Financial Configuration Concepts

1/23/13 FinancialConfiguration_IntroConcepts_MP13
https://university.openbravo.com/pluginfile.php/9113/mod_resource/content/11/index.html 1/21
Openbravo ERP Selfstudy Course
Enterprise modeling and accounting configuration with
Openbravo Introduction and concepts
3.0MP12v1
© 2012 Openbravo S.L.U. All rights reserved. The information in this document is confidential and may not
be disseminated or disclosed to third parties (either in digital form or on paper) without the prior written
consent of Openbravo S.L.
Introduction
Scope and objective
Scope of the course
Prerequisites
Out of scope
Initial Configuration
Modelling the Enterprise
Client
Organization
Best practice
Organization changes
Calendar
Taxes
Accounting
Account Tree
Openbravo Financial Reports
Standard Financial Statements
Income statement (Profit and Loss report)
Balance Sheet
Cash Flow
Additional Financial Reports
Trial Balance report
General Ledger Report
General Ledger Journal Report
Review of set up in F&B
Balance sheet and P&L
Account Element
Balance sheet outcome
Account Tree
Default settings for accounts
Account Combinations
Account Dimensions
Account combinations
Account Schema Tables
Accounting background process
Initial Data Load

Introduction
Scope and objective
Scope of the course
The course is a practical execution to set up the accounting configurations during an
implementation by reviewing real business cases and providing the steps for the set ups. The
localization packs of different countries are used as a starting point for setting up data.
For the theory of the course, links to the wiki documentation are provided.
Prerequisites
Basic knowledge of accounting concepts is required. Recommended reading:
the book ‘Accounting made simple’
Author: Mike Piper
ISBN: 9780981454221
The creation of accounting combinations is included in the basic functional training and considered
as required basic knowledge of the student.
Please review the below youtube recording:
http://www.youtube.com/watch?
v=6oAxdfDSA9s&feature=autoplay&list=UUXfMRZmmc1RdB7TjWUE7zOg&playnext=20
Out of scope
The set up of roles and users is not included in this training.
For the theory please refer to the following wiki documentation:
http://wiki.openbravo.com/wiki/User
http://wiki.openbravo.com/wiki/Role
For the practical execution of the set up of roles and users, please refer to the basic technical
training:
http://www.openbravo.com/education/training/btt/
The initial data load is also not included in this training.
For the theory please refer to the following user manual:
http://forge.openbravo.com/plugins/mwiki/index.php/Xidl/User_Manual_3.0.0
For the practical execution of the data load, please refer to the basic
technical training:
The set up of taxes is included, but not extensively explained in the course. For full details, please
refer to the wiki documentation:
http://wiki.openbravo.com/wiki/Tax_Rate
Initial Configuration

Modelling the Enterprise
Client
Please read section 5 Client and Enterprises on the following wiki page:
http://wiki.openbravo.com/wiki/General_Setup
and the following wiki page:
http://wiki.openbravo.com/wiki/Client
Organization
Please read the Openbravo WIKI functional documentation:
Organization setup:
http://wiki.openbravo.com/wiki/Initial_organization_setup
When creating the organization structure, certain information is reviewed:
in which country is the profit and loss information created?
for which organizations is the balance created?
where are taxes being paid?
Specifics of the organization, as indicated on the above mentioned wiki page:
Organization type Legal with accounting:
Can have a chart of account (COA) assigned
Can have a calendar assigned
Permits consolidation of the balance sheet and the profit and loss report (P&L) only for the COA
that is assigned to the legal entity (L.E.)
Transactions allowed
Only one L.E. allowed per branch
The organizations that are underneath inherit the COA and the calendar
If the parent organization has the accounting information and the children have no accounting,
there will be a roll up to the parent level.
If accounting will be used in future but not at this point, periods need to be opened to enable
invoice completion. The easiest is to create a couple of years ahead and open all periods to avoid
any problems.
Organization type Legal without accounting:
Organizations of type legal entity without accounting are intended to support the usage of
Openbravo as an application to manage business processes that do not require accounting.
Business processes such as CRM, human resource management and many business processes
that can be supported in Openbravo by developing custom modules.
By choosing legal entity without accounting, the organization hierarchy is defined and Openbravo
is used without configuring or using the accounting functionality in the product. Since this set up
can not be easily changed later on, this organization type should only be chosen if it is 100%
certain that Openbravo will never be used for accounting purposes. If a change of the set up is
required in future, the recommended process is to define a new organization, move the master dat
and deactivate the old organization. Then accounting can be generated for new transactions for
the new organization, but transactions from the old organization will never generate accounting.
Organization type Organization:
No COA assigned
No calendar assigned
It's not allowed to consolidate the Balance sheet and P&L at this level
No transactions allowed
as many organizations type 'organization' allowed in the branch as required
Organization type Generic:
always structured below a legal entity
allows transactions
multiple organization of this type are allowed in an organization tree

