3
.. i18n: pair: chart of accounts; analytic
7
pair: chart of accounts; analytic
9
.. i18n: To Each Enterprise its own Analytic Chart of Accounts
10
.. i18n: =====================================================
13
To Each Enterprise its own Analytic Chart of Accounts
14
=====================================================
16
.. i18n: To illustrate analytic accounts clearly, you will follow three use cases, each in one of three different types of company:
19
To illustrate analytic accounts clearly, you will follow three use cases, each in one of three different types of company:
21
.. i18n: #. Industrial Manufacturing Enterprise,
25
.. i18n: #. IT Services Company.
28
#. Industrial Manufacturing Enterprise,
32
#. IT Services Company.
34
.. i18n: Case 1: Industrial Manufacturing Enterprise
35
.. i18n: -------------------------------------------
38
Case 1: Industrial Manufacturing Enterprise
39
-------------------------------------------
41
.. i18n: In industry, you will often find analytic charts of accounts structured into departments and products the company itself is built on.
44
In industry, you will often find analytic charts of accounts structured into departments and products the company itself is built on.
46
.. i18n: So the objective is to examine the costs, sales and margins by department and by product. The first level of the structure comprises the different departments, and the lower levels represent the product ranges the company makes and sells.
49
So the objective is to examine the costs, sales and margins by department and by product. The first level of the structure comprises the different departments, and the lower levels represent the product ranges the company makes and sells.
51
.. i18n: .. note:: Analytic Chart of Accounts for an Industrial Manufacturing Company
53
.. i18n: #. Marketing Department
55
.. i18n: #. Commercial Department
57
.. i18n: #. Administration Department
59
.. i18n: #. Production
61
.. i18n: * Product Range 1
65
.. i18n: * Product Range 2
68
.. note:: Analytic Chart of Accounts for an Industrial Manufacturing Company
70
#. Marketing Department
72
#. Commercial Department
74
#. Administration Department
85
.. i18n: pair: cost; allocation
89
pair: cost; allocation
91
.. i18n: In daily use, it is useful to mark the analytic account on each purchase invoice. The analytic account is the one to which the costs of that purchase should be allocated. When the invoice is approved, it will automatically generate the entries for both the general and the corresponding analytic accounts. So, for each entry on the general accounts, there is at least one analytic entry that allocates costs to the department which incurred them.
94
In daily use, it is useful to mark the analytic account on each purchase invoice. The analytic account is the one to which the costs of that purchase should be allocated. When the invoice is approved, it will automatically generate the entries for both the general and the corresponding analytic accounts. So, for each entry on the general accounts, there is at least one analytic entry that allocates costs to the department which incurred them.
96
.. i18n: Here is a possible breakdown of some general accounting entries for the example above, allocated to various analytic accounts:
99
Here is a possible breakdown of some general accounting entries for the example above, allocated to various analytic accounts:
101
.. i18n: .. csv-table:: Breakdown of general and analytic accounting entries (Case 1)
102
.. i18n: :header: "General accounts","","","","","Analytic accounts",""
103
.. i18n: :widths: 10,5,5,5,2,10,8
105
.. i18n: "Title","Account","Debit","Credit","","Account","Value"
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.. i18n: "Purchase of Raw Material","600","1500","","","Production / Range 1","-1 500"
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.. i18n: "Subcontractors","602","450","","","Production / Range 2","-450"
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.. i18n: "Credit Note for defective materials","600","","200","","Production / Range 1","200"
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.. i18n: "Transport charges","613","450","","","Production / Range 1","-450"
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.. i18n: "Staff costs","6201","10000","","","Marketing","-2 000"
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.. i18n: "","","","","","Commercial","-3 000"
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.. i18n: "","","","","","Administrative","-1 000"
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.. i18n: "","","","","","Production / Range 1","-2 000"
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.. i18n: "","","","","","Production / Range 2","-2 000"
115
.. i18n: "PR ","614","450","","","Marketing","-450 "
118
.. csv-table:: Breakdown of general and analytic accounting entries (Case 1)
119
:header: "General accounts","","","","","Analytic accounts",""
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:widths: 10,5,5,5,2,10,8
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"Title","Account","Debit","Credit","","Account","Value"
123
"Purchase of Raw Material","600","1500","","","Production / Range 1","-1 500"
124
"Subcontractors","602","450","","","Production / Range 2","-450"
125
"Credit Note for defective materials","600","","200","","Production / Range 1","200"
126
"Transport charges","613","450","","","Production / Range 1","-450"
127
"Staff costs","6201","10000","","","Marketing","-2 000"
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"","","","","","Commercial","-3 000"
129
"","","","","","Administrative","-1 000"
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"","","","","","Production / Range 1","-2 000"
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"","","","","","Production / Range 2","-2 000"
132
"PR ","614","450","","","Marketing","-450 "
134
.. i18n: The analytic representation by department enables you to investigate the costs allocated to each department in the company.
