COMPULINK 3300 Overland Avenue, Suite 201 § Los Angeles, California 90034 § 310 × 204 × 5121
BOOKKEEPING NOTES
The Jewelry Shopkeeper Version 8 and later releases primarily default to accrual basis. If you enter an invoice payable for any expense (merchandise or operating expense), the invoice total is expensed in the month the invoice was received, not when the invoice is actually paid. Any checks that were not applied against specific invoices (often called hand-checks) are expensed in the month they were written and added to the total of the invoices payable expenses for the month.
This differs from previous versions of the Jewelry Shopkeeper where merchandise purchases were calculated only from invoices posted (not including any checks, even hand-checks, and not including journal entries.) This also differs in that previous versions calculated operating expenses solely from the total of the checks that were written that month and gj entries (not from invoices received that month.)
INCOME STATEMENT
Gross Repairs Revenue: Total sales figures for the period just for sales where the major class code is classified as for repairs, but including any repairs discounts and sales tax, if any. [6,2,3,5,3]
Sales Tax Expense: Sales tax as calculated on each taxable sales item for the current period. Run a select items (itemized) sales report for the current period, sales tax version for taxable and non-taxable items, or run the regular version of this report, but in compressed printed mode. [6,2,3,5,E]
Sales Discounts: The difference between the tagged price for each item sold in the current sales period and the price actually entered on the sales screen. the tagged price is taken as the usual price (not MSRP) as seen on the inventory screen.
Charge Card Expense: The discount/charge percentage for each credit card multiplied by each charge card payment for the current sales period. There is currently no month-long detail report for this figure, but each day’s Z-Report has a charge card detail section which should total to this figure. If you prefer to manually enter the charge card expense as a miscellaneous transaction to your bank account when you get your statement, you should zero out the credit card percentages in the Store Information Defaults. If you both let the program calculate the percentages and deduct them from the sales and you also enter the expense as a bank transaction, that would double count the expense.
Net Sales: Gross Inventory Sales Revenue plus Gross Repairs Revenue minus Sales Tax Expense minus Charge Card Expense minus Sales Discounts.
COST OF GOODS SOLD: The cost of goods sold section of the Income Statement calculates the value of the merchandise that has been consumed (or that has disappeared) for the month in question. The Cost of Goods is generally not the total of the cost value of all the items found on the sales report for the month, although under normal circumstances, it should be close. The Goods Available for Sale is the amount of merchandise you would theoretically have at the end of the month if there had been no sales, plus the freight charges for the month and minus any vendor discounts you earned this month.
Several factors can skew the cost of goods sold: An incorrect opening inventory level (which can be fixed by choosing Edit Chart of Accounts from the Chart of Accounts Maintenance Menu); Making manual adjustments of inventory or using the Enter Existing Inventory option; mis-dating invoices to not fall within the current month, etc..
The current month is calculated as starting the day after the previous sales period was reset. For example, if you closed the previous month on the 2nd of this month, the current month is calculated as starting on the 3rd. To check which day the previous sales period was reset, choose Month-End Closing from the System Maintenance Menu.
Non-Itemized Inventory: If you have some inventory assets that you do not keep in the inventory file you can create several inventory asset accounts which you maintain manually by either directly modifying the balance from the Edit Chart of Accounts screen or issuing general journal entries. The default account number for non-itemized inventory accounts is 135, but you can create more than one such account. If you create one or more non-itemized inventory account, you need to make them in the account range you specify on the Chart of Accounts Defaults screen.
Cost of Goods Purchased: The total value of goods received for the current month. This figure is calculated by adding up all the invoices-payable received in the current month where the expense code is between 500 and 599 (or any expense code starting with 5). Memo invoices and invoices for non-merchandise are not included. Checks that were written during the current month for merchandise, but which were not specifically applied against invoices payable in the Jewelry Shopkeeper are also included. ("non-invoice checks" or "hand-checks") Checks that were specifically applied against invoices payable are NOT included — because that would double-count the expense. Any general journal entries with an expense code starting with 5 are also included in the cost of goods purchased in the month they were posted.