can have its own COA and also inherits the COA of the legal entity parent
the fiscal calendar and opening and closing of periods is not at this level
The default organization types that are available in a new created client are the ones just
reviewed:
Organization type Business Unit:
An additional organization type that is a business unit can be created:
belongs to a legal entity
multiple business units can be structured in a tree
Other than that the specifics are the same as for a legal entity with accounting:
Can have a chart of account (COA) assigned
Can have a calendar assigned. If structured underneath a legal entity, the calendar of the legal
entity has to be used.
Permits consolidation of the balance sheet and the profit and loss report (P&L) only for the COA
that is assigned to the legal entity (L.E.)
Transactions allowed
The organizations that are underneath inherit the COA and the calendar
If the parent organization has the accounting information and the children have no accounting,
there will be a roll up to the parent level.
Best practice
Although Openbravo allows an arbitrarily large amount of organizations, users should be aware
that adding organizations adds additional complexity. In general, the advice is to try to set up
Openbravo with the minimum number of organizations that are needed to manage the business
and to add organizations only when needed.
Since it is possible to add organizations at a later stage (see section Organization changes), in
case of doubt, the recommendation is to opt for fewer rather than more organizations.
Multiple clients or multiple organizations?
Since clients do not share master data and are completely oblivious to each other, multiple clients
are created when two different businesses are managed that are completely segregated (do not
share products, customers, etc.). Multiple organizations are created if the businesses share
information.

Organization changes
Before an organization can be used for transactions, the organization is set to ready. This means
that no changes can be made to the organization anymore. However, the organization structure
can be updated when changed. New organizations can be added, but the current organizations
have to remain at the same level. This means that new organizations can not be place above
current organizations, but can be placed underneath or at the same level. In any case if an
organization structure is not allowed, the application will display an error.
Calendar
Please read the wiki documentation:
http://wiki.openbravo.com/wiki/Fiscal_Calendar
The calendar has to be assigned to a legal entity or business unit. A calendar can be shared by
the legal entities/business units or be separate.
The periods for the calendar can follow the calendar year of January to December, or can differ
for example that the year starts in July and ends in June. Also instead of the 12 periods a different
number of periods can be configured. Different calendars for organizations in a set up may be the
result of the acquisition of companies that had different fiscal calendars.
The open and close of periods is done within the context of an organization. When opening or
closing periods, it is decided whether or not to cascade the action to open or close also the
organization(s) below the organization that share the same calendar. This is important in order to
allow decentralized management of different organizations.
If a parent company has several organizations underneath which are managed independently,
each organization will do its own period close cycle (and have different accounting teams working
independently). When all the organizations have closed their periods, the parent company can
close the period also.
On the other hand, the parent company can also enforce the centralized management of periods
(in this case for example a single accounting team is used to support all organizations). In this
case, the parent company can force the closing of the period of all the organizations by cascading
the close.
Taxes
The tax structure of the country where the taxes are paid is used. Taxes can be either installed
during the initial organization set up if included in the localization pack of the country or set up
manually.
For the theory of the taxes, please refer to the wiki documentation:
http://wiki.openbravo.com/wiki/Tax_Rate
For the practical execution of the set up of taxes, please refer to the Basic Functional Training:
http://www.openbravo.com/education/training/bft/
Accounting
Account Tree
Please first read the wiki documentation:
http://wiki.openbravo.com/wiki/Account_Tree
Some countries mandate the usage of a specific chart of accounts while others allow each
company to define the chart of accounts that best suits their practices.

