment, the accounts posting will be done as follows.

• Debit: Bank or Cash Account
• Credit: Customer (Debtor)

For outgoing payment:

• Debit: Supplier (Creditor)
• Credit: Bank or Cash Account

4. Other cases 

4.1 Multi Currency Payment Entry 

If you want to maintain a receivable/payable account in foreign currency, then create accounts with foreign currency (different from Company currency) and link it in the party account. For example:

ERPNext allows you maintain accounts and invoicing in multiple currency. If an invoice is made in the party currency, Currency Exchange Rate between the Company’s base currency and party currency is also entered in the invoice.

Note: A separate Debtor/Creditor account needs to be created and selected in the Sales Invoice/Order for currency exchange to work correctly. For example, if the Customer is from the US, create a receivable account called ‘Debtors US’.

When creating Payment Entry against that invoice, the current exchange rate will be fetched, but you can set the Currency Exchange Rate at the time of payment to match your records.

Click on the Set Exchange Gain/Loss button to automatically add a row to write off the difference amount.

Since Currency Exchange Rate fluctuates all the time, it can lead to a difference in the payment amount against invoice total. This difference amount can be booked in the Currency Exchange Gain/Loss Amount.

Payments can also be made independent of invoices by creating a new Payment Entry.

To know more about managing transactions in multiple currencies visit this page.

4.2 Internal Transfer 

Internal Transfer is used in cases where the money is transferred between the same Company’s accounts. For example, if a customer from the US using PayPal, transferring money from PayPal to a bank account can be considered as Internal Transfer.

Following internal transfers can be managed from the Payment Entry.

1. Bank – Cash
2. Bank – Bank
3. Cash – Cash
4. Cash – Bank

4.3 Managing Different Payment Scenarios 

For an unpaid invoice, outstanding amount = grand total. When creating Payment Entries, the value in the outstanding amount will reduce.

In most cases, apart from retail sales, billing and payments are separate activities. There are several combinations in which these payments are done. These cases apply to both Sales and Purchases.

• They can be upfront (100% in advance).
• Post shipment. Either on delivery or within a few days of delivery.
• Part in advance and part on or post delivery.
• Payments can be made together for a bunch of invoices.
• Advances can be given together for a bunch of invoices (and can be split across invoices).

ERPNext allows you to manage all these scenarios. All accounting entries (GL Entry) can be made against a Sales Invoice, Purchase Invoice or Payment Entry of advance payment (in special cases, an invoice can be made via a Sales Invoice too).

The total outstanding amount against an invoice is the sum of all the accounting entries that are made “against” (or are linked to) that invoice. This way you can combine or split payments in Payment Entry to manage the scenarios.

4.4 Difference between Payment Entry and Journal Entry 

1. Using Journal Entry requires an understanding of which Account will get Debited or Credited. In the Payment Entry, it is managed in the backend, hence simpler for the User.
2. Payment Entry is more efficient in managing payments in foreign currencies.
3. Cheques can be printed from Payment Entries using the Cheque Print Format.
4. Journal Entry can still be used for:
   • Updating opening balance in Accounts.
   • Fixed Asset Depreciation entry.
   • For adjusting Credit Note against Sales Invoice and Debit Note against Purchase Invoice, in case there is no payment happening at all.

4.5 Payments Using Journal Entry 

To make payment using Journal Entry follow these steps:

1. Activate Payment via Journal Entry. Go to Accounting > Accounting Masters > Accounts Settings, check the box ‘Make Payment via Journal Entry’. 
2. On submitting a document against which Journal Entry can be made, you will find the Payment under the Create button.
3. Save and submit the journal entry to record the payment against the invoice

A document to be sent as a persistent demand for debt payment.

Dunning is a document to store and send as a persistent demand for debt payment against an unpaid Sales Invoice.

To access the Dunning list, go to:

Home > Accounting > Dunning

1. Prerequisites 

• Sales InvoiceA Dunning can only be created against an overdue Sales Invoice.
• Dunning TypeA Dunning Type is used to pre-fill interest, fees and text blocks in a new Dunning.

2. How to create a Dunning 

A Dunning is created against a list of overdue scheduled payments. You can create a dunning in two different ways:

a) Create a new Dunning 

1. Go to the Dunning list and click on “Add Dunning”.
2. Select a Customer and click “Fetch Overdue Payments”. This will show a list of overdue Sales Invoices for this customer. Select the ones you would like to fetch into this Dunning and click on “Get Items”.

b) Create a Dunning from an overdue Sales Invoice 

1. Go to the Sales Invoice list and open any overdue Sales Invoice.
2. Click on “Create > Dunning”. This will fetch all overdue payments from the invoice’s payment schedule table into a new Dunning.

Fill the remaining fields 

1. Select a Dunning Type to fill interest, dunning fees and text blocks with predetermined values. Or you can set these values manually as well.
2. You can already set an income Account (for example, “Other interest and similar income”) and Cost Center for the income generated from interest and dunning fees. These will be used once a Payment Entry is created from this Dunning.
3. Save and submit the Dunning before sending it to the Customer.

