Odoo v18 Accounting Book : Basics of Accounting

Account Groups

Related ledger accounts are grouped together to create account groups. These account groupings are intended to illustrate the structure of ledger accounts. This ledger account structure will significantly aid in the creation of pertinent reports. The most commonly used account types in Odoo18 are the Regular, Payable, Receivable, and Liquidity account groups. Each of these account ledgers is described using these specified groups.

Let's look at each one separately.

1.Accounts Receivable ( Debtors )

An accounts receivable is the amount of money required to pay for products or services that have been received but for which the client has not yet made payment. The Accounts Receivable is also known as the debtors. For the purpose of monitoring all customer receivables, these accounts are especially useful. When we consider their nature, the receivables will be classified as assets. When accounting for a sale, the receivable accounts are debited in line with the increasing amount of receivables.

2. Bank and Cash

Since bank and cash accounts are, by definition, assets, they will all fall under the Bank and Cash type. To give one example, suppose a business chooses to pay with cash instead of credit and considers the amount deducted from the bank account. The bank account will be credited as a result of the asset's decline.

3. Current Assets

Current assets include cash and other assets that will be turned into cash within a year. Thus, this account type will make it easier to register short-term assets. Assets like inventory, short-term investments, prepayments, etc., may fall under this category. Bank deposits, loans, and advances given to employees fall under this category.

Stock valuation accounts, stock input and output accounts, deferred expense accounts, and many more are examples of general accounts. Odoo's "Current Assets" ledgers and entries of this type affect the balance sheet since they are assets by definition.

4. Non-Current Assets

The assets that the business buys or invests in are considered non-current assets. However, the amount of that investment does not change within an accounting year. Because of this, this kind of investment will yield returns for a long time and cannot be easily turned into cash. Examples of this type of asset include real estate, vehicles, insurance, and so on. The whole value cannot be ascertained throughout the accounting year. All of them are listed on the balance sheet.

5. Prepayments

One type of prepayment is prepaid expenses. In this case, the goods and services have already been paid for, but they haven't been used or received yet. For example, Odoo considered postponed or prepaid expenses to be within this category.

Assume, for example, that there was insurance that required an annual payment of $30,000. The complete cost will not be able to be included in the company's profit and loss report for the current year. The organisation must distribute the amount over a full year. Consequently, $2500 will be spent every month, and the cost will be documented. The payment type will be "Asset," and the asset value will decrease every year. Consequently, the payment account will be credited and the cost account debited as the expense gradually decreases.

6. Fixed Assets

All fixed asset transactions, including those involving machinery, automobiles, real estate, buildings, furniture, and many more, can be easily recorded with the Fixed Assets account type. It is possible to list all of the products that the company plans to employ for a long period. The Assets category also includes fixed assets. Consequently, the fixed asset will increase, the fixed asset account will be debited, and the fixed assets will be noted on the balance sheet whenever we make a transaction.

7. Payables

The Payables account category is also known as Creditors. It is the entire sum that a company owes to any one person or entity. All sums owing to suppliers or vendors can be tracked using the payables accounts. On a vendor bill, the payable account is also credited as the category of responsibility.

8. Credit Cards

The credit card is another type of account, and it has the feature of being liable. Credit card information is included in the balance sheet. When it comes to credit cards, the amount of money spent on any activity, like buying something or paying for other bills, will result in debt that we must pay back within a specific time frame, typically less than or nearly two months.

9. Current Liabilities

Current liabilities, or those that need to be settled within a year, are considered short-term liabilities. The following headings contain the Current Liability Account Type. These include bank overdrafts, fast loans, taxes and duties, salaries that need to be paid, payroll taxes, rising expenses, income taxes, and a host of other items.

10. Non-current liabilities

Long-term commitments that are listed on the balance sheet and have a maturity date of one year or more are referred to as non-current liabilities, long-period debts, or financial commitments. Long-term loans, deferred tax liabilities, pension benefit commitments, and long-term leasing obligations are examples of non-current liabilities.

11. Income & Other Income

The Income & Other Income account type is very useful when a business wants to display its revenue or income. Income is the account's nature and will be shown in the profit and loss statements. The selling of the company's products and services is its main source of revenue or direct income. Furthermore, other sources of income are regarded as indirect sources of income. Examples include rent payments, interest payments, and other revenue streams.

12. Expenses

During a given accounting period, the sorts of accounts called expenditure accounts are used to track every facet of how much an organisation spends on routine expenses. Delivery expenses, income tax costs, expenditures related to producing goods and services, payroll costs, advertising costs, maintenance costs, marketing costs, rent costs, etc., are all included in this type of expense account. The income statement or profit and loss report will include expenses, as that is the nature of the expense account type.

13. Depreciation

The term "depreciation account type" generally refers to the amount that an organization's assets are depreciated over a specific time period. Usually, this kind of account is used to monitor fixed asset degradation. In the case of fixed assets, depreciation will occur from time to time, and their value will surely decrease with time. This type of depreciation will consequently be either linear or regressive. An asset will have both a book value and a salvage value at the time of creation. The book value represents the initial cost. The amount that a business will get when selling a fixed asset after depreciation has been fully taken into consideration is known as the salvage value.

Furthermore, rather than being charged all at once to the current year, the expense will be spread out over a predetermined time period depending on the depreciation method employed. The depreciation accounts are debited, while the expense account is credited.

14. Cost Of Revenue

The cost of revenue and the direct costs of the company's products and services are closely tied. This indicates that it is the entire cost of creating and offering a product or service to consumers. Since it is directly related to the income statement, it is more comfortable to show the direct costs associated with the goods and services. It includes the cost of manufacturing the items and delivering them to the customers. Since the cost of revenue is, by definition, an expense, gross profit will be impacted by this sort of account.

15. Equity

A company's intellectual property can be represented financially by the form of an equity account. The amount of money that the employers gave to the start-up is shown. Equity may arise from residual revenue generated by a business or from payments made by its owners. To put it another way, equity is the total amount of assets that remain on the balance sheet after all liabilities have been fully paid. Common stock, contributed surplus, treasury stock, common and preference stocks, other substantial earnings, etc., are all included in this account type.

When considering its nature, equity will be classified as an asset type. The amount invested will be the same as the equity. Equity will therefore rise as a result of any investment. The capital account will subsequently be credited with the additional equity.

16. Current year earnings

The balance sheet's "Current Year Earnings" equity-based account type is used to show the net profit and loss for the current fiscal year. Sales and other transactions that affect the income and expense account will likewise affect the current year's earnings. This will also be mentioned on the balance sheet.