Odoo v18 Accounting Book : Basics of Accounting

Types of Accounting in Odoo 18

Three types of accounting processes are the main focus of Odoo 18. There are two types of accounting: "Anglo-Saxon accounting" and "Continental accounting. Storno Accounting, a practice that uses negative credit/debit values for reverse entries, can be applied to both types of accounting.

Continental Accounting

These concepts are strongly supported by the Odoo system, Odoo18, and continental accounting, which is the most used accounting method. Odoo 18's Enterprise and Community editions both support this accounting technique. This accounting will affect the expense account when a purchase is made. Therefore, the cost of a product is considered as soon as it is discovered to be in stock. By default, the Odoo18 platform uses continental accounting. Additionally, the stock can be validated automatically or manually. The information must be manually posted at the end of each month or year, but doing it by hand has no effect on the stock.

If stock valuations need to be documented as the stock is brought in and taken out, choose the "Automated" inventory valuation method.

The lengthy history of continental accounting has several positive consequences for the accounting of your business. As a result, we may look at how the ledgers affect different transactions or processes in continental accounting.

Transactions in Continental Accounting

An accounting transaction is any financial activity that directly affects the financial status and financial statements of a business. In essence, we may classify every type of financial transaction under this heading. Various businesses or organisations handle these transactions in different ways. So that some of the basic accounting transactions can be examined.

1. CPurchase Process

Purchases are the monetary exchanges required for the company to acquire the products or services required to produce revenue. The term "purchase journals" refers to all purchase-related transactions on the Odoo18 platform. All of these purchase-related transactions are documented in the purchase voucher. It is the transaction that is managed by the seller of a product or service that has been purchased, though it might also be any other asset that has been purchased. A purchase comprises a whole set of transactions, such as the purchase order, material receipt, rejection out, purchase invoice, and purchase return.

• Purchase Order: A formal document known as a purchase order is made by a buyer who promises to pay the seller for the sale of a certain good or service that will be provided later. A purchase order can be placed for any goods or services from a seller for the necessary amount. The stock and account ledgers are not immediately impacted when a purchase order is initiated.
• Goods Receipt: The following process, known as reception, handles information about the products that are meant for the workers' on-site work, such as product quantities and lot numbers. If the product is supplied by the supplier, it must be received and added to the inventory. The quantities will be added to the inventory. As a result, Material Receipt only affects the stock accounts.

Upon receiving the product, the Odoo18 platform's "Stock Valuation Account" and "Stock Input Account" are affected.

• Rejection Out (Purchase Return): Even before the payment is made, the company regularly returns the items it has bought. It could be for any reason. If the product is damaged, it will be refused. The rejection will also be influenced by a number of factors. As a result, the stock will reverse. It will be reversed to the same stock accounts. As a result, the stock value will also decline.

• Purchase Bill Creation: If you make a bill for the purchase order, it will affect both the payable and expense accounts. Given that the payable account is a "Liability," it will receive credit. However, the expenditure account is debited since it is an "expense" account.

• Registering Payment: When you generate a payment, it affects both the payable account and the outstanding receipt account. If the payment has been made, the liability will be lowered. Consequently, the payable account will be debited. Unreconciled inputs are kept in a temporary account called outstanding payments in the bank and cash journals of Odoo 18. The type of outstanding payments is "Liability". Or it can be configured as an “Asset”. Both configurations are correct. Since Asset = -Liability. As a result, as the liability increases for outstanding accounts, the outstanding payment account is credited.

• Reconciling: Following matching or reconciliation with the bank statement, the amount will be removed from the bank account. Consequently, the bank receives credit, and the account for outstanding accounts is debited.

When a buyer returns an item to a seller for a refund, for any other reason based on the seller's obligation, this is referred to as a "purchase return". Purchases will also occasionally be returned due to damage to the product or any quality issues.

For example, if the company is unhappy with the product, if they bought it by mistake, if the vendor shipped them the wrong item, or even if the company receives more items than ordered. Since a return happens after the invoice payment, the stock is deducted, and the whole amount paid must be reimbursed. As a result, the purchase return will affect both the accounts and the stock accounts. To compensate for this, appropriate reverse journal entries should be made.

The journal entries for each purchase transaction are detailed in the table below.

2. Sales Process

Any sale, agreement, or other transfer involving the delivery of products, services, or other assets—both material and immaterial—is considered a sales transaction. Here, we might discuss how the Odoo18 platform might assist you with managing sales transactions, their associated processes, and the impact on the journal entries. A sales transaction includes tasks like sales orders, delivery notes, rejection IN (sales return), sales invoices, and invoice payment. We could begin by looking at the following sales transaction operations.

• Sales Order:In essence, a sales order is a document that the company creates to collect information about the products or services that the buyer has ordered. Information on the product or service, the pricing, the quantity, the terms and conditions, and many other details are all included in the sales order. Because it has no impact on inventories or accounts, the selling order is only meant to be used for the creation of orders.
• Delivery Note: A delivery note is a record related to the shipping or delivery of goods. The details of the products, their quantity, and their price will be covered. The Delivery Note is also known as the Dispatch Note or the Goods Reception Note. When a confirmed order is filled from the inventory and shipped to the customer, the stock value decreases. The "Stock Output Account" and the "Stock Valuation Account," two accounts, are affected when items are delivered to clients.

• Rejection IN (Sales Return): Customers frequently return items even after they have been billed and paid. This type of sales return results in adjustments to accounts and stock. Additionally, journal entries will be made for them in reverse. A Rejection IN is a highly useful tool for tracking the products that customers have returned or rejected. Only the stock will be impacted if the goods are returned before billing; the accounts will remain intact. Restoring the product to the inventory also increases the stock value.

• Sales Invoice Creation: A sales invoice is a sort of accounting document that the company of goods or services sends to a customer. Everything will be covered, including the product and service offered, the cost to the customer, the payment method, and more. It is a legally binding contract between the business and its clients and is required for larger transactions. This will have an effect on both the Income Account and the Receivables Account.
• When we look at the characteristics of these accounts, we find that the Income Account has the nature "Income," and the Accounts Receivable is "Asset." In this case, the asset is increasing since the amount to receive from customers are increasing. The revenue is also increasing when a sale happens. Consequently, the Accounts Receivable is credited and the Income Account is debited.

• Registering Payment:Outstanding Receipts is a temporary account used for payment registration. A journal entry is created with Accounts Receivable and Outstanding Receipts as a result of payment registration.

• Reconciliation:Following reconciliation and comparison with the bank statement, the amount will be deposited into the bank account. Consequently, the account for outstanding receipts is credited, and the bank is debited.

The table below provides a breakdown of the journal entries for each sales transaction.

Ultimately, the sum of the debits and credits will match when employing the double-entry bookkeeping system.