2.1 What is a Dunning Type 

Dunning Type stores default values for dunning fee, interest rate and text blocks to be included. For example, a Dunning Type “First Notice” will not have any fees, but Dunning Type “Second Notice” will have a dunning fee and interest charged on the outstanding amount.

2.2 Statuses 

These are the statuses that are auto-assigned to Dunning.

• Draft: A draft is saved but yet to be submitted.
• Unresolved: The Dunning is unresolved when it is submitted but no payments have been received.
• Resolved: The Dunning is resolved when the outstanding payment has been received.
• Cancelled: A cancelled status is a cancelled Dunning document.

3. Payment 

When you receive a full payment, including interest and fees, please open the unresolved Dunning and click on “Create > Payment”. This will create a Payment Entry against the outstanding scheduled payments and record the interest and fees as “Payment Deductions or Loss”. The Payment Entry will automatically set the Dunning‘s status to resolved.

A Payment Request is used to request payment from a Customer for a Sales Order or Invoice.

Payment Request is sent via email and will contain a link to a Payment Gateway if set up. You can create a payment request via a Sales Order or a Sales Invoice. A Payment Request can also be set up against a Purchase Order or a Purchase Invoice for internal records. Then, payments can be processed in bulk using a Payment Order.

To access Payment Request go to:

Home > Accounting > Accounts Receivable > Payment Request

1. Prerequisites 

Before creating and using Payment Request, it is advisable to create the following first:

1. Sales Invoice
2. Purchase Invoice
3. Sales Order
4. Purchase Order

2. How to create a Payment Request 

A Payment Request cannot be created manually, it is created from a Sales/Purchase Order or Invoice.

2.1 Creating Payment Request via Sales Order 

In a Sales Order, click on Create and then click on Payment to make an advance payment. To know more about advance payment, visit the Advance Payment Entry page.

2.2 Creating Payment Request via Sales Invoice 

In a Sales Invoice, click on Create and then click on Payment to make payment against the invoice.

Select appropriate Payment Gateway Account on Payment Request for accounts posting. Account head specified on payment gateway will be considered to create a Journal Entry.

Note: Invoice/Order currency and ‘Payment Gateway Account’ currency should be the same.

2.3 Notifying the Customer 

You can notify customer from Payment Request using Print Format. If the customer contact email is set, it will be fetched automatically. If not so you can set an email address in Payment Request.

2.4 Request Mail 

Here is an example request email. The URL is generated automatically if you’ve set up the respective payment integration. To know more about integrations, visit this page.

2.5 Payment Request without using any Gateway 

In case you don’t want to use any integration or payment gateway and only want to send a notification, simply set the Bank Account. You’ll have to compose the message accordingly with bank details. The party can then transfer the amount to the mentioned bank account.

The Mode of Payment stores the medium through which payments are made or received.

To access the Mode of Payment list, go to:

Home > Accounting > Settings > Mode of Payment

1. How to create a Mode of Payment 

1. Go to the Mode of Payment list and click on New.
2. Enter a name for the Mode of Payment.
3. Set a type whether Cash, Bank, or General. This is useful for knowing the mode of payment used in Point Of Sales (PoS).
4. Set a default payment Account for all the companies.
5. Save.

Tip: Setting the default Account will this account fetched into Payment Entries.

Note: When making Payment Entries, the default bank account will be fetched in the following order if set:

  * Company form
  * Mode of Payment default account
  * Customer/Supplier default bank account
  * Select manually in Payment Entry

A Payment Term helps to set a schedule according to which payments will be made.

A Payment Term defines a specific payment slab. For example, 50% payment on shipping and 50% on delivery of the item. You can save your business’s payment terms on ERPNext and include them in all documents in the sales/purchase cycle. ERPNext will make all the General Ledger entries accordingly.

In ERPNext, the Payment Terms form only defines portion percentages. The actual payment schedule can easily be applied using the Payment Terms Template.

You can use Payment Terms in the following documents:

• Sales Invoice
• Purchase Invoice
• Sales Order
• Purchase Order
• Quotation

To access Payment Term go to:

Home > Accounting > Accounting Masters > Payment Term

1. How to create a Payment Term 

1. Go to the Payment Term list and click on New.
2. Enter a name for the Payment Term (eg: 50% post-shipment).
3. Enter the Invoice portion. If you enter 50, the portion will be 50 percent of the Invoice amount.
4. Select a Due Date type.
5. Under Credit Days enter the number of days after which the remaining amount has to be paid.
6. Save.

