Odoo v18 Accounting Book : Basics of Accounting

Anglo-Saxon Accounting

Anglo-Saxon accounting is appropriate for small regions, including those in the US, UK, Ireland, Canada, Australia, and many other countries. Anglo-Saxon accounting is only available in the enterprise edition of Odoo 18. The two accounting systems—Continental and Anglo-Saxon—have many differences. We discussed how a purchase impacts Continental Accounting's expense account. But in Anglo-Saxon accounting, the expense account is affected once a sales order is executed and the invoice is validated.

If you want to use all of the functionality of Odoo Accounting, you must enable Anglo-Saxon accounting from the Odoo Accounting Configuration Settings. You also need to activate the developer mode. Another significant feature of the Anglo-Saxon accounting system is the ‘price difference’ account, which records the difference between the purchase price and the vendor bill. Also, the inventory valuation can be marked as automated to record the Stock account characteristics.

Transactions in Anglo-Saxon Accounting

1. Purchase Process

Sometimes, when an expense is incurred, it won't be recorded. Purchases could be made in large quantities and distributed over an extended period of time. The profit and loss of the business will therefore be more significantly impacted if they are included as a cost in financial entries. To deal with those situations, it is therefore standard procedure to record purchased goods as assets and expenses at the time of consumption or sales. The costs of assets are recorded in the ledgers.

We will begin by purchasing a product.

• Purchase Order: Purchase orders just provide a legitimate document for receiving goods or services from the vendor; they have no effect on any accounting ledgers.
• Purchase Receipt: The incoming assets need to be added to stock after the receipt of the products has been acknowledged. Consequently, stock affects both stock input accounts and stock valuation accounts.

Stock is considered an asset when it is received and entered into the "Stock input account," but it turns into a liability until it is sold or used up. Therefore, either assets or liabilities could be involved. As either the asset or the liability changes, [Liability = -Assets].

• Purchase Return: Sometimes, there is a possibility that the item you bought could be returned due to a defect or damage to the product. Stock accounts are thereby inverted, and the stock move is precisely the opposite of the incoming one.

• Purchase Bill: After the purchase receipt is completed, the purchase bill is posted. As previously mentioned, the direct cost will be documented as an asset in Anglo-Saxon instead of at the moment of purchase. Consequently, "Account Payable" and "Stock interim accounts" are affected after a bill is generated. Accounts Payable contains the amount that needs to be paid to the vendor. Consequently, the amount owing to the vendor increases when a bill is created, increasing the company's liability and crediting the Accounts Payable.

• Register Payment: Registering it means transferring money to the merchant or making a payment. 'Account Payable' and 'Outstanding Payment Accounts' are affected this way. The payments paid to the vendor reduce the company's current liability. Accounts payable records the company's payable liabilities. Consequently, when the liability decreases, Accounts Payable—which is a liability by definition—is debited.

The Outstanding Payment account acts as an intermediary for holding unreconciled outgoing payments. These outstanding payment accounts are utilised to reconcile with the bank statement instead of the accounts payable. Consequently, the "Outstanding Payments" account gets credited each time a payment is registered.

• Reconciliation: The bank statement and vendor payment must match because that is the next step. The 'Outstanding Payment' and 'Bank' accounts are thus impacted by reconciliation. The following step requires that the vendor payment and the bank statement agree. Reconciliation thus affects the 'Bank' and 'Outstanding Payment' accounts. It will be recorded during this process that the bank account has at last paid the vendor. Consequently, the liability in "Outstanding Payment" falls, debiting "Outstanding Payment," and the asset in "Bank" decreases, crediting "Bank."

The total number of journal entries made throughout the purchasing process is shown in the table below.

2. Sales Process

A sales transaction involves several steps, such as placing the order, managing the product's delivery to the client, creating the invoice, paying for it, and finally reconciling it.

• Sale Order: When a consumer specifies the products and services they require, the quantity they require, the verified price, etc., a sales order is created. None of the accounts are impacted.
• Delivery Note: Items must be delivered to the customer after an order is accepted. After delivery has been verified, the stock account's characteristics will alter. The customer's supplied stock is tracked in the "Stock Output Account." Since a "Stock Output Account" is by definition an expense, the value of the expense increases and is debited in this instance. Furthermore, all of the warehouse's goods and assets lose value, which is noted in the "Stock Valuation Account." Thus, the stock value account is credited.

• Sales Return:Consider a consumer returning items for whatever reason. The stock is also flipped in this way.

• Sales Invoice: When generating a sales invoice for a client, the "Income Account" and the "Account Receivable" are affected. "Income Account" relates to revenue, whereas "Account Receivable" refers to assets. Consequently, the "Income Account" is credited and the "Account Receivable" is debited when assets increase and income grows. Furthermore, two further ledgers—the "Expense" Account and the "Stock Output Account"—are also affected because, in Anglo-Saxon accounting, the expense is affected as soon as the purchased item is depleted or sold out.

• Payment Registering:Following customer payment and registration in Odoo18, the 'Account Receivable' and 'Outstanding Receipts' accounts are affected. The receivable accounts are used to record the amount that has to be collected from the customer. By definition, "Account Receivable" is an asset. Assets are credited and reduced as the client makes payments. The arriving funds were first temporarily stored in the "Outstanding Receipts" account before being reconciled with the "Bank." The Outstanding Receipts account is based on assets and is debited when the value of the assets increases.

• Reconciliation: The asset in the bank increases when a payment is compared to a bank statement, which causes the bank to be debited. In addition, assets are credited and diminished in the parallel outstanding receipts account.

• Sales Return:Stock is impacted by returned goods, and a credit note must be sent for the reimbursement if the invoice has already been paid.

Below is a list of the whole journal entry.

Storno Accounting

The word "storno" in Italian means "cancellation" or "writing off." Therefore, using negative credit or debit amounts that have been recorded in your account, the original journal entries will be reversed under this accounting technique. Using this process, a bookkeeper can delete a file that contains erroneous accounting information regarding the reported amount.