Internal Accounting
Summary
This article provides an overview of how internal accounting is designed to work on Platinum. By internal accounting, we mean accounting for work done by one department for another department of the business, for example, charges made by the workshop to the sales department for preparation of a unitfor sale.
More Information
The reason that internal accounting is required is to provide a departmental breakdown to the information for management accounting, and to provide an audit trail for items not sold to retail customers. For example, items may be taken out of stock that are going to be used by another department in the business, and not sold to a retail customer. At the very least, you need to account for the stock movement, and you will need to decide where any "profit" in the deal is going to sit.
This is particularly true for internal charging from the workshop and parts department to the sales department in unit dealerships. The sales department will sell the unit to the customer and the sale may well include accessories. Accounting for the charges to prepare the unitis a very interesting area. The currently accepted business practice is that all internal charging should be at retail price, so the labour, parts and accessories required for the sale will be charged to the sales department at retail price, hence the "profit" in these items will stay in the originating department.
The sales department deals directly with the customer and chooses what they charge the customer for the items - this constitutes the actual turnover for the business. The charges for labour, parts and accessories to the sales department come from the workshop job for the preparation of the unitand these are all posted to profit and loss sales codes that are flagged as internal, so that they can be identified and removed for statutory accounts. The debtor that is created is cleared with a receipt that is posted to a sales preparation cost of sales account, which effectively removes the internal sale made from the profit and loss for the period.
When the internal invoice is posted, the system makes cost of sales postings from the stock/work in progress centres on the balance sheet to account for the actual cost of the items used. These cost of sales codes are flagged as internal, but they represent the actual cost to the business of the items used, and should be left in for statutory accounts purposes.
See also
- Internal Accounting, Example Promotional Stock
- Recommended accounting routines
- Stock integration to the nominal ledger
- Unit integration to nominal ledger