The fields are explained as follows:

• Payment Term Name: The name for this Payment Term.
• Due Date Based On: The basis by which the due date for the Payment Term is to be calculated. This is calculated X number of days from the posting date of the invoice/order. There are three options:
  • Day(s) after invoice date: Due date should be calculated in days concerning the posting date of the invoice. For example, if 7 is entered on date 20th, the due date will be 27.
  • Day(s) after the end of the invoice month: Due date should be calculated in days concerning the last day of the month in which the invoice was created. For example, if 7 is entered in the current month and the last day of the month is 30th, the due date will be the 7th of the next month.
  • Month(s) after the end of the invoice month: Due date should be calculated in months concerning the last day of the month in which the invoice was created. For example, if 3 is entered on the 20th of January, the due date will be on 20th March.
• Invoice Portion: The portion of the total invoice amount for which this Payment Term should be applied. The value given will be regarded as percentage i.e 50 = 50% of the invoice/orders Grand Total
• Credit Days (optional): The number of days or month credit is allowed depending on the option chosen in the Due Date Based On the field. 0 means no credit allowed.
• Description: (optional) A brief description of the Payment Term.

1.1 Setting up Discount on Early Payments 

You can set up a discounted payment terms such that if payment is done within the specified period then some amount/percentage of the invoice value will be discounted. The following fields define the discount configuration:

• Discount Type: Default is Percentage. You can also change it to Amount.
• Discount: In terms of Percentage or Amount (eg. 10% or ₹ 5,000).
• Discount Validity Based On: This field acts similar to the Due Date Based On the field in the previous section.
• Discount Validity: The number of days or months the discount is valid with respect to the invoice date (eg. 10 days after the invoice date).

You can now link the Payment Terms with an Invoice and on creating the payment against such invoice, the discount will be applied automatically.

Note: This discount is only applied on a Payment Entry that is made from an individual invoice. Independently made Payment Entries, where invoice references are fetched, will not have any early payment discount applied.

1.2 Payment Terms in Converted Documents 

When converting or copying documents in the sales/purchase cycle, the attached Payment Term(s) will be copied. When creating a Sales Order from a Quotation, the Due Date in the Payment Terms will be according to the Quotation, this needs to be updated.

For ease of use, you can also set a Payment Terms Template and simply reselect it.

1.3 Adding Payment Terms To Documents 

Once you have composed the Payment Terms Template, you can use them in sales and purchase transactions. Based on the value defined for Payment Terms and transaction value, the payment schedule will be defined, with a Due Date for each payment slab.

Note: The Payment Schedule can be shown in the Print View using the Print Format Builder.

Payment Terms Template allow you to club multiple payment terms together and fetch in transactions.

After creation, the Payment Terms Table can be set to a specific Customer/Supplier. On selecting the Customer/Supplier in a transaction, the Payment Terms Template will be fetched automatically into the transaction.

For example:

If you receive payment in the slab of 30-70, then you can define Payment Term for each slab, i.e. 30% and 70%.

In the Payment Terms Template, you can select all the Payment Terms and define a template which can be easily applied in the sales and purchase transactions.

1. Prerequisites 

Before creating and using Payment Request, it is advisable to create the following first:

1. Payment Terms

2. How to create a Payment Terms Template 

A Payment Terms Template tells ERPNext how to populate the table in the ‘Payment Terms Schedule’ section of the sales/purchase document.

You should use it if you have a set of standard Payment Terms or for ease of use.

1. Go to the Payment Term Template list and click on New.
2. Enter a name for the template.
3. Add the created Payment Terms in the table rows.
4. Make sure that the total Invoice Portion adds up to 100.
5. Save.

Payment done by the Customer/Supplier before the invoice is sent is an Advance Payment.

Generally, advance payment is done in the case of high value deals. Consider a Customer- Jane D’souza placing an order for a luxury furniture item costing ₹24,000 She is asked to give some advance before the furniture house begins work on her order. She gives them ₹10,000 in cash.

In ERPNext, advance payment entry is created using Payment Entry. If there exist a Sales Order, you can directly create a Payment Entry for the advance amount. Or else, you can also create a standalone Payment Entry for the Customer. Same way, you can also create advance Payment Entry for Supplier, via Purchase Order.

Note: If payment is not linked to an invoice, it is considered as an advance payment. The advance payments are reflected in the Accounts Receivable and Payable reports.

1. Prerequisites 

To create an advance payment entry, these need to be created first:

• Party (Customer/ Supplier)
• Payment Account (Bank or Cash account)

2. How to create Advance Payment Entry 

Once a Sales Order or Purchase Order is submitted, you will find an option to create a Payment against it. You can also create new Payment Entry and manually select values (like Party and payment account). Here are the steps to create Advance Payment against Sales Order.

1. Go to Sales Order and click on Make > Payment Entry.
2. Set/check the accounts.
3. Save and Submit.

Any Payment Entry that is not linked to an invoice is considered as advance payment by the ERPNext system.

If the Customer has given $5,000 as cash advance, it will be recorded as a credit entry against the Customer’s Receivable account. To balance it [as per the Double accounting system], $5000 is debited against the Company’s cash account.

2.2 Allocating Advance Payment in Invoice 

When creating an invoice, you can check if there is an Advance Payment against that Party.

On clicking Get Advance Received button, it will fetch the Advance Payment Entries found for that party. Once Advance Payment Entries are fetched, you can allocate the Amount of advance against this invoice. The allocation will reduce the Outstanding Amount for that invoice right-away.