For businesses in a country with a mandated the chart of accounts, the local chart of accounts
should be provided by the localization pack of the country, when available.
For businesses in a country without a mandated chart of accounts, one needs to be created for
the company. In that case, it is recommended to start from a sample chart of accounts and evolve
it for the company’s needs rather than starting from scratch. As a starting point, using the module
‘Generic Chart of Accounts’ is recommended, which delivers a standard list of accounts named in
English.
More information about this module is provided on the following forge webpage:
http://forge.openbravo.com/plugins/mwiki/index.php/GenericCOA
The steps to be executed for the configuration of the chart of accounts during an implementation
are the following:
Install the localization pack for the region if available
The localization pack might or might not include a sample chart of accounts for the country
If it does not, the generic chart of accounts can be installed as a starting point
Otherwise it can be started from scratch entering account after account
Apply the sample chart of account at the right organization level
Revise the account list adding or removing accounts
Understanding code combinations (and why, if they are not useful, you still need to use
them)
Structuring accounts in a tree
Understanding how account definition relate to the P&L and Balance Sheet structure.
What is the meaning of:
Element level
Account sign
Account type
Show value condition
Summary level
Element shown
Title node
For details please refer to the WIKI User guide:
http://wiki.openbravo.com/wiki/Account_Tree#Element_Value
Defining default accounts
Defining the Balance Sheet and P&L financial report
Adding calculated fields to the financial reports (for example: include Gross Margin to the
P&L as the difference between Revenues and COGS)
Updating the chart of accounts to meet changes in the business.
Note:
Please notice that this information is absolutely critical. One might argue that the primary purpose
of an ERP is to automatically generate the Balance Sheet and P&L report for the company and,
without that capability, an ERP is as useful as a car with no wheels and no engine: you can sit in it
but you cannot go anywhere.
Openbravo Financial Reports
Standard Financial Statements
Income statement (Profit and Loss report)
The income statement (profit and loss report) is created for organizations that are legal entities for
official publication, but can also be created for generic organizations for internal use.

official publication, but can also be created for generic organizations for internal use.
For the configuration of the report see the WIKI documentation:
http://wiki.openbravo.com/wiki/Balance_sheet_and_P%26L_structure_Setup
http://wiki.openbravo.com/wiki/General_Accounting_Report
Balance Sheet
The balance sheet is only created for organizations that are legal entities and for business units,
not for generic organizations, since the report has to be balanced. Accounts are balanced
between all generic organizations, but each generic organization on its own does not have to be
balanced.
For the configuration of the report see the WIKI documentation:
http://wiki.openbravo.com/wiki/General_Accounting_Report
and
http://wiki.openbravo.com/wiki/Accounting_Report
Cash Flow
No cash flow report is available in Openbravo. However, the report may be available in the
localization pack of countries.
Additional Financial Reports
Trial Balance report
This report can be used to analyze the evolution of the value of one or more accounts. For a given
period, it lists accounts detailing the opening value, the sum of the debits and credits that affected
it during the period, and the closing value.
Please read the WIKI documentation:
http://wiki.openbravo.com/wiki/Trial_Balance_Report
General Ledger Report
This report provides the next level of details, listing the individual debits and credits, as well as
their description, that affected a particular account.
http://wiki.openbravo.com/wiki/General_Ledger_Report
General Ledger Journal Report
This report lists all of the accounting entries, with their debits and credits as well as decription that
have taken place in a particular period. It also allows a drill down to the underlying document (for
example: invoice) or transaction (for example: shipment) that originated the entry.
http://wiki.openbravo.com/wiki/General_Ledger_Journal
These three reports are connected and allow for drill down from one report to the next. This
provides a very powerful tool for investigation and audit of the accounts.
An example:
When running the balance sheet a company notices that the short term liabilities are lower than
expected. To drill down the Trial Balance report is run to investigate which liability accounts have
had variations during the period. Then a drill down is done with the General Ledger report for
each of these accounts in order to see the individual debits and credit for the account. Then for a

further drill down, for each debit or credit the General Ledger Journal is reviewed to see the
complete accounting entry. From the entry the original document and transaction are viewed to
have the full picture of what happened.

