In this task your accounting users will transfer GL account totals to your financial accounting system and reset the financial cutoff date.
Education:
Financial Transfer Guide - GL Summary Transfer
Screen Help - GL Summary Transfer
Screen Help - Financial Cutoff Date
Training Tasks:
•Output a spreadsheet transfer file for each accounting period listed.
•Reset the financial cutoff date.
General Ledger Guidelines
GL summary transfer can be done daily or by period
You can select to group your GL entries by day or by period. We recommend that you enter daily complete batches. The daily increment leads to better visibility of the balancing entries of the DBA system. You could choose to also book your entries by period at period end. We do not recommend the weekly or monthly option as these transactions do not always line up with your financial periods.
Do not skip using the financial transfer
Do not skip using the financial transfer because it is a mandatory process without which your company will have no accounting integrity. Even though you will be operating with two self-contained accounting systems, each system depends on the other for vital information. The WIP accounting in DBA, for example, relies on labor and overhead costing information from the financial accounting system to calculate shop rates. The financial accounting system will not have validity or useful value without AR and AP voucher invoices and manufacturing account totals.
Never make journal entry adjustments to your Inventory account
Never make journal entry adjustments to your Inventory account. This is a self-adjusting account that is always fully reconciled with the total inventory value of stock on hand.
Never make journal entry adjustments to your Work in Process account
Never make journal entry adjustments to your Work in Process account. This is a self-adjusting account that is always fully reconciled with underlying job costs.
Do not manage multiple operating entities within a single DBA system
Do not manage multiple operating entities, meaning other factories or remote warehouse operations, within a single DBA system. Each operating entity must be furnished with its own DBA system and product license and will use the financial transfer to update your financial accounting system to reflect its activities. MRP and shop control are inventory-driven processes that only work properly when used with a single factory where all inventory is locally available for immediate issuing, receiving, and picking. WIP accounting and shop rate calculations also only work properly when used with a single operating entity.
Reference:
Financial Transfer Guide - Multiple Operating Entities
Common Questions
Can I use DBA without the financial transfer?
DBA cannot function properly without proper accounting. If you do not post to the general ledger or transfer vouchers and account totals to your financial accounting system, the manufacturing system cannot function with any success. General ledger transactions are essential for establishing shop rates, tracking inventory and WIP balances, accounting for absorbed costs, and tracking sales and cost of goods sold accounts. Without the financial transfer, it is not possible to have valid and useful financial reporting for business management or tax compliance.
Can we replicate our cost and profit reports in DBA?
It is not possible or desirable to replicate cost and profit reports from a previous system in DBA because absorption costing totally changes the inputs from which costs are derived. It is also highly probable that your reports were of dubious accuracy and analytical value due to the workarounds that are required to simulate WIP costs.
Here are some reports in DBA that can replace your old cost and profit reports with more accurate and useful information:
•The cost of goods sold transactions that flow to the Income Statement are derived from invoice line items with accurate inventory costs that reflect absorbed labor, subcontract services, and overhead. This yields accurate gross margins at the item category or customer type level. Absorbed costs are offset by actual costs to provide an accurate overall gross profit margin.
•The Sales Order Invoices data view enables you to assess profit margins by customer and by item.
•The Profit Margin by Item report enables you to assess and rank profit margins by product.
•The Profit Margin by Customer report enables you to assess and rank profit margins by customer.
•The Base Prices & Costs report enables you to assess margins relative to selling price.
Does DBA provide for departmental accounting?
DBA does not provide departmental accounting because it is not relevant to a WIP accounting system.
Departmental accounting in non-WIP systems attempts to transform work centers or shop departments into cost centers in which various expenses are allocated and charged to respective departments. Departmental accounting involves a great deal of manual intervention, including reporting labor hours and allocating overhead expenses and material usage to particular departments. These allocations are arbitrary, easily manipulated, error-prone, and of little analytical value.
In a WIP accounting system departmental accounting is replaced by absorption costing, which is far more efficient and useful. Instead of tediously reporting payroll costs to specific departments, labor is costed at work center hourly rates that are automatically applied as job labor transactions occur. Instead of manually allocating overhead expenses to various work centers, hourly work center rates for manufacturing overhead are automatically applied as job labor transactions occur.
The hourly work center rates for direct labor and manufacturing overhead are not arbitrary amounts. They are derived from overall shop rates, which are calculated from past actual costs and reported labor hours. At the work center level these overall shop rates can be factored up or down by a percentage to reflect differences among work centers in pay levels or relative overhead burden.
Absorption costing is much more useful because work center costs and productivity can be assessed at both the item and work center level. The cost rollup and job cost data views and reports break out labor and overhead hours and costs by routing sequence and associated work center. The Work Center Performance data view tracks estimated and actual labor hours at the work center level.
To summarize, departmental accounting and all the manual intervention that goes with it is not possible or needed in DBA because it is replaced by absorption accounting, which occurs automatically as job labor transactions are made.
Are period end inventory adjustments needed?
DBA maintains a perpetual real time inventory that does not require the period end quantity and cost adjustments that are typically made with non-WIP systems.
On hand quantities are updated in real time as items are received to stock or issued to jobs or picked for shipment. On hand quantities already reflect quantities in WIP and no period end quantity adjustment is required. Item receipt costs already reflect absorbed costs for direct labor and manufacturing overhead and no period end cost adjustment is required.
The Inventory and Work in Process accounts are self-adjusting and should never be subject to journal entry adjustment. Any such adjustments will sever the relationship with the underlying transactions and must be avoided.
How can I use the financial transfer without a data import capability?
All three financial transfers – AR Voucher Transfer, AP Voucher Transfer, and GL Summary Transfer – involve one-line totals without any line item or transaction detail. If your accounting system does not have an import utility for customer and supplier invoices or journal entries, these financial transfers can easily be made by manual entry as follows:
•To transfer an AR voucher invoice you simply enter the customer, invoice number, invoice date, terms code, and a single non-inventory line item for the invoice total amount.
•To transfer an AP voucher invoice you simply enter the supplier, invoice number, invoice date, terms code, account number, and a single amount for the invoice total.
•To transfer period end account totals, you simply enter a batch journal entry with a single debit and credit amount per active account.
The two voucher transfers are each reconciled against a transfer account as a safeguard against data entry errors. The period end batch journal entry must be in balance as a safeguard against data entry errors. Whether transfers are made through data import or manual entry, they only take a few minutes per day.
