Odoo 19 Accounting Book :Core Concepts of Accounting

Account Groups

Account groups are made up of related ledger accounts. The purpose of these account categories is to show how ledger accounts are organized. The development of relevant reports will be greatly aided by this ledger account structure. The Regular, Payable, Receivable, and Liquidity account groups are the most frequently utilized account types in Odoo19. These designated groupings are used to describe each of these account ledgers.

Let's examine each one independently.

1. Accounts Receivable ( Debtors )

The amount of money needed to cover goods or services that have been received but for which the customer has not yet paid is known as an Accounts Receivable. The debtors are another name for the accounts receivable. These accounts are particularly helpful for keeping an eye on all consumer receivables. The receivables will be categorized as assets when their nature is taken into account. The receivable accounts are debited in accordance with the growing quantity of receivables when accounting for a sale.

2. Bank and Cash

Since bank and cash accounts are by definition assets, they will all be included in the Bank and Cash class. As an analogy, let's imagine a corporation decides to pay with cash rather than credit and takes the amount taken out of the bank account into consideration. The asset's drop will result in a credit to the bank account.

3. Current Assets

Cash and other assets that will be converted into cash within a year are considered current assets. Therefore, registering short-term assets will be simpler with this type of account. This category may include assets like goods, short-term investments, prepayments, etc. This includes bank deposits, loans, and advances made to staff members.

General accounts include deferred expense accounts, stock input and output accounts, stock valuation accounts, and many more. Since they are assets by definition, Odoo's "Current Assets" ledgers and entries of this kind have an impact on the balance sheet.

4. Non-Current Assets

Non-current assets are those that the company purchases or invests in. But during an accounting year, the amount of that investment remains constant. As a result, this type of investment will produce profits over an extended period of time and is difficult to convert into cash. Real estate, automobiles, insurance, and other items are examples of this kind of asset. Over the course of the accounting year, the entire value cannot be determined. The balance sheet lists each of them.

5. Prepayments

Prepaid costs are one kind of prepayment. In this instance, the products and services have already been paid for but have not yet been utilized or received. For instance, Odoo classified prepaid or postponed expenses as falling under this category.

For instance, let's say there was insurance that demanded a $50,000 yearly payment. The company's profit and loss report for the current year will not be able to include the entire expense. The money must be distributed by the group over the course of a full year. Consequently, a monthly expense of $2500 will be incurred and documented. The asset value will decrease every year, and "Asset" will be the payment method. Consequently, the payment account will be credited, and the cost account will be debited when the expense gradually decreases.

6. Fixed Assets

All fixed asset transactions, including those involving buildings, furniture, real estate, vehicles, machinery, and many more, are easily recorded using the Fixed Assets account type. It is feasible to enumerate every product that the business intends to use for a considerable amount of time. Fixed assets are also included in the Assets category. The fixed asset will therefore increase, the fixed asset account will be debited, and the fixed assets will be noted on the balance sheet each time we finish a transaction.

7. Payables

Another name for the Payables account category is Creditors. It is the total amount owed by a business to any one individual or organization. The payables accounts can be used to track any amounts owed to vendors or suppliers. The payable account is also listed as the category of responsibility on a vendor bill.

8. Credit Cards

Another kind of account is a credit card, which has the characteristic of being liable. The balance sheet contains credit card information. When it comes to credit cards, the amount of money spent on any activity, such as purchases or other payments, will result in debt that we have to repay within a set period of time, usually less than or almost two months.

9. Current Liabilities

Short-term obligations are those that must be paid off within a year, or current liabilities. The Current Liability Account Type is listed under the following areas. Bank overdrafts, quick loans, taxes and duties, unpaid salaries, payroll taxes, growing costs, income taxes, and many other things are examples of these.

10. Non-Current liabilities

Non-current liabilities, long-period loans, or financial commitments are long-term obligations that are listed on the balance sheet and have a maturity date of one year or longer. Long-term loans, deferred tax obligations, 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 quite useful when a business wishes to display its sales or income. The profit and loss figures show that the account's nature is income. The selling of its products and services is the company's main source of direct income. Moreover, additional sources of income are considered indirect sources of income. Payments for rent, interest, and other sources of income are a few examples.

12. Expenses

The types of accounts known as expenditure accounts are used to monitor every aspect of an organization's regular expense spending throughout a specific accounting period. This kind of expense account includes delivery costs, income tax costs, production-related expenses, payroll costs, advertising costs, maintenance costs, marketing costs, rent costs, etc. Due to the nature of the expense account type, spending will be included in the income statement or profit and loss report.

13. Depreciation

Generally speaking, "Depreciation account type" relates to how much an organization's assets are depreciated over a given time period. This type of account is typically used to track the deterioration of fixed assets. Fixed assets will undoubtedly lose value over time due to periodic depreciation. As a result, this kind of depreciation will either be regressive or linear. At the time of creation, an asset will have both a book value and a salvage value. The initial cost is represented by the book value. Salvage value is the sum that a company will receive when selling a fixed asset after all depreciation has been deducted. Additionally, depending on the depreciation method used, the expense will be spread out over a defined time period rather than being charged all at once to the current year. The spending account is credited, and the depreciation accounts are debited.

14. Cost Of Revenue

The direct costs of the company's goods and services are directly related to the cost of revenue. This means that it is the whole cost of producing and providing a good or service to customers. It is more comfortable to display the direct expenses of the goods and services since they are immediately tied to the revenue statement. It covers the price of producing the goods and shipping them to the clients. This type of account will affect gross profit since the cost of revenue is, by definition, an expense.

15. Equity

An equity account can serve as a financial representation of a company's intellectual property. The sum of money that the start-up received from its employers is displayed. Equity might come from payments paid by the company's shareholders or from residual revenue it generates. In other words, equity is the total amount of assets on the balance sheet following the full payment of all liabilities. This sort of account includes common stock, contributed surplus, treasury stock, common and preference stocks, other significant earnings, etc. Equity will be categorized as an asset type based on its nature. The equity and the amount invested will be equal. Therefore, any investment will increase equity. The extra equity will then be credited to the capital account.

16. Current year earnings

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