137
The analytic representation by department enables you to investigate the costs allocated to each department in the company.
139
.. i18n: So, the analytic chart of accounts shows the distribution of the company's costs using the example above:
142
So, the analytic chart of accounts shows the distribution of the company's costs using the example above:
144
.. i18n: .. csv-table:: Analytic chart of accounts (Case 1)
145
.. i18n: :header: "Account","Total"
146
.. i18n: :widths: 10, 5
148
.. i18n: "Marketing Department","-2 450 "
149
.. i18n: "Commercial Department","-3 000 "
150
.. i18n: "Administration Department","-1 000 "
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.. i18n: "Production","-6 200 "
152
.. i18n: "Product Range 1","-3 750"
153
.. i18n: "Product Range 2","-2 450"
156
.. csv-table:: Analytic chart of accounts (Case 1)
157
:header: "Account","Total"
160
"Marketing Department","-2 450 "
161
"Commercial Department","-3 000 "
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"Administration Department","-1 000 "
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"Production","-6 200 "
164
"Product Range 1","-3 750"
165
"Product Range 2","-2 450"
167
.. i18n: In this example of a hierarchical structure in OpenERP, you can analyse not only the costs of each product range, but also the costs of the whole production. The balance of a summary account (*Production*) is the sum of the balances of the child accounts.
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In this example of a hierarchical structure in OpenERP, you can analyse not only the costs of each product range, but also the costs of the whole production. The balance of a summary account (*Production*) is the sum of the balances of the child accounts.
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.. i18n: A report that relates both general accounts and analytic accounts enables you to get a breakdown of costs within a given department. An analysis of the Production / Product Range 1 department is shown in this table:
175
A report that relates both general accounts and analytic accounts enables you to get a breakdown of costs within a given department. An analysis of the Production / Product Range 1 department is shown in this table:
177
.. i18n: .. csv-table:: Report merging both general and analytic accounts for a department (Case 1)
178
.. i18n: :header: "Production / Product Range 1",""
179
.. i18n: :widths: 10,5
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.. i18n: "General Account","Amount"
182
.. i18n: "600 – Raw Materials","- 1 300"
183
.. i18n: "613 – Transport charges","- 450"
184
.. i18n: "6201 – Staff costs","-2 000"
185
.. i18n: "Total","-3 750"
188
.. csv-table:: Report merging both general and analytic accounts for a department (Case 1)
189
:header: "Production / Product Range 1",""
192
"General Account","Amount"
193
"600 – Raw Materials","- 1 300"
194
"613 – Transport charges","- 450"
195
"6201 – Staff costs","-2 000"
198
.. i18n: The examples above are based on a breakdown of the costs of the company. Analytic allocations can be just as effective for sales. That gives you the profitability (sales - costs) of different departments.
201
The examples above are based on a breakdown of the costs of the company. Analytic allocations can be just as effective for sales. That gives you the profitability (sales - costs) of different departments.
203
.. i18n: .. note:: Representation by Unique Product Range
205
.. i18n: This analytic representation by department and by product range is generally used by trading
206
.. i18n: companies and industries.
208
.. i18n: A variant of this, is not to break it down by sales and marketing departments, but to assign each
209
.. i18n: cost to its corresponding product range.
210
.. i18n: This will give you an analysis of the profitability of each product range.
212
.. i18n: Choosing one over the other depends on how you look at your marketing effort.
213
.. i18n: Is it a global cost allocated in some general way, or is each product range responsible
214
.. i18n: for its own marketing costs?
217
.. note:: Representation by Unique Product Range
219
This analytic representation by department and by product range is generally used by trading
220
companies and industries.
222
A variant of this, is not to break it down by sales and marketing departments, but to assign each
223
cost to its corresponding product range.
224
This will give you an analysis of the profitability of each product range.
226
Choosing one over the other depends on how you look at your marketing effort.
227
Is it a global cost allocated in some general way, or is each product range responsible
228
for its own marketing costs?
230
.. i18n: Case 2: Law Firm
231
.. i18n: -----------------
237
.. i18n: Law firms generally adopt management by case, where each case represents a current client file. All of the expenses and products are then attached to a given file.
