Journal Creation for Invoices

Invoiced amounts from locked invoices can have their values posted to the chart of accounts. For a sales invoice, the journal entries track income. For a purchase invoice, although the invoice is not usually sent to the client, the values can be posted to the chart of accounts for the Purchase Invoice document type for the purpose of forecasting expected expenditure.

If a chart of accounts for the relevant document type (for example, Sales Invoice, Freight Invoice, Demurrage Invoice) is configured (see Charts of Accounts), when the invoice is locked, journal entries can be created automatically or manually for the invoice.

The configuration of a district includes whether control must be passed before journals for final sales invoices can be locked. See Create a District for a Company. The delivery terms of the despatch order determine the conditions that must be met on despatches in order for control to pass.

Invoices can have line items and totals with zero value, and journal entries for invoice items can also be created with zero value.

Automatic Journal Creation for Invoiced Amounts

The contractual invoice iteration types that have been defined for the associated Sales Contract or Purchase Contract specify whether to automatically Generate Journals On Lock. See Specify Invoice Iteration Types for a Set of Contract Terms. After the invoice is locked, if journal entries are not created automatically due to a configuration issue, the journals can be created manually .

Example: A chart of accounts of document type Sales Invoice can be set up specific to District A, containing two accounts that debit revenue to Account A0001 and credit revenue to Account A0002. When a sales invoice is created for a sales contract with seller of District A, and subsequently the invoice is locked, a journal for District A is created. This includes the two journal entries, one for each of the two accounts.

For invoices of a repurchase action (see Repurchase Contracts), whether journals are created automatically depends on the Generate Journals On Lock setting for final invoices specified in the Invoice Types screen.

Journal Entries for Subsequent Invoices for the Same Despatch Order

When subsequent Prepayment, Provisional and Final invoices are created and all the invoices are locked, the Journal Reversal Method specifies how to manage the journal update.

An Incremental journal update will only post the difference between the values of the invoice items and their related existing journal entries.

A full reversal journal update reverses the existing journal entries and then creates the new journal entries based upon the new invoice items.

Example: First journal entry from an item on the first invoice: $100,000. Second invoice for the same despatch order as that invoiced in the first invoice: $110,000. An incremental journal update will post the difference, that being $10,000. A full reversal journal update will reverse the initial $100,000, and then post the new value of $110,000.

However, if the previous invoice is a Proforma, a full journal creation is performed to create the new journal entries based upon the new invoice items.

Example: Only a Final invoice exists for a despatch order. That invoice is unlocked, and the despatch orders unselected. A Provisional invoice is created, recalculated and locked. The Final invoice then has the despatch orders re-selected, recalculated and locked. The journal entry values are picked up from the Provisional invoice because in the journal process, the invoice date is used to determine the older invoices that exist for the despatch order.

Accrual Accounts

If an invoice is created as accrual, the values are not posted to the actual accounts, but to the accrual set of accounts. This is often done for the purpose of forecasting the amounts expected to be received.

When creating an incremental journal and the previous journal was created as an accrual, a full reversal of the previous accrual journal is done, and the new journal created is an incremental of the journal entries that are previous to the accrual journal entries.

Example 1

An accrual invoice for 1,000,000 USD was created on 31 May. The accrual invoice has one journal with the following journal entries:

  • Accrual CR 1,000,000 Account A
  • Accrual DB 1,000,000 Account B

A first provisional (non-accrual) invoice for 1,100,000 USD was created on 2 June. The provisional invoice has two journal groups:

  • One group with the reversal of the accrual invoice journal entries:
    • Accrual DB 1,000,000 Account A—Note that DB/CR is swapped.
    • Accrual CR 1,000,000 Account B
  • One group with the normal journal entries:
    • CR 1,100,000 Account X
    • DB 1,100,000 Account Y
Example 2

This example assumes that Auto-reverse Accrual Journals is checked in the Options screen. See Specify Sales and Marketing Settings.

Sometimes an invoice is created on a date later than the invoice date set in the invoice. For example, at month end, a business might create accrual invoices for any despatch orders that have not yet been invoiced. However, the month-end process may itself take a few days, and in the meantime, a (non-accrual) invoice may have already been created.

A provisional (non-accrual) invoice for 1,100,000 USD is created on 2 June, with journal entries posted the same day. The provisional invoice has one journal group with the following journal entries:

  • CR 1,100,000 Account X
  • DB 1,100,000 Account Y

An accrual invoice for 1,000,000 USD is created on 4 June, but its invoice date is 31 May. The accrual invoice has two journal groups:

  • One group dated 31 May with the accrual invoice journal entries:
    • Accrual CR 1,000,000 Account A
    • Accrual DB 1,000,000 Account B
  • One group dated 1 June (the first day of the next month) with the reversal of the accrual invoice journal entries:
    • Accrual DB 1,000,000 Account A
    • Accrual CR 1,000,000 Account B

Journal Entries in Multiple Currencies

If the relevant account in the chart of accounts has:

  • Both a primary and a secondary currency defined, the Debits and Credits fields display for both currencies in the journal entry
  • Store Original Currency checked, the Debits and Credits fields display for the original currency as well as the primary and secondary currencies if applicable

If debits and credits display for multiple currencies, the exchange rates also display.

Journal Explorer

The Journal Explorer can be used to view journals and their journal entries. Multiple journals can also be locked or unlocked.