An Overview of Accounting in ADempiere

Provides an overview of how the accounting works in ADempiere

Accounting is one of the expected functions of any ERP system. In ADempiere, the accounting capabilities are at the core of the system, keeping track of the transactions and entries that make up the financial records known as the company books. Like most capabilities in ADempiere, with proper configuration and setup, the user doesn't need to deal with the accounting directly - it all happens automatically. At the same time the accountants have full control.

ADempiere can manage multiple books in multiple currencies as required to meet the financial reporting requirements in different regions of the world. Each book is represented by an "Accounting Schema" which defines the currency, behavior and accounts used by the book.

The there can be multiple Charts of Accounts defined in ADempiere as Account Elements. Each Schema can select which Account Element to use. In addition, each Schema can add additional "dimensions" of data to the accounts, enabling detailed reporting across these dimensions as required. The dimensions provide a way to categorize the accounting data so that the the number of accounts can be small. In other words, there is no need to create a large number of accounts, each specific to some combination of these dimensions.

When assigning accounts to use for a particular purpose, a "combination" of these dimensions is used. The Account Combination defines the account and default dimension values that will be used when posting an accounting fact. A set of default Account Combinations is defined within the Schema and then the behavior can be customized in each area of accounting as required. For example, the account combination to use for the accounts receivable of a particular customer can be set uniquely for that customer, for all customers of a group or as the default for all customers.

The generation of accounting facts, the detailed entries in the books, is performed by documents such as invoices, material receipts, bank statements etc. There is a direct analogy with the equivalent paper document process. The document has some accounting consequence and provides the source for the accounting facts that are posted in the books. For this reason, the documents are strictly controlled to prevent changes once they are approved and completed but the accounting facts aren't. While it is not possible to manipulate the accounting data directly, the accounting data can be "reset" as required and regenerated using the information in the documents. This makes is possible to correct the accounting if changes in the account combinations are required. For example, if a particular customer requires a different account for accounts receivable and you need to use this account for all their transactions since the beginning of the fiscal year, then you can change their default account combination and reset the accounting to post the information to the correct account.

With multiple Accounting Schema setup, a single document will post its accounting facts into every Schema defined, using the accounts, currencies and dimensions defined for that Schema.

Manual generation of accounting facts can be done using a General Ledger Journal (GL Journal) entry to provide management estimates and corrections as required. With proper setup and use of the ADempiere system, the need for manual GL Journal entries is minimized compared to other accounting systems. Each accounting facts is associated with a document and that document is controlled, providing an audit trail for the accounting results. This provides a direct relation between the accounting balances and the documents, making the audit process simpler. To prevent GL Journal entries from affecting this direct relationship, the Accounts can be set as "Document Controlled" to limit the accounting facts to those generated by documents rather than GL Journal entries. Corrections to these accounts should be done by correcting the documents, not by adjusting the accounting with a GL Journal entry.

Postings to the accounting data can also be controlled by opening and closing calendar periods. If a period is closed, it won't be possible to post new accounting data or reset the data in that period. Closing periods is useful to prevent inadvertent changes to the accounting data after an audit or the end-of-period processes is completed. The period control is actually done at the document level so a period can be closed for, say, invoice posting, but not for the GL Journal.

Finally, detail reporting is possible to summarize the accounting data or delve into it in great detail. The reporting structure provides ways to report by account or any specific dimension within the schema.