Save and submit the Sales Invoice.

An Inter Company Journal Entry is done between organizations that belong to the same group.

You can create Inter Company Journal Entry if you are making transactions with multiple Companies. You can select the Accounts which you wish to use in the Inter Company transactions. A possible use case would be a company buying goods on behalf of another company.

Inter company Journal Entries are created using the Journal Entry form in ERPNext. To access the Journal Entry list, go to:

Home > Accounting > Company and Accounts > Journal Entry

1. Prerequisites 

Before creating an Inter Company Journal Entry, you need the following:

• At least two Companies

2. How to create an Inter Company Journal Entry 

1. Go to the Journal Entry list, and click on New.
2. Select Entry Type as ‘Inter Company Journal Entry’.
3. Set the Company that is buying Items on behalf of another company.
4. Add rows for the individual accounting entries. Only inter company accounts can be fetched here.
5. In each row, you must specify:
   • The Internal account that will be affected.
   • The amount to Debit or Credit.
   • The Cost Center (If it is an Income or Expense).
6. On submitting the Journal Entry, you will find a button on the top right corner, Make Inter Company Journal Entry.
7. Click on the button. Now, you will be asked to select the Company against which you wish to create the linked Journal Entry.
8. On selecting the Company, you will be routed to another Journal Entry where the relevant fields will be mapped, i.e. Company, Voucher Type, Inter Company Journal Entry Reference etc.
9. Select the Internal accounts for the second Company in the table.
10. Submit the Journal Entry.
11. Make sure the total Debit and Credit Amounts are same as the previously created Journal Entry’s total Credit and Debit Amounts respectively but the debits and credits will be opposite.

Note: The accounts in second Journal Entry should be the opposite of what you did in the first Journal Entry. For example, Company A is buying something from Company B. This is how the payment cycle between the two companies will look like using Inter Company Journal Entry.

1. Debit Bank Account by 500 and credit Debtors account of Company B by 500.
2. Now, in the Inter Company Journal Entry, debit Creditors account of Company A by 500 and credit Bank Account by 500.
3. You also need to select the parties for Creditors and Debtors account before proceeding with the Journal Entry.

You can also find the reference link at the bottom, which will be added in both the linked Journal Entries and will be removed if any of the Journal Entries are cancelled.

Tax Withholding Category is Tax Deducted at Source.

According to this, a person responsible for making payments is required to deduct tax at source at prescribed rates. Instead of receiving tax on your income from you at a later date, the govt wants the payers to deduct tax beforehand and deposit it with the government.

To access the Tax Withholding Category list, go to:

Home > Accounting > Taxes > Tax Withholding Category

1. Prerequisites 

Before creating and using a Tax Withholding Category, it is advised to create the following first:

1. Supplier
2. Customer

2. How to create a Tax Withholding Category 

In IONIC ERP, Tax Withholding Categories for most cases are available by default, however, you can create more if needed.

1. Go to the Tax Withholding Category list and click on New.
2. Enter a unique name, eg: Section 194C Individual.
3. Enter a Category Name (Dividends, Professional Fees, etc,.).
4. Enter a Tax Withholding Rate against a Fiscal Year.
5. You can set the threshold for a single invoice or sum of all invoices.
6. Select an account against your Company to which tax will be credited.
7. Add more companies and accounts as needed.
8. Save.

Under accounting details, the TDS account is added for each Company in the system.

2.1 Assigning Tax Withholding to Supplier 

After saving, it can be assigned to a Supplier:

2.2 How does the threshold work? 

Consider a Supplier on whom a Tax Withholding Category is applied.

For example, let’s say a rate of 5% will be applicable on invoice where Single threshold is 20,000 and the Cumulative threshold is 30,000. If an invoice is created with a grand total of 20,000 then the single threshold will be triggered and a 5% tax would be charged.

But if the invoice amount totaled up to be 15,000 then no tax will be charged as it didn’t cross the threshold. If again another invoice is created against the same supplier with a total of 15,000 then although it didn’t cross the Single threshold, charges will be deducted since the sum of the last invoice and this invoice adds up to be 30,000 which is equal to the specified Cumulative threshold.

3. Using Tax Withholding 

3.1 Use in Purchase Invoice 

In the following example, we have selected ‘TDS – 194C – Individual’ which has a single threshold of 30,000, cumulative threshold of 1,00,000 and rate of 1%.

1. If the Supplier has the tax withholding field set, then upon selecting that Supplier, a checkbox will become visible in the Purchase Invoice to select whether to apply tax or not.

1. Let’s create an invoice for 90,000. Saving the invoice automatically calculates tax and appends it in the taxes table.
2. To see the effect of Cumulative threshold, let’s create an invoice with of amount 10,000 and submit it.Although the invoice amount didn’t cross the Single threshold (30,000), we see that tax has been charged. This is because the previous and the current invoice adds up to be 1,10,000 which exceeds the Cumulative threshold. Hence, tax based on the rate provided in the Tax Withholding Category is applied accordingly.

