Probably the most common support question we get is, “Where do I enter this transaction?“
The answer to this question lies in the knowledge that in Interprise Suite, like most accounting packages, information flows down into deeper levels of the program but doesn’t flow “uphill” very well at all. Enter your transaction at the highest possible level so that if properly updates everything beneath it!
Interprise Suite Transaction Flow Diagram
As you can see from this diagram, if I enter a customer’s payment received through a “Customer Receipt,” that transaction will write information down into my checking account register (Banking Module) as well as the General Ledger.
Same with a “Customer Invoice,” it writes down into the Inventory Module (reducing on-hand quantities, creating movement histories, etc.) as well as the General Ledger (sales, cost of goods, accounts receivable, inventory accounts).
Subsidiary Ledgers
Accounting systems are made up of a collection of lists or “Ledgers.” The General Ledger is the “lowest common denominator” of all the lists and contains the information your financial reports are pulled from. The other ledgers such as “Accounts Receivable” are known as “Subsidiary Ledgers” because they store secondary lists of the detailed transactions making up the information in that module and should balance with the information in the General Ledger.
Think about it… The Accounts Receivable subsidiary ledger is a listing of all of your customers’ open transactions and should total the amount in the Accounts Receivable account in the General Ledger. Same with Accounts Payable. Same with the Inventory valuation. Same with the bank transactions in a Bank Account matching their related asset account in the General Ledger.
It’s important that all of these ledgers stay in balance with their control accounts!
An Example of a Mistake
Consider this: I want to refund my customer $25 so I write a hand check and create a Journal Entry to the General Ledger that credits the bank and debits Accounts Receivable. Is this correct?
NO! It would look right in the General Ledger, but the transaction wouldn’t write “uphill” into the Customer Module or the Banking Module. My customer’s balance would be wrong. I’d have no refund to allocate to an open credit memo. My bank balance in the Banking Module would be wrong. I’d have a mess!
What should I have done?
I should have gone into the Customer Module and entered a customer refund. That would have updated my customer, my bank account, and the General Ledger all in one transaction. Remember, information flows downhill.
The Cardinal Rule
How do I know if I’m entering a transaction in the wrong place? Here is the most important piece of information to remember:
If you are in a place where you are selecting a General Ledger account and you are picking a “Control Account,” you are doing it wrong!
A control account is any Subsidiary Ledger balance. For example: Accounts Receivable or Payable, a Bank Cash account or the Inventory Control account. Even on initial setup, the opening balance tools create these balances using module transactions.
We spend a lot of time helping our customers find and correct entries that were made incorrectly in the system. Remembering this simple rule can save you a lot of money and time!
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