Concepts

This section will introduce you to the concepts involved in understanding how CAPITAL Office's invoices, supplier entries, purchase order deliveries, cash book adjustments, and so forth, manage to talk to and update batches that CAPITAL GL Controller, your general ledger, is able to process and organise. It will also give you practical step by step advice on how to integrate the two applications into a workable management and financial control system that will be able to oversee your entire organisation's accounting process.

The various sub-systems or "sub-ledgers" in CAPITAL Office, such as invoicing and stock control, will generate journals for all exchanges that involve changes to assets, liabilities, revenues or expenses. For example, if an invoice for $100 is raised for a customer which involved $50 worth of stock, then journals for the debtors, income, inventory, and cost of sales accounts might be generated by CAPITAL Office automatically. The term might be is used because the journals CAPITAL generates depends, in part, on how you set-up communications between the two applications.

CAPITAL GL Controller can be thought of as conceptually sitting on top of the various CAPITAL Office sub-systems as a supervisor. It can manage and redirect the accounting transactions generated by them and use this information to update relevant general ledger account codes. The systems themselves, such as invoicing or stock control, while generating journals that are used by the general ledger, know very little about how the general ledger is organising the information they produce.

Communications between the general ledger and the management accounting system is handled by a series of tables called general ledger sets. These sets are assigned a series of fixed priority rules that determine which transactions update particular general ledger account codes. This system, as you will soon see, offers a considerable amount of flexibility.

In order to give you some feel for the synergy that can be achieved by combining the two applications, consider an example. A $100 invoice is raised for a customer, $50 of which is stock, $10 of which is tax, $5 of which is freight and the remaining $35 which is made up of services. CAPITAL Office might automatically generate the following journals:

1.      Debit debtors $100.

2.      Debit cost of sales by $50.

3.      Credit inventory $50.

4.      Credit income (i.e., Spare parts sales) $50

5.      Credit freight $5

6.      Credit income (services) $35

7.      Credit the tax liability account $10.

Let us now say that once this transaction is entered and totalled, we realise that we need to back-date it to the last day of the prior period. The invoice would be edited and the date changed. Since this effects a different accounting period, a further seven journals would be raised reversing the adjustments made to the invoice in the original period. Then another seven journals (the same as the first set issued) would be generated for the prior period. Again, all automatically. Complete flexibility. Complete control.