Generating Financial Statement

To generate Trial Balance, Profit and Loss Statement and Balance Sheet, we need to follow the steps below:

Some users of Wavelet may have been using Wavelet.biz EMP for a period of time, before they start using the Accounting Module fully. This is normal because for all ERP implementations, we need to ensure the software is operationally fit for use, before we look at using the financial statements fully.

Scenario:

20th March 2005 - Company start using Wavelet to manage its inventory system, Point of Sales, Cash flow etc., in parallel with old system.

31st December 2005 - Company use old accounting software to do closing, and submit figures for audit etc.

1st January 2006 - Company continue to use Wavelet through out the year, in parallel with old software.

31st December 2006 - Company first closing year with Wavelet

5th July 2006 - Company decided to switch their financial year to Wavelet fully, from 1st January 2006.

To generate the profit and loss and balance sheet, which is the ultimate reports to be seen, users need to follow steps below:

1) IDENTIFY THE OPENING DATE OR THE STARTING DATE

The very first step is for us to ensure that ACCOUNTING -> CONFIGURATIONS -> ADD FINANCIAL YEAR shows only financial year from 1st Jan 2006. If the first financial year shown there is 1st Jan 2005, we need to delete the 1st Jan 2005 - 31st Dec 2005 financial year and corresponding periods within that year.

As of time of writing, this deletion of financial year could only be done at SQL level, for acc_financial_year.sql and acc_financial_period.sql.

2) REMOVE / CLEAN UP UNWANTED JOURNAL TRANSACTIONS before the OPENING DATE

There are 2 ways of deleting the journal transactions before the opening date:

a) Click ACCOUNTING -> CONFIGURATIONS -> SET OPENING BALANCE

The system will prompt the user to delete these journal transactions before the opening date.

b) SQL Statement

Refer to the following link for SQL statement to do so.

When the number of transactions are too big, it is not advisable to use method (a) above because it is too resource intensive to loan all transactions on a single JSP page.

3) CLEANING UP CUSTOMER MODULE, SUPPLIER MODULE AND INVENTORY MODULE

a) ACCOUNT RECEIVABLE

Click CUSTOMER -> MONITOR OUTSTANDING DOCUMENTS. This is to ensure that your customer outstanding invoices and so on are accurate. Any adjustment on customer outstanding invoices will have impact on the accounting module later, so it is most important for users to ensure accuracy at the CUSTOMER module.

b) ACCOUNT PAYABLE

Click SUPPLIER -> MONITOR OUTSTANDING DOCUMENTS. This is to ensure that your supplier outstanding invoices and so on are accurate. Any adjustment on supplier outstanding invoices will have impact on the accounting module later, so it is most important for users to ensure accuracy at the SUPPLIER module.

c) INVENTORY BALANCE

Click INVENTORY -> STOCK REPORTS -> STOCK BALANCE BY LOCATIONS

After generating this report, please make sure that the inventory balance are correct. If not, make necessary adjustments on the items.

4) GENERATE LATEST ACCOUNT RECEIVABLE, ACCOUNT PAYABLE AND INVENTORY

We define the following variables for calculations purpose:

CUST-RECEIVABLE-TODAY = Total Account Receivable generated based on CUSTOMER -> HISTORICAL AR BALANCE based on today's date (assume 5th July 2007).

ACC-AR-SYS-TODAY = Total Account Receivable generated based on General Ledger (ACCOUNTING -> TRIAL BALANCE)

ACC-AR-SYS-OPENING = Total Account Receivable generated based on General Ledger (ACCOUNTING -> TRIAL BALANCE)

ACC-AR-OLD-OPENING = Opening AR figure based on old accounting software on 1st Jan 2006.

ACC-AR-SYS-DISCREPANCY = ACC-AR-SYS-TODAY - CUST-RECEIVABLE-TODAY (discrepancy between customer module and accounting general ledger in Wavelet)

ACC-AR-TFR-DISCREPANCY = ACC-AR-SYS-OPENING + ACC-AR-SYS-DISCREPANCY - ACC-AR-OLD-OPENING

SUPP-PAYABLE-TODAY = Total Account Payable generated based on SUPPLIER-> HISTORICAL AP BALANCE based on today's date (assume 5th July 2007).

ACC-AP-SYS-TODAY = Total Account Payable generated based on General Ledger (ACCOUNTING -> TRIAL BALANCE)

ACC-AP-SYS-OPENING = Total Account Payable generated based on General Ledger (ACCOUNTING -> TRIAL BALANCE)

ACC-AP-OLD-OPENING = Opening AP figure based on old accounting software on 1st Jan 2006.

ACC-AP-SYS-DISCREPANCY = ACC-AP-SYS-TODAY - SUPP-PAYABLE-TODAY (discrepancy between supplier module and accounting general ledger in Wavelet)

ACC-AP-TFR-DISCREPANCY = ACC-AP-SYS-OPENING + ACC-AP-SYS-DISCREPANCY - ACC-AP-OLD-OPENING

INV-STOCK-BALANCE-TODAY = Total stock balance based on stock reports in inventory module

ACC-INVENTORY-SYS-TODAY = Stock level/balance based on inventory General Ledger as of today using ACCOUNTING -> TRIAL BALANCE)

ACC-INVENTORY-SYS-OPENING = Inventory level/balance based on inventory General Ledger as of 31st December 2005

ACC-INVENTORY-OLD-OPENING = Inventory level/balance based on inventory General Ledger in the old software as of 31st December 2005

ACC-INVENTORY-SYS-DISCREPANCY = ACC-INVENTORY-SYS-TODAY - INV-STOCK-BALANCE-TODAY

ACC-INVENTORY-TFR-DISCREPANCY = ACC-INVENTORY-SYS-OPENING + ACC-INVENTORY-SYS-DISCREPANCY- ACC-INVENTORY-OLD-OPENING

5) SPECIFY THE OPENING BALANCE

Since the opening balance figure on 1st Jan 2006 has to be the same as the closing figure of 31st December 2005, which was audited and based on the old software, we need to transfer figures exactly matches the audited figures in Wavelet.

6) MAKE LUMP SUM ADJUSTMENT IN JOURNAL ENTRIES TO TIE UP THE FIGURES BY CREATE A JOURNAL TRANSACTION

Depends on your book values, and your inventory module, we need to make adjustment to tie the figures back.

7) CHECKING FOR ROUNDING UP ERROR

Click Accounting -> Error Checking -> Check Balance
Edit the Journal Transaction to balance up the figures

8) MONTH END PROCESSING

Once you click on the month end processing, it will transfer all temporary GL (Expenses, revenue etc) into the P&L.

9) For previous year end, the P&L should be transferred to "Reserved GL" to park under equity.

10) Now you can proceed to generate the Balance Sheet and P&L accurately.