Note: On submitting the invoice, three GL Entries are created:

1. First for debit from the expense head
2. Second for credit in Creditors account
3. Third for credit in the account selected in Tax Withholding Category.

3.2 Deducting Tax at source on Advances 

3.2.1 Deduction Advance TDS against Purchase Order 

1. Set up Tax Withholding Category against supplier and make a Purchase Order against the supplier. One point to remeber here is not to check “Apply Tax Withholding” check in the PO as the PO has to generated for the full amount
2. Create Payment Entry against that Purchase Order, In the Taxes and Charges section enable “Apply Tax Withholding” and enter other details and then save and submit the entry.

3. Create a Purchase Invoice against this order and enable “Set Advances and Allocate(FIFO)” so that payment linked to the corresponsing order is automatically applied. No Tax will be withheld in the Purchase Invoice if the Tax paid on advance in more than or equal to the tax amount in Invoice. Tax Will be withheld only for the excess amount if applicable.

3.2.2 Deducting TDS against advances paid (Using Payment Entry) 

1. Select “Payment Type” as “Pay”
2. Select “Party Type” as “Supplier” and the appropriate supplier
3. Enter paid amount, paid amount should be the amount before TDS deduction
4. Under the Taxes and Charges section check “Apply Tax Withholding Amount” and select Tax Withholding Category
5. Click on Save. TDS will be auto applied
6. Submit the entry
7. Same will also be visible in TDS payable monthly report

3.3 Setting up TCS – Section 20C(1H) for eligible customers 

In the following example, we have create a Tax Withholding Category for TCS – Section 20C(1H) and set it up against an eligble customer.

1. We will first create a Tax Withholding Category named TCS – Section 20C(1H) and we set cumulative threshold to 50 Lakhs as per the scheme.

1. If a Customer is expected to crosses the sales threshold of 50 Lakh in current Fiscal Year, then we can set the Tax Withholding Category of the customer to TCS – Section 20C(1H) for automatically calculation TCS on sale of goods against the customer’s invoices.
2. Let’s create an invoice for 50 Lakhs against the eligible customer. Saving the invoice automatically calculates tax and appends it in the taxes table.Since the invoice cross the Cumulative threshold (50 Lakhs), we see that tax has been charged. Hence, tax based on the rate provided in the Tax Withholding Category is applied accordingly. Note that, as per the scheme, the TCS is calculated on the amount exceeding the threshold i.e 0.075 % of 10 Lakhs.

3.4 Advanced options in Tax Withholding Category 

1. Consider Entire Party Ledger Amount: In many situations threshold has to be calculated on the entire party ledger amount instead of the sum of the net total of specific invoices. On enabling this check cumulative threshold will be checked against the sum of the grand total of all the invoices against a particular Supplier/Customer.
2. Only Deduct Tax On Excess Amount: On enabling this tax will be deducted only on the amount exceeding the threshold and not the entire amount. For example, if the cumulative threshold is 50000 and if the cumulative amount goes till 52000 the tax will be applied only on 2000 and not the entire 52000.
3. Round Off Tax Amount: Enabling this check will round off the calculated tax amount to the nearest integer value (Normal Rounding Method)

A Tax Rule automatically applies taxes to transactions based on preset rules.

You can define which Tax Template must be applied on a Sales / Purchase transaction using Tax Rule. This is decided by various factors like Customer, Customer Group, Supplier, Supplier Group, Item, Item Group or a combination of these.

To access the Tax Rule list, go to:

Home > Accounting > Taxes > Tax Rule

1. Prerequisites 

Before creating and using a Tax Rule, it is advised to create the following first:

1. Sales Taxes and Charges TemplateOr
2. Purchase Taxes and Charges Template

2. How to create a Tax Rule 

1. Go to the Tax Rule list and click on New.
2. Under Tax Type select whether the tax will be applied at Sales or Purchase.
3. Select the Tax Template to be applied.
4. Save. 

You can list Items online using the Website module. Selecting ‘Use for Shopping Cart’ will use this Tax Rule for Shopping Cart transactions also. To know more, visit the Shopping Cart page.

Note: It is advised to not use the Sales/Purchase Template selected here in Item Tax Template, it may cause interference. If you want to use same tax rates for Tax Rule and Item Tax Template, use a different name for the Sales/Purchase Tax Templates.

3. Features 

3.1 Auto applying Tax Rule based on Customer/Supplier 

Select a Customer/Supplier if tax is to be applied for a specific party. Leave it as All Customer Groups/All Supplier Groups if this Tax Rule is applicable to all Customers/Suppliers.

On selecting a Customer/Supplier their Billing and Shipping addresses will be fetched if saved in the Customer/Supplier master.

3.2 Auto applying Tax Rule based on Item / Item Group 

On setting an Item or Item group in the Tax Rule, this Tax Rule will automatically be applied to new transactions that have the selected Item/Item Group.

3.3 Setting a Tax Category 

Setting a Tax Category allows applying multiple Tax Rules to a transaction based on different factors. To know more, visit the Tax Category page.

