1.4 Anglo-Saxon Accounting: Introduction Odoo Accounting

The Anglo -Saxon Accounting is suitable for small localities such as the countries in the United States, United Kingdom, Ireland, Canada, Australia, and many other countries. The 1.4 Anglo-Saxon Accounting: Introduction Odoo Accounting | Odoo 16 Accounting Book in Odoo is only available in the enterprise edition. These two accounting systems, Continental and 1.4 Anglo-Saxon Accounting: Introduction Odoo Accounting | Odoo 16 Accounting Book, have noted many differences. In Continental Accounting, we discussed that the expense account is affected by a purchase. But in 1.4 Anglo-Saxon Accounting: Introduction Odoo Accounting | Odoo 16 Accounting Book, the expense account gets affected after processing a sale order.

If you want to get the full feature of Anglosaxon accounting, you want to activate the feature from the Odoo Accounting Configuration Settings. One more significant feature of the 1.4 Anglo-Saxon Accounting: Introduction Odoo Accounting | Odoo 16 Accounting Book system is the cost distinctions between Account and Stock account properties when the inventory valuation is automated. The price difference account is applied to record the difference in price between the vendor bill and the purchase order.

Transactions in Anglo-Saxon Accounting

In some scenarios, the expense will not record when it is purchased. The purchases may be bulk purchases and will be consumed for a long period of time. Therefore, adding those as an expense to financial entries will create a greater impact on the profit and loss of the company. As a result, in order to handle those situations, it is a standard practice to record purchased items as assets and expenses at the time of consumption. The expense of consumed assets is recorded in ledgers.

We will begin with the purchase of a product.

Purchase Order:

Creating purchase orders generates only a valid document for receiving goods or services from the vendor, which will not affect any accounting ledgers.

Receipt:

Once the receipt of goods is acknowledged, the incoming assets have to be recorded in stock. Thus stock accounts get affected, both stock input accounts and stock valuation accounts.

Accounts Nature Increasing/Decreasing Debit/Credit
Stock valuation account Asset Increasing Debit
Stock Input account Asset Decreasing Credit

Here the incoming value or stock recorded in the ‘Stock input account’, this will be considered as assets and if it is not sold out or consumed, thus it becomes a liability. So it can be either Liability or Assets. [ Liability = -Assets, as liability increases or asset decreases]

Return:

In some cases, there will be a chance of returning the purchased product due to quality issues or product damage. Thus the stock move is just the opposite of the incoming, and stock accounts are reversed.

Accounts Nature Increasing/Decreasing Debit/Credit
Stock valuation account Asset Decreasing Credit
Stock Input account Asset Increasing Debit

Purchase Bill:

Once the purchase receipt is done, the next step is to post its purchase bill.

Accounts Nature Increasing/Decreasing Debit/Credit
Account Payable Liability Increasing Credit
Tax Account Asset Increasing Debit
Stock Input account Asset Increasing Debit

In Anglo-Saxon, as mentioned above, the direct expense will not be recorded at the time of purchase; instead, it will be recorded as an asset. Thus here, ‘Account Payable’ and ‘Stock interim accounts’ are affected once a bill is generated. Account Payable records the amount to pay for the vendor. Thus on bill generation the payable amount to the vendor increases, which increases the liability of the company and the Account Payable credited.

Register Payment:

Registering payment makes payment or sends money to the vendor. During this process, ‘Account Payable’ and ‘Outstanding Payment Accounts’ get affected.

Accounts Nature Increasing/Decreasing Debit/Credit
Account Payable Liability Decreasing Debit
Outstanding Payments Liability Increasing Credit

As the company makes payment to the vendor, the liability of the company decreases. Account payable records the payable liabilities of the company. Thus Account Payable, whose nature is a liability, and as liability decreases, it gets debited.

The Outstanding Payment account is the intermediary account that is used along with cash and bank journals that keeps unreconciled outgoing payments. And these outstanding payment accounts are used to reconcile with the bank statement rather than the Account payable. Thus here on registering payment ‘Outstanding Payments’ account gets credited as liability increases.

Reconciliation:

As the next level bank statement has to be matched with vendor payment. So on reconciliation, the ‘Outstanding Payment’ and ‘Bank’ accounts are affected.

Accounts Nature Increasing/Decreasing Debit/Credit
Outstanding Payments Liability Decreasing Debit
Bank Account Asset Decreasing Credit

In this process, it will record the payment is finally sent to the vendor from the bank account. Thus asset in ‘Bank’ decreases, and hence bank is credited and liability in ‘Outstanding Payment’ decreases, and thus it is debited.

The overall journal entries of the purchase process are shown in the table below.