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Law firms generally adopt management by case, where each case represents a current client file. All of the expenses and products are then attached to a given file.
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.. i18n: A principal preoccupation of law firms is the invoicing of hours worked, and the profitability by case and by employee.
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A principal preoccupation of law firms is the invoicing of hours worked, and the profitability by case and by employee.
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.. i18n: Mechanisms used for encoding the hours worked will be covered in detail in `Human Resources`. Like most system processes, hours worked are integrated into the analytic accounting. Every time an employee enters a timesheet for a number of hours, that automatically generates analytic accounts corresponding to the cost of those hours in the case concerned. The hourly charge is a function of the employee's salary.
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Mechanisms used for encoding the hours worked will be covered in detail in `Human Resources`. Like most system processes, hours worked are integrated into the analytic accounting. Every time an employee enters a timesheet for a number of hours, that automatically generates analytic accounts corresponding to the cost of those hours in the case concerned. The hourly charge is a function of the employee's salary.
253
.. i18n: single: absences
259
.. i18n: So a law firm will opt for an analytic representation which reflects the management of the time that employees work on the different client cases.
262
So a law firm will opt for an analytic representation which reflects the management of the time that employees work on the different client cases.
264
.. i18n: .. note:: *Example Representation of an Analytic Chart of Accounts for a Law Firm*
268
.. i18n: * Paid Absences
270
.. i18n: * Unpaid Absences
272
.. i18n: #. Internal Projects
274
.. i18n: * Administrative
278
.. i18n: #. Client Cases
291
.. note:: *Example Representation of an Analytic Chart of Accounts for a Law Firm*
317
.. i18n: All expenses and sales are then attached to a case. This gives the profitability of each case and, at a consolidated level, of each client.
320
All expenses and sales are then attached to a case. This gives the profitability of each case and, at a consolidated level, of each client.
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.. i18n: Billing for the different cases is a bit unusual. The cases do not match any entry in the general account nor do they come from purchase or sales invoices. They are represented by the various analytic operations and do not have exact counterparts in the general accounts. They are calculated on the basis of the hourly cost per employee. These entries are automatically created when billing worksheets.
325
Billing for the different cases is a bit unusual. The cases do not match any entry in the general account nor do they come from purchase or sales invoices. They are represented by the various analytic operations and do not have exact counterparts in the general accounts. They are calculated on the basis of the hourly cost per employee. These entries are automatically created when billing worksheets.
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.. i18n: At the end of the month when you pay salaries and benefits, you integrate them into the general accounts but not in the analytic accounts, because they have already been accounted for in billing each account. A report that relates data from the analytic and general accounts then lets you compare the totals, so you can readjust your estimates of hourly cost per employee depending on the time actually worked.
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At the end of the month when you pay salaries and benefits, you integrate them into the general accounts but not in the analytic accounts, because they have already been accounted for in billing each account. A report that relates data from the analytic and general accounts then lets you compare the totals, so you can readjust your estimates of hourly cost per employee depending on the time actually worked.
332
.. i18n: The following table shows an example of different analytic entries that you can find for your analytic account:
335
The following table shows an example of different analytic entries that you can find for your analytic account:
337
.. i18n: .. csv-table:: Analytic Entries for the Account Chart (Case 2)
338
.. i18n: :header: "Title","Account","Amount","","General Account","Debit","Credit"
339
.. i18n: :widths: 15, 10, 8, 2, 15, 8, 8
341
.. i18n: "Study the file (1 h)","Case 1.1","-15","","","",""
342
.. i18n: "Search for information (3 h)","Case 1.1","-45","","","",""
343
.. i18n: "Consultation (4 h)","Case 2.1","-60","","","",""
344
.. i18n: "Service charges","Case 1.1","280","","705 – Billing services","","280"
345
.. i18n: "Stationery purchase","Administrative","-42","","601 – Furniture purchase","42",""
346
.. i18n: "Fuel Cost -Client trip","Case 1.1","-35","","613 – Transports","35",""
347
.. i18n: "Staff salaries","","","","6201 – Salaries","","3 000"
350
.. csv-table:: Analytic Entries for the Account Chart (Case 2)
351
:header: "Title","Account","Amount","","General Account","Debit","Credit"
352
:widths: 15, 10, 8, 2, 15, 8, 8
354
"Study the file (1 h)","Case 1.1","-15","","","",""
355
"Search for information (3 h)","Case 1.1","-45","","","",""
356
"Consultation (4 h)","Case 2.1","-60","","","",""
357
"Service charges","Case 1.1","280","","705 – Billing services","","280"
358
"Stationery purchase","Administrative","-42","","601 – Furniture purchase","42",""
359
"Fuel Cost -Client trip","Case 1.1","-35","","613 – Transports","35",""
360
"Staff salaries","","","","6201 – Salaries","","3 000"
362
.. i18n: Such a structure allows you to make a detailed study of the profitability of various transactions. In this example, the cost of Case 1.1 is 95.00 (the sum of the analytic costs of studying the files, searching for information and fuel costs), but has been invoiced at 280.00, which gives you a gross profit of 185.00.