3.4 Validity 

Set a Start and End Date if the tax is to be applied only for a specified period. Leaving both dates blank will result in the Tax Rule to have no time limits.

3.5 Priority 

Setting a priority number here will decide on which order a Tax Rule will be applied in case multiple Tax Rules have similar criteria. ‘1’ is the highest priority, ‘2’ has lesser priority and so on.

4. How does Tax Rule Work? 

Let us configure Tax Rule so that system automatically applies specific tax rates when a specific condition matches. For example, if the city in the billing address of customer is ‘Malibu’ then a 6.25% of state tax, 1% of county tax and 2.25% of district tax should be applied.

Create a Sales Taxes and Charges Template as shown below.

Create a Tax Rule as shown below.

Once you select a customer and a billing address of that customer with city as ‘Malibu’, system automatically applies the appropriate taxes.

A Payment Entry is a record indicating that payment has been made for an invoice.

Payment Entry can be made against the following transactions.

• Sales Invoice
• Purchase Invoice
• Sales Order (Advance Payment)
• Purchase Order (Advance Payment)
• Expense Claim
• Internal Transfer

In ERPNext, there are two options through which User can capture the payment:

• Payment Entry (Default)
• Journal Entry

Here are diagrams to understand the flow:

In Sales: 

In Purchase: 

To access the Payment Entry list, go to:

Home > Accounting > Accounts Receivable/Payable > Payment Entry

1. Prerequisites 

A Payment Entry can also be created directly then linked to an order/invoice later. Before creating and using Payment Entry, it is advised to create the following first:

1. Customer
2. Supplier
3. Bank Account

If you’re following the Sales/Purchase Cycle, you’d need the following:

1. Sales Order (Advance Payment)
2. Purchase Order (Advance Payment)
3. Sales Invoice
4. Purchase Invoice

Set up:

1. Chart Of Accounts
2. Company (for default accounts)

2. How to create a Payment Entry 

On submitting a document against which Payment Entry can be made, you will find the Payment option under the Create button.

1. Change the posting date.
2. The Payment Type will be set based on the transaction you’re coming from. The types are ‘Receive’, ‘Pay’, and ‘Internal Transfer’.
3. The Party Type, Party, Party Name will be fetched automatically.
4. The Account Paid To and Account Paid From will be fetched as set in the Company form.
5. The Amount Paid will be fetched from the Invoice.
6. Save and Submit. 

2.1 Creating a Payment Manually 

A Payment Entry created manually will have no order/invoice linked to it. Payments made this will be recorded in the Customer’s/Supplier’s account and can be reconciled later using the Payment Reconciliation Tool.

1. Go to the Payment Entry list and click on New.
2. Select the Party Type and the respective Customer/Supplier.
3. Select the Bank Account/Cash Account Paid To and Paid From. Enter the Cheque Number and date if bank transfer.
4. Enter the Amount Paid.
5. Save and Submit.

3. Features 

3.1 Setting Mode of Payment 

Mode of Payment: Entering this helps classify Payment Entries based on the payment mode used. Modes of Payment can be Bank, Cash, Wire Transfer, etc.

Tip: In the Mode of Payment master, default Account can be set. This default payment Account will be fetched into Payment Entries.

3.2 Payment From/To 

• Party Type: Whether Customer, Supplier, Employee, Shareholder, Student, or NGO Member.
• Party: The specific party for which the Payment Entry is made.
• Party Name: The name of the party, this is fetched automatically.
• Company Bank Account: Your Company’s Bank Account.
• Party Bank Account: The Party’s Bank Account.
• Contact: If the Party is an organization, a Contact person can be stored here.

3.3 Accounts 

• Party Balance: The overall amount receivable or payable from Customer or Supplier from Invoices set in the current Payment Entry. Paid amounts will be positive and if advance payments are made, they will be negative.
• Account Paid From: The Account from which the amount will be deducted when Payment is submitted.
• Account Paid To: The COA account from which the amount will be added when Payment Entry is submitted.
• Account Currency: The Currencies of these accounts will be fetched as set in the Account and cannot be edited here. To know about more about transactions in multiple currencies, visit this page.
• Account Balance: The total amount balance from all the invoices of the selected accounts.

Paid Amount: The total amount paid for the current Payment Entry is shown in this field.

Note: When making Payment Entries, the default bank account will be fetched in the following order if set:

• Company form
• Mode of Payment default account
• Customer/Supplier default bank account
• Select manually in Payment Entry

3.4 Reference 

Fetching outstanding Invoices 

This can be used to make payments to multiple Sales Invoices using one Payment Entry. When creating a new Payment Entry, on clicking the Get Outstanding Invoice button all the outstanding Invoices and open Orders will be fetched for the party. You need to enter the ‘Paid Amount’ to see this button. From here a date range and invoices to be fetched can be selected.

If the Party has not made full payment, enter the amount paid in the ‘Allocated’ field.

If creating Payment Entry for a Customer, the Payment Amount will be allocated against a Sales Invoice. On the same lines, when creating Payment Entry for a Supplier, Payment Amount will be allocated against a Purchase Invoice.