Operation Accounts Affected Debit Credit
Purchase orderNo Accounts Affected
Material Receipt
Stock Valuation Account
Stock Input Accountt
XX
..
..
XX
Purchase Bill
Stock Input Account
Account Payable
Tax Account
XX
..
XX
..
XX
..
Registering Payment
Account Payable
Outstanding Payments
XX
..
..
XX
ReconcilingOutstanding Payments XX
...Bank Account XX

Now let's look at the Sales Process.

The sales transaction involves different operations, including order creation, processing delivery of the product to the customer, invoice generation, and its payment and reconciliation.

Sales Order:

The creation of a sales order makes a valid document for customers, including the products and services they require, quantity and confirmed price, etc. It does not affect any accounts.

Delivery Note:

As an order is confirmed, the next step is to deliver the items to the customer. Once delivery is validated, stock account properties will be affected. The ‘Stock Output Account’ records the stock delivered to the customer. The nature of a ‘Stock Output Account’ is Asset, and here, the asset value increases and is debited. And the total stock value or asset value from the warehouse decreases, which is kept in the ‘Stock Valuation Account.’ Thus the Stock Valuation Account is credited.

Accounts Nature Increasing/Decreasing Debit/Credit
Stock valuation account Asset Decreasing Credit
Stock Output account Asset Increasing Debit

Return Operation:

Consider the return of product from the customer due to any reason. Thus the stock is also reversed as follows.

Accounts Nature Increasing/Decreasing Debit/Credit
Stock valuation account Asset Increasing Debit
Stock Output account Asset Decreasing Credit

Sales Invoice:

While creating a sales invoice for a customer, the ‘Income Account’ and ‘Account Receivable’ gets affected. The nature of ‘Income Account’ is income, and ‘Account Receivable’ is assets. Thus on creating income increases, thus ‘Income Account’ is credited, and asset increases, therefore ‘Account Receivable’ is debited. Along with this, two more ledgers are affected, the ‘Stock Output Account’ and the ‘Expense’ Account, since, in 1.4 Anglo-Saxon Accounting: Introduction Odoo Accounting | Odoo 16 Accounting Book, the expense is affected once the purchased product is consumed or sold out.

Accounts Nature Increasing/Decreasing Debit/Credit
Income Account Income Increasing Credit
Account Receivable Asset Increasing Debit
Tax Account Liability Increasing Credit
Stock Output Account Asset Decreasing Credit
Expense Account Expenses Increasing Debit

Payment Registering:

Once payment is received from the customer and when it is registered in Odoo, ‘Account Receivable’ and ‘Outstanding Receipts’ accounts are affected.

Accounts Nature Increasing/Decreasing Debit/Credit
Accounts Receivable Asset Decreasing Credit
Outstanding Receipts Asset Increasing Debit

Payment Registering:

Once payment is received from the customer and when it is registered in Odoo, ‘Account Receivable’ and ‘Outstanding Receipts’ accounts are affected.

Accounts Nature Increasing/Decreasing Debit/Credit
Accounts Receivable Asset Decreasing Credit
Outstanding Receipts Asset Increasing Debit

The receivable accounts record the amount that has to be received from the customer. The nature of ‘Account receivable’ is Asset. As the customer makes payment, assets decrease and are credited. The incoming payments were then temporarily kept in the ‘Outstanding Receipts’ account and reconciled with the ‘Bank.’ The nature of the Outstanding Receipts account is Assets, and as the asset increases, it is debited.

Reconciliation:

Once payment is reconciled with a bank statement, the asset in the bank increases and thus the bank is debited. And the counterpart outstanding receipts account, where assets decrease and thus are credited.

Accounts Nature Increasing/Decreasing Debit/Credit
Outstanding Receipts Asset Decreasing Credit
Bank account Asset Increasing Debit

Sales Return:

The return of products affects stock and if the invoice is paid, refund has to be registered with a credit note.

The overall journal entry is as follows.

Operation Accounts Affected Debit Credit
Sales order
No Accounts affected
Stock valuation account
NA
..
NA
XX
Delivery Note
Stock Output account
XX
..
Customer Invoice
Income Account
Account Receivable
Tax Account
Stock Output Account
Expense Account
..
XX
..
XX
XX
XX
XX
XX
XX
..
Registering Payment
Accounts Receivable
Outstanding Receipts
..
XX
XX
..
ReconcilingOutstanding ReceiptsXX XX
...Bank Account XX ..
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Calicut

Cybrosys Technologies Pvt. Ltd.
Neospace, Kinfra Techno Park
Kakkancherry, Calicut
Kerala, India - 673635

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Cybrosys Technologies Pvt. Ltd.
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Dickenson Road,
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