1.1 Purpose of Finance & Accounting Module

The Finance & Accounting module records, manages, and monitors all financial transactions in the organization.

It ensures:

• Accurate bookkeeping

• Real-time financial reporting

• Tax compliance

• Budget control

• Audit readiness
  
  

All financial data is automatically updated from:

• Sales

• Purchase

• Inventory

• Manufacturing

• Payroll

• Assets

This eliminates duplicate entries.

2.1 Chart of Accounts (COA)

What is Chart of Accounts?

The Chart of Accounts is the financial backbone of the ERP System.

It defines all accounts under:

• Assets

• Liabilities

• Equity

• Income

• Expenses

Account Types

Assets

• Cash

• Bank

• Inventory

• Receivables

• Fixed Assets

Liabilities

• Payables

• Loans

• Taxes Payable

Income

• Sales Revenue

• Service Income

Expenses

• Purchase

• Salary

• Rent

• Utilities

Best Practices

• Use structured account grouping

• Avoid unnecessary new accounts

• Maintain proper account hierarchy

2.2 Cost Centers

Cost Centers track expenses by department or project.

Examples:

• Sales Department

• Production Department

• Branch Location

• Project

Used for:

• Profitability analysis

• Budget control

2.3 Fiscal Year Setup

Define:

• Financial year start date

• Financial year end date

Used for:

• Year-end reporting

• Compliance

3.1 Sales Invoice (Revenue Entry)

When Sales Invoice is submitted:

System posts:

• Debit → Customer (Accounts Receivable)

• Credit → Sales Income

• Credit → Tax Payable

Automatically updates receivables and revenue.

3.2 Purchase Invoice (Expense Entry)

When Purchase Invoice is submitted:

System posts:

• Debit → Expense or Inventory

• Credit → Supplier (Accounts Payable)

3.3 Payment Entry

Used for:

• Receiving customer payments

• Paying suppliers

• Bank transfers

Effects:

• Reduces receivable/payable

• Updates bank or cash account

3.4 Journal Entry

Used for:

• Adjustments

• Accrual entries

• Provisions

• Corrections

• Depreciation

Journal Entry does not affect stock.

3.5 Contra Entry

Used for:

• Cash to Bank transfer

• Bank to Bank transfer

4.1 Purpose

Match system records with bank statement.

4.2 Process

1. Import bank statement

2. Match transactions

3. Confirm reconciliation

Ensures:

• No missing entries

• Accurate bank balance

5.1 Customer Outstanding

Track:

• Total receivable

• Due invoices

• Overdue invoices

5.2 Aging Analysis

Categorized by:

• 0–30 days

• 31–60 days

• 61–90 days

• 90+ days

Helps manage credit risk.

5.3 Credit Limit Control

System can restrict:

• Sales if credit limit exceeded

6.1 Supplier Outstanding

Monitor:

• Pending payments

• Due dates

• Advance payments

6.2 Aging Report

Track payable aging to:

• Avoid penalties

• Maintain supplier relationships

7.1 Tax Setup

Configure:

• Sales tax

• Purchase tax

• Withholding tax

• VAT/GST

7.2 Tax Calculation

System automatically:

• Calculates tax

• Posts tax to payable account

7.3 Tax Reports

• Tax Summary

• Input vs Output Tax

• Tax Ledger

Supports compliance and audit.

8.1 Budget Setup

Define:

• Expense budgets

• Department budgets

• Project budgets

8.2 Budget Validation

System can:

• Warn if budget exceeded

• Restrict transaction

9.1 Asset Capitalization

Purchase → Convert to Asset

9.2 Depreciation

System supports:

• Straight Line Method

• Written Down Value

Automatically posts depreciation journal entry.

9.3 Asset Disposal

On disposal:

• Remove asset value

• Record gain/loss

Inventory transactions automatically update:

• Inventory account

• Cost of Goods Sold

• WIP account

Ensures real-time stock valuation.

11.1 Trial Balance

Displays:

• All ledger balances

Used to verify accounting accuracy.

11.2 Profit & Loss Statement

Shows:

• Revenue

• Expenses

• Net Profit

11.3 Balance Sheet

Displays:

• Assets

• Liabilities

• Equity

11.4 Cash Flow Statement

Tracks:

• Operating cash

• Investing cash

• Financing cash

11.5 General Ledger

Shows detailed transaction history for any account.

Multi-Company

System supports:

• Separate books per company

• Consolidated reporting

Multi-Currency

Supports:

• Foreign currency invoices

• Exchange rate differences

• Gain/Loss posting

Segregation of Duties

Separate:

• Invoice creation

• Payment approval

• Bank reconciliation

Approval Workflow

Enable for:

• High-value payments

• Journal entries

• Credit notes

Audit Trail

System tracks:

• Created by

• Modified by

• Submission time

Recommended Steps:

1. Complete all invoices

2. Reconcile bank accounts

3. Reconcile receivables & payables

4. Review expense postings

5. Post accrual entries

6. Review trial balance

7. Generate P&L and Balance Sheet

• Close fiscal year

• Post final adjustments

• Lock previous year

• Generate financial statements

• Audit review

• Editing submitted documents without amendment

• Not reconciling bank monthly

• Ignoring aging reports

• Incorrect tax configuration

• Posting journal entries without explanation

• Review financial reports weekly

• Perform monthly reconciliation

• Maintain clear account hierarchy

• Restrict journal entry access

• Enable approval workflows