Payment References table 

• Type: Whether the payment is being made against a Sales Order, Sales Invoice, or a Journal Entry.
• Name: The particular transaction ID is fetched/selected here.
• Total Amount: The total amount of one Invoice/Journal Entry in the row.
• Outstanding: The amount to receive/to pay for this invoice.
• Allocated: If the Paid Amount is less than the invoice amount only the paid amount will be allocated to the invoice(s) fetched in the Payment Entry. The payment may be made in parts, for example, if there are three invoices of amounts 20, 20, 20, the Paid Amount is 60 then this Paid Amount will be distributed equally. Payment Terms may also be involved.

What is Unallocated Amount? 

When a Payment Entry is made in ERPNext and the Paid Amount is more than the total invoice amount, it is stored in the Customer’s/Supplier’s account. This amount is hence currently ‘Unallocated’. Unallocated amount can be used against future invoices.

For example, you create a Sales Invoice totaling 1,000 and the Customer paid 1,500. When another invoice is created for this Customer in the future for 1,000 again, the previously paid 500 can be used.

3.5 Deductions or Loss 

When a Payment Entry is created against an invoice, there could be some difference in the actual Paid Amount and the invoice outstanding amount. This difference could be due to rounding errors or changes in the currency exchange rate. You can set an Account here where this difference amount will be booked.

The loss/deductions can be written off. Let’s see an example here where the paid amount is 25 but the allocated amount is 30 since 30 is the amount to be collected as per the invoice. The ‘Difference Amount’ will be 5 in this case. This difference amount can occur due to discounts or Currency Exchange. The Difference Amount needs to be 0 in order to submit the Payment Entry. This can be adjusted using the Make Difference Entry button. The amount will be adjusted in the Write Off account.

3.6 Write Off 

Write off happens when the paid amount is less than the allocated amount. I.e. the remaining amount is considered as lost in miscellaneous charges or that amount isn’t going to be paid. This is considered as loss.

3.5 After Submitting 

Save and Submit Payment Entry. On submission, outstanding will be updated in the Invoices.

If payment entry was created against Sales Order or Purchase Order, the field ‘Advance Paid’ will be updated in them. When creating Invoice against those transactions, Payment Entry will be auto-updated in that Invoice so that you can allocate invoice amount against advance payment entry.

For incoming payment, the accounts posting will be done as follows.

• Debit: Bank or Cash Account
• Credit: Customer (Debtor)

For outgoing payment:

• Debit: Supplier (Creditor)
• Credit: Bank or Cash Account

4. Other cases 

4.1 Multi Currency Payment Entry 

If you want to maintain a receivable/payable account in foreign currency, then create accounts with foreign currency (different from Company currency) and link it in the party account. For example:

ERPNext allows you maintain accounts and invoicing in multiple currency. If an invoice is made in the party currency, Currency Exchange Rate between the Company’s base currency and party currency is also entered in the invoice.

Note: A separate Debtor/Creditor account needs to be created and selected in the Sales Invoice/Order for currency exchange to work correctly. For example, if the Customer is from the US, create a receivable account called ‘Debtors US’.

When creating Payment Entry against that invoice, the current exchange rate will be fetched, but you can set the Currency Exchange Rate at the time of payment to match your records.

Click on the Set Exchange Gain/Loss button to automatically add a row to write off the difference amount.

Since Currency Exchange Rate fluctuates all the time, it can lead to a difference in the payment amount against invoice total. This difference amount can be booked in the Currency Exchange Gain/Loss Amount.

Payments can also be made independent of invoices by creating a new Payment Entry.

To know more about managing transactions in multiple currencies visit this page.

4.2 Internal Transfer 

Internal Transfer is used in cases where the money is transferred between the same Company’s accounts. For example, if a customer from the US using PayPal, transferring money from PayPal to a bank account can be considered as Internal Transfer.

Following internal transfers can be managed from the Payment Entry.

1. Bank – Cash
2. Bank – Bank
3. Cash – Cash
4. Cash – Bank

4.3 Managing Different Payment Scenarios 

For an unpaid invoice, outstanding amount = grand total. When creating Payment Entries, the value in the outstanding amount will reduce.

In most cases, apart from retail sales, billing and payments are separate activities. There are several combinations in which these payments are done. These cases apply to both Sales and Purchases.

• They can be upfront (100% in advance).
• Post shipment. Either on delivery or within a few days of delivery.
• Part in advance and part on or post delivery.
• Payments can be made together for a bunch of invoices.
• Advances can be given together for a bunch of invoices (and can be split across invoices).

ERPNext allows you to manage all these scenarios. All accounting entries (GL Entry) can be made against a Sales Invoice, Purchase Invoice or Payment Entry of advance payment (in special cases, an invoice can be made via a Sales Invoice too).

The total outstanding amount against an invoice is the sum of all the accounting entries that are made “against” (or are linked to) that invoice. This way you can combine or split payments in Payment Entry to manage the scenarios.