Note: (often applies to C.O.D. checks) If you write a check for an invoice before you enter the invoice into the Jewelry Shopkeeper, this is seen as a hand-check so it is included in the cost of goods purchased. If you subsequently post the invoice, that invoice amount is also added to the cost of goods purchased which would result in double-counting. If you simply must post a check before the invoice is entered, then after the invoice is posted, you should delete the check and re-issue the check (using the same check number) specifically against the invoice. (Deleting a check allows you to re-use the number.) However even this solution will only yield satisfactory results if you post the invoice and re-issue the check in the same month that you initially recorded the hand-check.
To see a detailed listing of the transactions included in the Cost of Goods Purchased, run a check book report selecting All Bank Accounts plus General Journal Entries. Choose the current month’s date range and sort the report by Expense Code. When asked if you want to match the income statement, choose Yes. Note that this section does not take into account whether or not the invoices were paid this month, just whether they were received this month. Also note that the invoice date is ignored, just the date received is factored.
Freight of Goods Purchased: The total freight included on invoices for goods received for the current month. The Checkbook report detailed in the above paragraph will show this detail and total if you run the compressed version of the report. Note that the freight of goods is factored into the overall cost of goods sold in the month that the goods were received not when the merchandise is sold.
Returned to Vendor this Period: The total value of merchandise you returned to the vendor this month excluding memos. To run a detailed listing, run the Report Returned Merchandise option from the Payables Listings & Reports screen. Note that this section does not take into account whether or not you have been formally issued a returned merchandise credit slip, nor whether you have subtracted the return credit on a payment check. The amount is calculated as soon as you enter a return-to-vendor memo.
Vendor Discounts this Period: The total of discounts that you took on checks that you wrote this month against invoices payable. Note that this figure reduces the cost of goods sold in the month in which the discounts were taken, which may be later than the month in which the goods were received. There is currently no report which shows a detail of these discounts.
Goods Available For Sale: This is the amount of merchandise you would theoretically have at the end of the month if there had been no sales, plus the freight charges for the month minus returns and discounts. In words, the Goods Available for Sale is: Opening Inventory (previous month’s closing inventory) plus Cost of Goods Purchased (purchases this month) plus Freight of Incoming goods (freight on purchases this month) minus Returns to Vendor This Period minus Vendor Discounts This Period (discounts actually taken this month — discounts marked as taken on a payment to a vendor) equals Goods Available for Sale.
Closing Merchandise: The total cost value of merchandise as listed in your inventory file minus the value of the merchandise which was sent you on memo. You can run an inventory report [6,5 from the Main Menu] to see a detailed listing of your inventory. To exclude the memo merchandise from the report choose the For Invoice option, type MEM, <Enter>, <Exclude>.
Cost of Goods Sold: This is the Goods Available For Sale minus the Closing Merchandise.
GROSS MARGIN FROM SALES: This is the Net Sales minus the Cost of Goods Sold
OPERATING EXPENSES: This section summarizes the operating expenses for the month which includes invoices-payable, general journal entries and hand-checks written this month with expense codes starting with the number 6, 7, 8 or 9
The current month is calculated as starting the day AFTER the previous sales period was reset. To verify which day the previous sales period was reset, choose Month-End Closing from the System Maintenance Menu.
The Jewelry Shopkeeper does not currently have subtotal accounts so there will be one line showing for each account with activity. E.g. if you have six payroll expense accounts with activity, there is no option for creating a payroll subtotal account so that only a one-line summary for those accounts will appear.
The expense appears in the operating expense section of the income statement in the month the invoice was received which could be earlier than the month the check was cut. This is referred to as accrual-basis which is often legally required for businesses with inventory.
If you record checks for operating expenses where you did not previously enter a invoice into the accounts payable system, they are referred to as "hand-checks" or "non-invoice checks". Since there was no invoice to be counted as an expense, these hand-checks are expensed in the month they were written. Any general journal entries with an expense code starting with 6, 7, 8 or 9 are also added in to this section in the month they were posted.