Review of set up in F&B
Balance sheet and P&L
A good way to understand how the accounting schema and the financial reports relate is by
looking at the demo data.
Both the balance sheet and the profit and loss sheet (P&L) are already configured. The
configuration of the balance sheet is as following, as reflected in the Balance Sheet and P&L
Structure Setup screen:
Some important fields:
Point in Time, this type is used for reports such the Balance Sheet as account's balance needs to
be referred to a specific date.
The Balanced flag which must be activated whenever the report needs to be launched just for
Legal with Accounting and Business Unit organization types as that is the enterprise level where
accounting balance is executed.
This flag needs to be flag as active for the Balance Sheet report.
The [Grouping category] tab allows to define categories which groups report node/s. Each
grouping category implies a page break in the report showing the defined report node/s.
Node: A node defines the information of the account element that is shown in the report. The
account elements selected here are usually "Heading" element level types,
therefore the calculated balance of the node will be taken into account and will show the balance
of all the account elements of other types which are underneath it. In order to correctly display the
information, the account element has to be part of the corresponding account tree and be correctly
configured.
Above explanation is taken from the wiki and please refer to the wiki user guide for the complete
explanation of the configuration:

Account Element
In the [Node] tab of the Balance Sheet and P&L Structure Setup screen, the Account
Element field can be clicked and brings up the element value in the corresponding account tree:
When in the [Element Value] the tree icon at the top can be clicked to review the tree structure
that is underneath the account Balance Sheet:
The Current Assets consisting of:
And the longterm assets of:

The 3300 folder is also part of the balance sheet header:
The 2100 folder opened shows the following accounts:

Therefore when running the balance sheet, the amounts posted against these accounts are
displayed.
To see the detailed information the balance sheet can be run with the following filter values:
The account level selection determines the level of detail that is displayed in the report: heading,
account, breakdown, subaccount being the options in sequence of granularity. To see the details
down to the account numbers in order to see a relation to the account tree seen earlier, the
subaccount is chosen. Also the option to show the account codes is selected and the option to
only show accounts with a value is not selected.
Balance sheet outcome
The outcome of the balance sheet run with these filters:

On the report different elements appear, such as headers without any amount behind it,
subheaders with amounts behind them, totals at the bottom of a column of accounts.
Account Tree
To understand the structure of the report, the account tree setup is reviewed:
1000Assets the header without any total behind it:
Another element that appears on the report is for example 1130 Accounts Receivable:
To create an account that is a formula the following is executed:
In the Account Tree screen the account is selected and in the [Element Value] tab the
record of the element that will have the formula is selected.
Ensure that the element has the summary level checkbox is not selected (otherwise the
total will display the sum of the children)
Go to the [Customized Elements] tab of the record
For each account that has to be part of the sum a record is created. For accounts that are
added to the calculation, the value 1 is entered in the Sign field. For accounts that are
subtracted the value 1 is used in the Sign field.
For example the set up for account 1900 in the F&B International Group account:

The details of one of the customized elements:
The set up of the formula to define gross margins as revenues minus cost of goods (cogs),
the following records are added in the [Customized Elements] tab:
First record: sequence number = 10, Sign = 1, Account = Account Revenue
Second record: sequence number = 20, Sign = 1, Account = cogs
Default settings for accounts
In order that amounts are registered for the different accounts, they are configured in different
screens or used during certain transactions.
Screens that are configured with account numbers:
the [General Ledger] tab in the Accounting Schema screen
For information about the reflected accounts, please refer to the wiki documentation:
http://wiki.openbravo.com/wiki/Accounting_Schema#General_Ledger
the [Defaults] tab in the Accounting Schema screen

This screen is where all the defaults that are used in other screens are listed. Since it is
the source of information used for all business partners, products, tax rates, assets
account numbers, it is important that this screen is correct.
For information about the defaults, please refer to the wiki documentation:
http://wiki.openbravo.com/wiki/Accounting_Schema#Defaults
The defaults reflected in the Accounting Schema are used to populate the defaults when
entering the following screens:
the [Accounting] tab of the Business Partner Category screen
For details, please refer to the wiki documentation:
http://wiki.openbravo.com/wiki/Business_Partner_Category#Accounting
Based on these set ups the information is populated in the Business Partner screen
for customers in the [Customer Accounting] tab:
for vendors in the [Vendor Accounting] tab:

