:code-column:

==============================================
Accounting Memento For Entrepreneurs (US GAAP)
==============================================

.. h:div:: intro-list

   .. rst-class:: intro-p-l

   The **Profit and Loss** (P&L) report shows the performance of the company
   over a specific period (usually the current year).

   * .. rst-class:: intro-gross-profit

     The **Gross Profit** equals the revenues from sales minus the cost of
     goods sold.

   * .. rst-class:: intro-opex

     **Operating Expenses** (OPEX) include administration, sales and R&D
     salaries as well as rent and utilities, miscellaneous costs, insurances,
     … anything beyond the costs of products sold.

   .. rst-class:: intro-balance

   The **Balance Sheet** is a snapshot of the company's finances at a specific
   date (as opposed to the Profit and Loss which is an analysis over a period)

   * .. rst-class:: intro-assets

     **Assets** represent the company's wealth, things it owns. Fixed assets
     includes building and offices, current assets include bank accounts and
     cash. A client owing money is an asset. An employee is not an asset.

   * .. rst-class:: intro-liabilities

     **Liabilities** are obligations from past events that the company will
     have to pay in the future (utility bills, debts, unpaid suppliers).

   * .. rst-class:: intro-equity

     **Equity** is the amount of the funds contributed by the owners (founders
     or shareholders) plus previously retained earnings (or losses).

     .. rst-class:: intro-retained

     Each year, net profits (or losses) are reported to retained earnings.

.. h:div:: doc-aside accounts-table

   .. placeholder

What is owned (an asset) has been financed through debts to reimburse
(liabilities) or equity (profits, capital).

A difference is made between buying an assets (e.g. a building) and expenses
(e.g. fuel). Assets have an intrinsic value over time, versus expenses having
value in them being consumed for the company to "work".


.. rst-class:: doc-aside

.. highlights:: Assets = Liabilities + Equity

Chart of Accounts
=================

The **chart of accounts** lists all the accounts, whether they are balance
sheet accounts or P&L accounts. Every financial transaction (e.g. a payment, an
invoice) impacts accounts by moving value from one account (credit) to an other
account (debit).

.. h:div:: doc-aside

   .. highlights:: Balance = Debit - Credit

   .. h:div:: chart-of-accounts

      .. placeholder


Journal Entries
===============

Every financial document of the company (e.g. an invoice, a bank statement, a
pay slip, a capital increase contract) is recorded as a journal entry,
impacting several accounts.

For a journal entry to be *balanced*, the sum of all its debits must be equal
to the sum of all its credits.

.. h:div:: doc-aside journal-entries

   examples of accounting entries for various transactions. Example:

   Example 1: Customer Invoice:

   Explanation:

     - You generate a revenue of $1,000
     - You have a tax to pay of $90
     - The customer owes $1,090

   Configuration:

     - Income: defined on the product, or the product category
     - Account Receivable: defined on the customer
     - Tax: defined on the tax set on the invoice line

     The fiscal position used on the invoice may have a rule that
     replaces the Income Account or the tax defined on the product by another
     one.

   Example 2: Customer Payment:

   Explanation:

     - Your customer owes $1,090 less
     - Your receive $1,090 on your bank account

   Configuration:

     - Bank Account: defined on the related bank journal
     - Account Receivable: defined on the customer

.. _accounting/reconciliation:

Reconciliation
==============

Reconciliation is the process of linking journal items of a specific account,
matching credits and debits.

Its primary purpose is to link payments to their related invoices in order to
mark invoices that are paid and clear the customer statement. This is done by
doing a reconciliation on the *Accounts Receivable* account.

An invoice is marked as paid when its Accounts Receivable journal items are
reconciled with the related payment journal items.

Reconciliation is performed automatically by the system when:

* the payment is registered directly on the invoice
* the links between the payments and the invoices are detected at the bank
  matching process


.. h:div:: doc-aside reconciliation-example

   .. rubric:: Customer Statement Example

   .. rst-class:: table-condensed d-c-table

   +-------------------------+-------------------------+-----------------------+
   |Accounts Receivable      |Debit                    |Credit                 |
   +=========================+=========================+=======================+
   |Invoice 1                |100                      |                       |
   +-------------------------+-------------------------+-----------------------+
   |Payment 1.1              |                         |70                     |
   +-------------------------+-------------------------+-----------------------+
   |Invoice 2                |65                       |                       |
   +-------------------------+-------------------------+-----------------------+
   |Payment 1.2              |                         |30                     |
   +-------------------------+-------------------------+-----------------------+
   |Payment 2                |                         |65                     |
   +-------------------------+-------------------------+-----------------------+
   |Invoice 3                |50                       |                       |
   +-------------------------+-------------------------+-----------------------+
   |                         |                         |                       |
   +-------------------------+-------------------------+-----------------------+
   |Total To Pay             |50                       |                       |
   +-------------------------+-------------------------+-----------------------+


Bank Reconciliation
===================

Bank reconciliation is the matching of bank statement lines (provided by your
bank) with transactions recorded internally (payments to suppliers or from
customers). For each line in a bank statement, it can be:

matched with a previously recorded payment:
  a payment is registered when a check is received from a customer, then
  matched when checking the bank statement
recorded as a new payment:
  the payment's journal entry is created and :ref:`reconciled
  <accounting/reconciliation>` with the related invoice when processing the
  bank statement
recorded as another transaction:
  bank transfer, direct charge, etc.

Odoo should automatically reconcile most transactions, only a few of them
should need manual review. When the bank reconciliation process is finished,
the balance on the bank account in Odoo should match the bank statement's
balance.

.. rst-class:: checks-handling

Checks Handling
===============

There are two approaches to manage checks and internal wire transfer:

* Two journal entries and a reconciliation
* One journal entry and a bank reconciliation

.. h:div:: doc-aside

   The first journal entry is created by registering the payment on the
   invoice. The second one is created when registering the bank statement.

   .. rst-class:: table-condensed d-c-table

   +-------------------------+--------------+------------+---------------+
   |Account                  |Debit         |Credit      |Reconciliation |
   +=========================+==============+============+===============+
   |Account Receivable       |              |100         |Invoice ABC    |
   +-------------------------+--------------+------------+---------------+
   |Undeposited funds        |100           |            |Check 0123     |
   +-------------------------+--------------+------------+---------------+

   .. rst-class:: table-condensed d-c-table

   +-------------------------+--------------+------------+---------------+
   |Account                  |Debit         |Credit      |Reconciliation |
   +=========================+==============+============+===============+
   |Undeposited funds        |              |100         |Check 0123     |
   +-------------------------+--------------+------------+---------------+
   |Bank                     |100           |            |               |
   +-------------------------+--------------+------------+---------------+

.. h:div:: doc-aside

   A journal entry is created by registering the payment on the invoice. When
   reconciling the bank statement, the statement line is linked to the
   existing journal entry.

   .. rst-class:: table-condensed d-c-table

   +-------------------------+--------------+------------+---------------+---------------+
   |Account                  |Debit         |Credit      |Reconciliation |Bank Statement |
   +=========================+==============+============+===============+===============+
   |Account Receivable       |              |100         |Invoice ABC    |               |
   +-------------------------+--------------+------------+---------------+---------------+
   |Bank                     |100           |            |               |Statement XYZ  |
   +-------------------------+--------------+------------+---------------+---------------+