Note: If you write a check for an invoice before you enter the invoice into the Jewelry Shopkeeper, this is seen as a hand-check so it is included in the operating expenses. If you subsequently post the invoice, that invoice amount is also added to the cost of goods purchased or operating expenses which would result in a double-counted expense. If you post an operating expense check without posting an invoice, then don’t subsequently post the invoice.
To see a detailed listing of the expenses summarized in the Operating Expense section of the income statement, run a check book report selecting All Bank Accounts plus General Journal Entries. Choose the current month’s date range and sort the report by Expense Code. When asked if you want to match the income statement, choose Yes.
INCOME FROM OPERATIONS: This is the Gross Margin From Sales minus the Total Operating Expenses.
OTHER REVENUES & EXPENSES: This section can include finance and late charges assessed on in-house charge accounts. Other entries here can result from posting deposits or general journal entries with a chart of accounts code of 400—499 (starting with 4). When posting a check, deposit or a general journal entry where part of the entry is posted to a 400-series account, a negative number implies a revenue or income; a positive number implies an expense. For example, if your state give you a credit on your sales tax payable of $50, you could enter a general journal entry with positive $50 against account 201 (or the appropriate sales tax liability account) to reduce the liability and negative $50 against account 411 (or the appropriate revenue) to increase revenue.
BALANCE SHEET:
The current month is calculated as starting the day AFTER the previous sales period was reset. To check which day the previous sales period was reset, choose Month-End Closing from the System Maintenance Menu.
The values of some asset and liability accounts are transferred to the balance sheet from the detail files that the Jewelry Shopkeeper maintains. Even if you manually change the current month value of these special asset and liability accounts in the chart of accounts, or enter general journal entries posted to those accounts, the Jewelry Shopkeeper will override those figures with the actual figures from the detail files.
Bank Accounts: The values in the bank account asset accounts are transferred from the checking account detail files. You can choose Checkbook Balances from the Checkbook menu to see what value will be entered for the bank account asset accounts. If you need to change the bank balance values in the chart of accounts and/or on the balance sheet, you have to enter a check, a deposit or a miscellaneous bank transaction from the checkbook menu. The default account numbers for bank accounts are 101—104.
Accounts Receivable: The in-house charge account balances are maintained in the accounts receivable section of the Jewelry Shopkeeper and are automatically transferred to the accounts receivable accounts on the balance sheet. You can, however, create additional accounts receivable accounts in the balance sheet and maintain them with your own transactions, provided these accounts receivable are not related to the in-house charge accounts maintained by the Jewelry Shopkeeper. The default account numbers for accounts receivable are 121—125.
Inventory: The total inventory cost value as found in the inventory report is transferred to the balance sheet minus the memo merchandise. If you need to make adjustments to the inventory figure on the balance sheet, you should adjust the inventory file itself. The inventory figure is split between inventory available for sale and inventory being held on layaway. The default account number for inventory and layaway inventory are 131 and 132.
Transferred Liability Accounts: The value of some liability accounts is transferred to the balance sheet from the detail files.
Accounts Payable: The value of the accounts payable is calculated by summing the total amount due on invoices payable. The payables are summed whether or not they are due immediately and for both inventory and non-inventory invoices, but memo invoices are not included. To see a list of payables included in this figure run a Cash Requirements report excluding Memos, from the Accounts Payable, Listings & Reports screen.
Commissions Payable: If you have entered a list of sales clerks and their sales commission percentage and have entered the clerks initials in the sales, then the Jewelry Shopkeeper will calculate the commissions due to the clerks. This figure is the total of all the commissions due on sales where the sales are not marked as having been paid. To see a detailed listing of the commissions due in this figure, run a commissions report from the Reports Menu. If you want to mark sales as having had their commission paid, choose the Commissions Report option, choose the Pay Commissions option. Choose Yes next to each sale you want to mark as paid. At the end of each clerk choose YES to pay this clerk and enter the check number used to pay the commissions. If you have already paid the commissions or do not want the program to create the commissions check, still choose YES to pay this clerk, but choose NO to update the bank balance. If you have not paid the commissions and want the program to create the commissions check and update the bank balance, choose YES to update the bank balance.
