transaction classes in AR

[M. Usman]

hi all,
i have the following scenerio for all to suggest me on it.

my client has accepted refundable deposits from customers e.g. security deposits.

1st Question. how can i handle such refundable deposits in AR ?

i personly think that we can use the transaction class "Deposit" for such purposes.

if this is not the right way to handle the scenerio then what is the proper way for that in AR ?

and

if this is the right wway then i have the following further questions to be answered.

in the deposits, i have to select an INVOICE TYPE.... what is its purpose?
and what is the purpose of offset account in deposit class?

and the last one is that.......... i entered depoists in TEST instance........
then i applied a receipt on the depoists.
and then i checked the customer ledger, it showed a debit balance from the customer
but infact it is a liablity and is refundable so the balance should have been credit rather than the debit.

would anybody please help me on this topic
prompt help will be appreciated.

[tgs100]

You can create a deposit transaction for this.

1. Create a new transaction type with offset account as Refundable Deposit account (which is of type 'Liability')
2. Create a deposit transaction with the above defined transaction type and also with "effective from" and "effective to" date as a future date (Ex: Enter both date as '31-May-2010'). This will prevent the users in accidentally applying invoices againt deposit.
The accounting entry will be
Customer Account - Dr
Refundable Deposit Account - Cr
3. Create a Receipt for the deposit transaction.
The accounting entry will be
Bank/Cash Account - Dr
To Customer Account

If you want to apply this deposit against any invoice, then change the effective from and effective to dates. Otherwise, refund the amount.

The above will work only if your autoaccouting picks revenue account from the transaction type. Offset account is the credit account for the deposit transaction.

Cheers,
Saravanan TG

[M. Usman]

hi TGS 100
thanks a lot for such a prompt reply,
its all my pleasure..

but the point which i want to make is that, when i see the customer ledger then it shows a Debit entry of the deposit and then for the receipt it shows a Credit balance. so as i entry the deposit and apply the receipt on that deposit then eventuly the customer balance shows a Nill balance.

but i am of the opinion that Refundable deposits must been shown on the Credit side of the ledger as a libility, untill converted into revenue or repaid...

[tgs100]

Customer Account will be zero only as we have received the amount and there is nothing to receive the from the customer. If there are any invoices for which receipt is not done, only then you will get the customer balance.

If you take the customer open items report, then the deposit transaction should appear in the credit side.

Regarding the debit entry in the customer ledger, can you please tell me which report or screen you are referring to?

Cheers,
Saravanan

[M. Usman]

hi TGS 100
thanks for enlighting me on the topic,
but
dont you agree with me on the fact that "Refundable Deposits" are a liability for us coz we have to refund them to the customers in future (except realised as Revenue)

so if u agree with me on this, then my question is that how can we handle such deposits in AR coz such type of deposits are liability for us and must be shown as a Credit balance in the respective customer ledger.

what is the process in AR to handle such Liability Nature Deposits?
i hope, now i would have made my question & point of view clear to you so that you may suggest me
thanking in anticipation

[tgs100]

must be shown as a Credit balance in the respective customer ledger.

Are you refering to any customer ledger report in AR?

The refundable deposit is indeed a liability and the credit account given in deposit should of type "LIABILITY".

I am not sure whether I have understood your question properly.

Cheers,
Saravanan TG

[M. Usman]

hi saravanan TG,
its good that we agreed on that the refundable deposits are of a liability nature.
now to explain my question to you, let me tell you that whole scenerio and the steps which i am performing.

my client has many tenants in its building....
my client receives advance rent for three years from its tenents and then amortises it over three years.

Lets assume the tenant is Warid Telecom,
its monthly rental is 100,000 and advance rent for three years received by my client is 3,600,000

first of all i made a receipt of 3.6 million
then i made a Deposit with the following:

accounts receivable 3,600,000 Dr.
Advance Rent (liability) 3,600,000 Cr.

then i applied the receipt on the deposit so that accouting receivable get knocked off.

then after a month, i amortized the rent for the month by entring a transaction and applied the transaction on the deposit, entry is

Advance Rent (liability) 100,000 Dr.
Rental Income 100,000 Cr.


Now our liability is 3.5 milllion
and my question was and still is that, this 3.5 million must be shown as a liability (on the credit side) of Warid Telecom ledger.
but it does't.
customer ledger shows nill balance

moreover,
when we nevigate to "Account Details" in main nevigation window and give the respective dates and customer name then it also gives a Debit balance (but i and you both are of the opinion that this 3.5 million is a liability and a Credit Balance)

i hope, now i would have made my question explicitly clear to you... !

and in the end, i would like to tell you that my autoaccouting picks revenue from memo line, not from transaction type.
thankssss.....

[tgs100]

Account details shows the original amount and the balance amount against the transactions. Once you make the receipt against the deposit invoice, the balance amount will be zero. I fail to understand where is the debit balance and credit balance in the 'Account Details' screen.

If you want to see how much is the deposit credit balance for a customer against a deposit transaction, you should run the 'Commitment balance report'.

Cheers,
Saravanan TG

[M. Usman]

Hi Saravanan

i got ur point that the balance of deposit (in my example 3.5 million) can been seen from commitment balance report.

actualy, we have developed a Customer Ledger report. so that we can see the customer ledger.

now the only issue with me is that, whenver i enter a deposit transaction it shows the amount at the Debit side of the ledger and when i create a receipt and apply it on the deposit then it shows it on the credit side of the ledger, so after enter a depsoit transaction and applying a receipt on it, the ledger balance shows Nil balance.

but you and i both are of the opinion that deposits are liability and hence the customer ledger must show a Credit (payable) balance.

what you say?

[tgs100]

actualy, we have developed a Customer Ledger report. so that we can see the customer ledger.

This is what I have been asking. Finally you are telling that it is a customized report. So the problem is not in the system, but in your report.

Whenever deposit transactions are displayed, you may follow the following rules (We too developed a customized report with the same rules)

1. Display the commitment balance in the credit side for deposit transactions
2. If receipt is not done for the deposit, do not consider the deposit transaction
3. Receipts for the deposits should not be considered.

Cheers,
Saravanan TG

[M. Usman]

Thanks Saravanan
i would be following you rules for the report.

Thanks a lot again![:)]