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Accounting Tutorials

Best Accounting's Journal Structure

One of Best Accounting's features is that you can enter in a journal watching how it reflects your entries.

Book Structure
                General journal
                Pur_Sale books
2.Ledger (and/or General ledger)
3.Sub_ledger---Inventory subledger
                      Supplier subledger
                      Customer subledger
                      Other subledgers

Every transaction is divided into a cash transaction and a noncash transaction. A cash transaction is a transaction that involves cash. A noncash transaction is a transaction that does not involve cash. A book treating cash transactions is a cashbook and a book treating noncash transactions is a general journal. If you have both of them, you can treat every transaction.

However, purchases and sales are main business transactions and connect directly to sale margin, inventory, supplier, customer and VAT, so separate journals(called purchase book or sales book) are provided for them. Therefore, the separate pur_sale books might conflict with the cashbook or the general journal because a pur_sale is a cash transaction or a noncash transaction. If the general journal treats all but the cashbook and the pur_sale books treat, it is free from the conflict.

But in the light of each book's purpose,
the cashbook need to include all cash transactions to show cash states and the pur_sale books need to include all pur_sales to show pur_sale states. Therefore the cashbook might conflict with the pur_sale books over where to treat a pur_sale settled directly by cash.

To avoid this conflict, Best Accounting treats every pur_sale as a noncash transaction. A pur_sale settled directly by cash is transformed into two transactions - a pur_sale on account, a settlement by cash. The former is treated in a pur_sale book and the latter is treated in the cashbook.

As a result, every cash transaction is treated in the cashbook, every pur_sale of noncash transaction is treated in pur_sale books and every other noncash transaction is treated in the general journal.

Cash definition
Because Best Accounting defines cash as [holding cash + current deposits - credit cards] to provide insight of current fund states, it regards every transaction involving holding cash, current deposit or credit card as a cash transaction to be treated in the cashbook. Every other transaction without these cash elements is regarded as a noncash transaction.
Holding cash :
cash as it is called in our usual lives.

Current deposits : deposits that is usable anytime for payment and separated to use as main means of settling receipts and disbursements.
Credit cards :
credit cards that is separated to use as main means of settling disbursements. Such a phone payment as is used promptly for payment and settled later can be registered in the "Credit Cards" category and used like a credit card.

Internal transfer among cash elements
In respect of the formula [holding cash + current deposits - credit cards=net cash], a transaction increasing net cash is treated as [1.incomming] and a transaction decreasing net cash is treated as [2.outgoing]. On the other hand, internal transfer among cash elements result in not change in net cash but change in mix of internal elements, so treated as [3.transfer]. In transfer transaction, the same amount is entered in both incoming and outgoing to show that there is such a transaction, not affecting net cash. In addition, a simple noncash transaction can be treated as a [3.tran] in the cashbook.

High functionalities of treating purchases and sales
Entry of the pur_sale book is automatically double-journalized. But the book requires a lot of entries to get more data.
1.To get data for VAT, you need to enter in type.
2.To get data for suppliers, you need to register suppliers and enter them.
3.To get data for customers, you need to register customers and enter them.
4.To get data for inventories, you need to register inventory items and enter them.
5.If you select a direct settlement, it is entered automatically in the cashbook.

- Alfred Sang Hoon Lee -