365
Such a structure allows you to make a detailed study of the profitability of various transactions. In this example, the cost of Case 1.1 is 95.00 (the sum of the analytic costs of studying the files, searching for information and fuel costs), but has been invoiced at 280.00, which gives you a gross profit of 185.00.
367
.. i18n: But an interest in analytical accounts is not limited to a simple analysis of the profitability of different cases.
370
But an interest in analytical accounts is not limited to a simple analysis of the profitability of different cases.
372
.. i18n: The same data can be used for automatic recharging of the services to the client at the end of the month. To invoice clients, just take the analytic costs in that month and apply a selling price factor to generate the invoice. Invoicing mechanisms for this are explained in greater detail in `Services & Project Management`. If the client requires details of the services used on the case, you can print the service entries in the analytic account for this case.
375
The same data can be used for automatic recharging of the services to the client at the end of the month. To invoice clients, just take the analytic costs in that month and apply a selling price factor to generate the invoice. Invoicing mechanisms for this are explained in greater detail in `Services & Project Management`. If the client requires details of the services used on the case, you can print the service entries in the analytic account for this case.
377
.. i18n: .. tip:: Invoicing Analytic Costs
379
.. i18n: Most software that manages billing enables you to recharge hours worked.
380
.. i18n: In OpenERP, these services are automatically represented by analytic costs.
381
.. i18n: But many other OpenERP documents can also generate analytic costs, such as credit notes and
382
.. i18n: purchases of goods.
384
.. i18n: So when you invoice the client at the end of the month, it is possible for you to include all the
385
.. i18n: analytic costs, and not just the hours worked. So, for example, you can easily recharge the whole cost of your journeys
386
.. i18n: to the client.
389
.. tip:: Invoicing Analytic Costs
391
Most software that manages billing enables you to recharge hours worked.
392
In OpenERP, these services are automatically represented by analytic costs.
393
But many other OpenERP documents can also generate analytic costs, such as credit notes and
396
So when you invoice the client at the end of the month, it is possible for you to include all the
397
analytic costs, and not just the hours worked. So, for example, you can easily recharge the whole cost of your journeys
400
.. i18n: Case 3: IT Services Company
401
.. i18n: ---------------------------
404
Case 3: IT Services Company
405
---------------------------
407
.. i18n: Most IT service companies face the following problems:
410
Most IT service companies face the following problems:
412
.. i18n: * project planning,
414
.. i18n: * invoicing, profitability and financial follow-up of projects,
416
.. i18n: * managing support contracts.
421
* invoicing, profitability and financial follow-up of projects,
423
* managing support contracts.
425
.. i18n: To deal with these problems, you would use an analytic chart of accounts structured by project and by contract. A representation of that is given in the following example:
428
To deal with these problems, you would use an analytic chart of accounts structured by project and by contract. A representation of that is given in the following example:
430
.. i18n: .. note:: *Example Analytic Representation of a Chart of Accounts for an IT Services Company*
432
.. i18n: #. Internal Projects
434
.. i18n: * Administrative and Commercial
436
.. i18n: * Research and Development
438
.. i18n: #. Client Projects
442
.. i18n: * Project 1.1
444
.. i18n: * Project 1.2
448
.. i18n: * Project 2.1
450
.. i18n: * Project 2.2
452
.. i18n: #. Support Contracts – 20h
454
.. i18n: * Customer X
456
.. i18n: * Customer Y
459
.. note:: *Example Analytic Representation of a Chart of Accounts for an IT Services Company*
463
* Administrative and Commercial
465
* Research and Development
481
#. Support Contracts – 20h
487
.. i18n: The management of services, expenditures and sales is similar to that presented above for lawyers. Invoicing and the study of profitability are also similar.
490
The management of services, expenditures and sales is similar to that presented above for lawyers. Invoicing and the study of profitability are also similar.
492
.. i18n: But now look at support contracts. These contracts are usually limited to a prepaid number of hours. Each service posted in the analytic accounts shows the remaining hours of support. To manage support contracts, you would use the quantities and not the amounts in the analytic entries.