At the creation of the business partner these defaults are loaded, but can be updated
manually.
the [Accounting] tab of the Product Category screen
In order to copy the information to all the products of the product category, the button
Copy Accounts is clicked.
For more information, please refer to the wiki documentation:
http://wiki.openbravo.com/wiki/Product_Category#Accounting
The [Accounting] tab in the Product screen will show the defaults based on the product
category of the product.
The defaults are loaded upon the creation of the product, but can be updated manually.
the [Accounting Configuration] tab in the Financial Account screen:
When the Enable Bank Statement checkbox is selected, bank statements are posted.
Mandatory configurations for this selection are the Bank Asset Account and the Bank
Transitory Account.
For complete information, please refer to the wiki documentation:
http://wiki.openbravo.com/wiki/Financial_Account#Accounting_Configuration
the [Accounting] tab of the Asset Group screen (no demo data available, but when
entering a new record, the data appear upon saving the main screen):

In order to copy the information to all assets that belong to the asset group, the
Copy Accounts button is clicked.
For further information, please refer to the wiki documentation:
http://wiki.openbravo.com/wiki/Asset_Group
The [Accounting] tab of the Assets screen will default the accounts based on the
selected asset group.
The default settings are loaded upon the creation of the asset, but can be updated
manually.
the [Accounting] tab in the Tax Rate screen
For information concerning the fields, please refer the wiki documentation:
http://wiki.openbravo.com/wiki/Tax_Rate#Accounting
Another screen that has an [Accounting] tab is the G/L Item screen. However, this screen is
configured manually with the account information and no defaults are loaded. A G/L Item is used
for transactions for which account numbers are used, for example salary payments. Instead of
having to remember account numbers each time a salary payment is done, a G/L Item called
Salaries is entered once with the correct account numbers and used each time salaries are paid.
For more information about G/L items, please review the wiki documentation:
http://wiki.openbravo.com/wiki/G/L_Item
Apart from the configuration of accounts in screens, manual entries for accounts can be done in
the G/L Journal. For more information about the screen, please refer to our wiki documentation:
http://wiki.openbravo.com/wiki/G/L_Journal
Note:
To see the accounting tabs, the following configuration is required:
Go to the Preference screen (in General Setup).
Select ShowAcct, Visible at User = blank (will apply to all users), Visible at Role = blank,
Search Key = Y, save the record.
Account Combinations

Account Dimensions
http://wiki.openbravo.com/wiki/Accounting_Dimension
During the set up of the organizations accounting dimensions are chosen. The dimensions appear
in the Accounting Schema screen, for example looking as following:
Apart from the selected accounting dimensions, also the dimensions Organization and
Account are created by default. This way all postings contain information about the organization,
account, product, business partner and project (if defined in the window) for that particular
transaction.
If needed, additional accounting dimensions can be added even after the initial organization setup,
by adding new records in the [Account Schema Element] tab of the Accounting Schema
screen.
In the F&B demo data, the accounting dimensions business partner and product are used. When
posting an invoice, the details of the posting can be found in the Accounting Transaction
Details screen:
Account combinations

http://wiki.openbravo.com/wiki/Account_Combination
Before being able to use the dimensions, they have to be combined in account combinations.
New account combinations can be created through the selector of accounts (for example in the
[Accounting] tab of the Product screen):
In the above screen the account schema elements that are being used for the particular
organization are selected and the Save button is clicked to save the new created combination.
Alternatively, the combination can be created in the Account Combination screen:
Account Schema Tables
The default settings of the accounts is needed so when documents are processed, the
corresponding amounts are related to the correct account. However, to determine whether
documents are being posted, the corresponding table has to be active.
An overview of the tables and whether they are active or not can be found in the [Account
Schema Tables] tab of the Accounting Schema screen:

For a mapping of the tables to windows, please refer to the wiki documentation:
http://wiki.openbravo.com/wiki/Accounting_Schema#Account_Schema_Tables
Accounting background process
All posting of windows is executed by the background process for accounting. In the Process
Request screen the frequency can be updated or the automatic process can be stopped:
Initial Data Load
For the execution of the initial data load during an implementation, we refer to the Basic Technical
Training:

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