Gift Certificate Liabilities: This figure is the total of the unused credit slips and gift certificates listed in the program. To see a detailed listing of the credit slips run the List Gift/Credit Slips report from the Sales Menu and choose to see only Open certificates. If certificates are showing up even if they have been used, you can manually mark them as used by choosing Edit Gift/Credit Certificates from the Sales Menu.
Layaway Liabilities: This figure is the total of payments made on layaways and special orders that have not yet been picked up. To see a detailed listing of the layaways included in this total run the Layaway & Special Order Report from the Sales Menu or the Layaway Statements & Reports option from the Sales Reports Menu. To remove a layaway from the list that you know was already picked up, you will have to mark that layaway as having been paid in full by choosing Edit Sales, Enter Layaway Payments from the Sales Menu.
Other Asset & Liability Accounts: Other asset & liability accounts such as fixtures, notes payable and payroll taxes payable are maintained solely by manual adjustments from the Edit Chart of Accounts screen or by checkbook and general journal transactions. That is to say there are no special ledgers or detail files for any of these individual accounts such as there are for inventory, bank balance, accounts receivable, etc.
When you run a balance sheet each of these asset and liability accounts is calculated by taking the previous month’s ending balance and adding (adding for assets, subtracting for liabilities) the total of the checkbook and general journal transactions. You can view the previous month’s ending balance from the Edit Chart of Accounts screen or from the Browse Chart of Accounts screen. When you close the period at the end of each month, the historical balances of each account are aged one month and the current balances are brought forward to the current month.
To see a detailed listing of the transactions which could affect these other asset and liability accounts, run a check book report selecting All Bank Accounts plus General Journal Entries. Choose the current month’s date range and sort the report by Expense Code. If you have made any adjustments directly to the stored figures in the chart of accounts, you cannot see a list of those adjustments.
Long Term Assets & Liability Accounts:
Long term assets & liability accounts function exactly the same way as do the Other asset & liability accounts above. The only difference is that on the balance sheet they appear with a separate subtotal from the current assets and liabilities. You are able to choose which assets and liabilities are considered Current and which are considered Long Term. In the Chart of Accounts Defaults screen there is a Long Term Asset field for you to fill in and a Long Term Liability field for you to fill in. These are the break-points, so that assets and liability accounts after these numbers are subtotaled separately on the balance sheet.
Equity Accounts.
On the Jewelry Shopkeeper balance sheet, the Total Equity is the calculated balance of Assets minus Liabilities. The Retained Equity is the difference between the Total Equity as calculated above and any individual equity accounts that you might have posted.
Example: If you have Total Assets of $100 and Total Liabilities of $60, the Total Equity is calculated to be $40. Now, if you have created equity accounts (beginning with 3) such as Retained Earnings As of 12/31/9x for a figure of $17 and you have a Common Stock Dividends of $5, then you have itemized equity accounts totalling $22. The Retained Equity is then calculated as Total Equity minus Itemized Equity = $40 minus $22 = $18
If in the above example, you did not have any values in any Itemized Equity accounts, then the Retained Equity would equal the Total Equity.
Matching the Balance Sheet & Income Statement.
Being designed for smaller business, the Jewelry Shopkeeper is very flexible (perhaps too flexible than some would prefer) and can in certain instances permit the posting of one-sided transactions (e.g., adjustments to inventory without an off-setting accounts sales without deposits, etc.) Essentially, any one-sided entry that you post without making an off-setting entry will usually result in the difference being posted to equity. For our customers who appreciate more formality between the income statement and the balance sheet we suggest the following.
1) Force the income statement and the balance sheet to agree as of a given date. (adjusting entry to retained earnings, assets, liabilities, opening inventory, something else)
2) Run the income statement and balance sheet daily to check for correlation.
3) When you come across a day that does not match, review the day’s activity for the transaction that probably caused the mismatch and make a correction. If you are unable to discover the cause of the mismatch yourself, you may wish to discuss it with us.
4) Within some months, you should have encountered most of the types of transactions which cause mismatches and subsequently learn how to handle them in a balanced fashion.