4.4 Difference between Payment Entry and Journal Entry 

1. Using Journal Entry requires an understanding of which Account will get Debited or Credited. In the Payment Entry, it is managed in the backend, hence simpler for the User.
2. Payment Entry is more efficient in managing payments in foreign currencies.
3. Cheques can be printed from Payment Entries using the Cheque Print Format.
4. Journal Entry can still be used for:
   • Updating opening balance in Accounts.
   • Fixed Asset Depreciation entry.
   • For adjusting Credit Note against Sales Invoice and Debit Note against Purchase Invoice, in case there is no payment happening at all.

4.5 Payments Using Journal Entry 

To make payment using Journal Entry follow these steps:

1. Activate Payment via Journal Entry. Go to Accounting > Accounting Masters > Accounts Settings, check the box ‘Make Payment via Journal Entry’. 
2. On submitting a document against which Journal Entry can be made, you will find the Payment under the Create button.
3. Save and submit the journal entry to record the payment against the invoice

Consider Tax or Charge field in Taxes and Charges table of purchase or sales transactions has three values.

• Total
• Valuation
• Total and Valuation

Let’s consider an example to understand an effect of each charge type. We purchase ten units of item, at the rate of 800. total purchase amount is 800. Purchased item has 4% VAT applied on it, and INR 100 was incurred in transportation.

Total: 

Tax or Charge categorized as Total will be included in the total of purchase transactions. But it will not have impact on the valuation of item purchased.

If VAT 4% is applied on item, it will amount to INR 32 (at item’s based rate is 800). Since VAT is the consumption tax, it should be added value of Purchase Order/Invoice, since it will be included in payable towards supplier. But it should not be added to the value of Purchased item.

When Purchase Invoice is submitted, general ledger posting will be done for tax/charge categorized as Total.

Valuation: 

Tax or charge categorized as Valuation will be added in the value of purchased item, but not in the total of that purchase transaction.

Transportation charge of INR 100 should be categorized as valuation. With this, the value of purchased item will be increased from 800 to 900. Also, this charge will be not be added to the total of purchase transaction, because it is your expense, and should not be reflected to the supplier.

Check here to learn general posting done for expense categorized as Valuation.

Total and Valuation: 

Tax or Charge categorized as for Total and Valuation will be added in the valuation of item, as well as in the totals of purchase transactions.

Let’s assume that transportion is arranged by our supplier, but we need to pay transportation charges to them. In that case, for transportation charges, category selected should be Total and Valuation. With this, INR 100 transportation charge will be added to the actual purchase amount 800. Also, INR 100 will reflect in the total, as it will be payable for us towards supplier.

1. Select type of tax as On Net Total
2. Select or add new tax as NBT and set rate at 2%.
3. Then add a new row and select type of tax as On Previous Row Total and select or add new tax as VAT and set rate at 15%.

An Inter Company Journal Entry is done between organizations that belong to the same group.

You can create Inter Company Journal Entry if you are making transactions with multiple Companies. You can select the Accounts which you wish to use in the Inter Company transactions. A possible use case would be a company buying goods on behalf of another company.

Inter company Journal Entries are created using the Journal Entry form in IONIC ERP. To access the Journal Entry list, go to:

Home > Accounting > Company and Accounts > Journal Entry

1. Prerequisites 

Before creating an Inter Company Journal Entry, you need the following:

• At least two Companies

2. How to create an Inter Company Journal Entry 

1. Go to the Journal Entry list, and click on New.
2. Select Entry Type as ‘Inter Company Journal Entry’.
3. Set the Company that is buying Items on behalf of another company.
4. Add rows for the individual accounting entries. Only inter company accounts can be fetched here.
5. In each row, you must specify:
   • The Internal account that will be affected.
   • The amount to Debit or Credit.
   • The Cost Center (If it is an Income or Expense).
6. On submitting the Journal Entry, you will find a button on the top right corner, Make Inter Company Journal Entry.
7. Click on the button. Now, you will be asked to select the Company against which you wish to create the linked Journal Entry.
8. On selecting the Company, you will be routed to another Journal Entry where the relevant fields will be mapped, i.e. Company, Voucher Type, Inter Company Journal Entry Reference etc.
9. Select the Internal accounts for the second Company in the table.
10. Submit the Journal Entry.
11. Make sure the total Debit and Credit Amounts are same as the previously created Journal Entry’s total Credit and Debit Amounts respectively but the debits and credits will be opposite.

Note: The accounts in second Journal Entry should be the opposite of what you did in the first Journal Entry. For example, Company A is buying something from Company B. This is how the payment cycle between the two companies will look like using Inter Company Journal Entry.

1. Debit Bank Account by 500 and credit Debtors account of Company B by 500.
2. Now, in the Inter Company Journal Entry, debit Creditors account of Company A by 500 and credit Bank Account by 500.
3. You also need to select the parties for Creditors and Debtors account before proceeding with the Journal Entry.

You can also find the reference link at the bottom, which will be added in both the linked Journal Entries and will be removed if any of the Journal Entries are cancelled.