495
But now look at support contracts. These contracts are usually limited to a prepaid number of hours. Each service posted in the analytic accounts shows the remaining hours of support. To manage support contracts, you would use the quantities and not the amounts in the analytic entries.
497
.. i18n: In OpenERP, each analytic line lists the number of units sold or used, as well as what you would usually find there – the amount in currency units (USD or GBP, or whatever other choice you make). So you can sum the quantities sold and used on each analytic account to determine whether any hours of the support contract remain.
500
In OpenERP, each analytic line lists the number of units sold or used, as well as what you would usually find there – the amount in currency units (USD or GBP, or whatever other choice you make). So you can sum the quantities sold and used on each analytic account to determine whether any hours of the support contract remain.
503
.. i18n: pair: cost; allocation
507
pair: cost; allocation
509
.. i18n: To differentiate services from other costs in the analytic account, you use the concept of the analytic journal. Analytic entries are then allocated into the different journals:
512
To differentiate services from other costs in the analytic account, you use the concept of the analytic journal. Analytic entries are then allocated into the different journals:
514
.. i18n: * service journal,
516
.. i18n: * expense journal,
518
.. i18n: * sales journal,
520
.. i18n: * purchase journal.
531
.. i18n: To obtain the detailed breakdown of a support contract, you only have to look at the service journal for the analytic account corresponding to the contract in question.
534
To obtain the detailed breakdown of a support contract, you only have to look at the service journal for the analytic account corresponding to the contract in question.
536
.. i18n: Finally, the analytic account can be used to forecast future needs. For example, monthly planning of staff on different projects can be seen as an analytic budget limited to the service journal. Accounting entries are expressed in quantities (such as number of hours, and numbers of products), and in amounts in units of currency (USD or GBP for instance).
539
Finally, the analytic account can be used to forecast future needs. For example, monthly planning of staff on different projects can be seen as an analytic budget limited to the service journal. Accounting entries are expressed in quantities (such as number of hours, and numbers of products), and in amounts in units of currency (USD or GBP for instance).
541
.. i18n: So you can set up planning on just the basis of quantities. Analysing the analytic budget enables you to compare the budget (that is, your plan) to the services actually carried out by month end.
544
So you can set up planning on just the basis of quantities. Analysing the analytic budget enables you to compare the budget (that is, your plan) to the services actually carried out by month end.
546
.. i18n: .. tip:: Cash Budgets
548
.. i18n: Problems of cash management are amongst the main difficulties encountered by small growing businesses.
549
.. i18n: It is really difficult to predict the amount of cash that will be available when a company is young
550
.. i18n: and rapidly growing.
552
.. i18n: If the company adopts management by case, then staff planning can be represented in the analytic
553
.. i18n: accounts report, as you have seen.
555
.. i18n: But since you know your selling price for each of the different projects, you can see that it is easy to use the plan in the analytic accounts to more precisely forecast the amounts that you will invoice in the coming months.
558
.. tip:: Cash Budgets
560
Problems of cash management are amongst the main difficulties encountered by small growing businesses.
561
It is really difficult to predict the amount of cash that will be available when a company is young
564
If the company adopts management by case, then staff planning can be represented in the analytic
565
accounts report, as you have seen.
567
But since you know your selling price for each of the different projects, you can see that it is easy to use the plan in the analytic accounts to more precisely forecast the amounts that you will invoice in the coming months.
569
.. i18n: .. Copyright © Open Object Press. All rights reserved.
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.. Copyright © Open Object Press. All rights reserved.
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.. i18n: .. You may take electronic copy of this publication and distribute it if you don't
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.. i18n: .. change the content. You can also print a copy to be read by yourself only.
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.. You may take electronic copy of this publication and distribute it if you don't
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.. change the content. You can also print a copy to be read by yourself only.
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.. We have contracts with different publishers in different countries to sell and
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.. distribute paper or electronic based versions of this book (translated or not)
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.. in bookstores. This helps to distribute and promote the OpenERP product. It
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.. also helps us to create incentives to pay contributors and authors using author
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.. i18n: .. Due to this, grants to translate, modify or sell this book are strictly
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.. products are claimed as trademarks. Where those designations appear in this book,
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.. resulting from the use of the information contained herein.
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.. i18n: .. Published by Open Object Press, Grand Rosière, Belgium
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.. Published by Open Object Press, Grand Rosière, Belgium
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i18n/zh_CN/source/book/4/4_10_Accounts/4_10_Accounts_analytic_chart.rst
