How to do the Accounting of Advance and Retention money ?

June 26, 2024 skgupta

How to do the Accounting of Advance and Retention money ?

Good control on Purchase, Sales, Stores, Site Stores, Accounts and Taxation

Finsys ERP is serving EPC companies in areas like (a) Engineering Construction , example Contractors of Water Pipelines for Thermal Power Plants (b) Contractors of Solar Power Plant EPC (c) Contractors of Steel Rolling Mill Machinery Manufacture and its all EPC activities.

EPC & Infrastructure

Accounting concept in Project Business

Accounting Manual

Formatted File – Download from link below

*Finsys project business accounting

Accounts to open

Advance accounts Supply 08 series

Erection 08 series

Freight 08 series

Main Debtor account Supply 16 series

Erection 16 series

Freight 16 series

Retention money 1 ( Installation) Supply 1710 series long term advance

Erection 1710 series long term advance

Freight 1710 series long term advance

Retention money 2 ( final ok ) Supply 1711 series long term advance

Erection 1711 series long term advance

Freight 1711 series long term advance

Project Summary

contract : Rs 50 crores

Supply 40.00

Erection 8.00

Freight 2.00

Total 50.00

Entries to be done on Advance

Advance received Rs 10 crore

Now, we must divide this in parts

Supply 8.00 20% of the supply project

Erection 1.60 20% of erection

Freight 0.40 20% of freight

10.00

accounting entry

BankDebit 10.00

to NTPC – Singauli Supply Advance A/c 8.00 long term liability (08series)

to NTPC – Singauli Erection Advance A/c 1.60 long term liability (08series)

to NTPC – Singauli Freight Advance A/c 0.40 long term liability (08series)

( this account is opened in liability side of balance sheet,)

if made in 06 series, then we can have bill wise o/s also

if in 8 or 9 series

then bill wise outstanding will not happen in Finsys

Entries to be done on Invoicing

Now, when invoicing starts

First bill is sentRs 2 crore

and fact is that it is for supply

Supply 2.00

Erection –

Freight –

2.00

( this account is opened in Debtor side of balance sheet,) 16 series

Accounting entry

to NTPC – Singauli Supply Debtor MAIN A/cDebit 2.36 >16 series

To Sales Domestic 2.00 > income

to GST Payable ( IGST ) 0.36

Debtor closing at this stage

Net receivable 2.36 Crores against that bill at this stage

Entries to be done on Adjustment of Advance

Now, adjustment of advance

adjust the advance, retention 1 , and retention 2

Base valueRs 2 crore

Advance was 20%

So adjustment is 0.40

adjust in which advance ?Supply 0.40

Erection –

Freight –

0.40

debtor

accounting entry

NTPC – Singauli Supply Advance A/cDebit 0.40

to NTPC – Singauli Supply Debtor Main A/c 0.40

advance is adjusted, no problem

Debtor closing at this stage

Net receivable 1.96 Crores against that bill

Now, adjustment of Retention money – Part 1

Release against “Installation” and first QC report

This is 12% of the Basic value , as per the PO terms12%

Open this Retention mony in 17 series, long term security deposit

NTPC – Singauli Supply Retention 1 A/c. Debit 0.24

to NTPC – Singauli Supply Debtor (main) A/c 0.24

advance is adjusted, no problem

( shipment was 2 crore, so above percent of that )

Debtor closing at this stage

Net receivable 1.72 Crores against that bill

Now, adjustment of Retention money – Part 2

Release against “Live testing”

This is 8% of the Basic value , as per the PO terms8%

Open this Retention money also in 17 series, long term security deposit

NTPC – Singauli Supply Retention -PG Test Debit 0.16

to NTPC – Singauli Supply Debtor A/c 0.16

advance is adjusted, no problem

( shipment was 2 crore

Debtor closing

Net receivable 1.56 Crores against that bill

Voucher for TDS income tax and TDS GST

TDSR- Itax Receivable – NTPC ( TAN ____ )Debit 0.04 (2% of 2 Crore )

TDSR- GST Receivable – NTPC ( GSTIN ____ )Debit 0.04 (2% of 2 Crore )

to NTPC – Singauli Supply Debtor A/c 0.08 debtor closing

1.48

( shipment was 2 crore so, 2% of that )

for the Formatted File for the Accounting entries can be Download from link below

Our Customers feel that Finsys ERP Software for project, inventory, sales, accounting and management is an extremely cost-effective construction (infrastructure) industry software solution that addresses all the financial accounting, departmental, tax compliance, marketing, after sales, supplier, inventory and operational requirements of companies within this industry sector.

It is modular, flexible and powerful and its built-in scalability means that as your construction business needs increase, it will grow with you.

From goods-in to dispatch, .. Finsys ERP software promotes efficient inventory management and timely delivery. Large product catalogues are easily maintained and the system will automatically generate inter-site transfers, back-to-back orders and drop ship delivery instructions for non-stock items

User-friendliness, fast accessibility of data, intuitive ergonomics and transparent menu-structures are some of the most distinctive attributes of Finsys ERP.

Finsys ERP is useful for Engineering Construction Industry, and Capital goods and Project Industry, any type of Infrastructure Industry.

Finsys ERP has developed basic framework of software as customized project and later our system designing team has upgraded in advance Infrastructure ERP.

Our Management Information “Dashboards” provide the answers. Easily mastered, our software will give fresh insights into key performance measures for your business.

Note : Finsys does not plan to do the Microsoft Projects or ZOHO projects line of software, they are separate and remain separate

This page was to help you with Accounting entries in the Projects Finsys Retention Money Advance set off

Youtube – 15 Videos Shot at Goa

June 23, 2024 skgupta

Finsys brings to you the 15 short Videos we shot at Goa

These reels are great

Videos at Goa by Finsys Sangeet Gupta

Youtube Finsys

Link: https://www.youtube.com/playlist?list=PLmbWfGYzaUnduiXCa_tSMmewR_rGzqSH7

Links to some of them

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Jun 15, 2024

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Youtube – Material Requirement Planning MRP methods in Finsys

June 9, 2024 skgupta

Material Requirement Planning

Click here

MRP in CAPITAL GOODS Material Requirement planning – Machinery

this is a good 180 page powerpoint. Click on the link above

This is surely Material Requirement Planning , MRP, MRP2, one of the Best MRP Software in India

Material Requirement Planning

Material Storage Prevention and Scientific Planning using ERP Software Finsys

To support the need to reduce cost and time to market, greater emphasis is needed to control shop floor activities. For a well-organized manufacturing process, resulting elimination of bottleneck and waste, a reliable, flexible and user friendly production planning and control system is a must.

The planning engine of an ERP system, through closed loop MRP capability, generates planned production orders, based on the forecast demand, in respective monthly / weekly time buckets.

Our Youtube Video on this topic

After confirmation, full functional production orders, with adjustable routing and components, states what quantity of product should be manufactured and its scheduled date of production.

While generating the production order, the system takes cognizance of the various factors related to the order like Production time, Machine Capacity and Availability of materials and components.

Based on this Planning, the subsequent functions need to be planned. For Instance, based on the availability of Materials the purchase of the materials short for production need to be initiated.

In the process above after the MRP Run, the relevant vendors are mailed the Delivery Schedules or Purchase Orders for the Materials required for production.

Such precise Material Planning, will further give the Inventory Management a Minimalism and hence induce “LEAN MANUFACTURING” practice in the business. This will further lead to Optimal Outputs from the given Input,hence increasing the Profit Margin of the Business.

Material Requirement Planning page demo PPT

click here

Logics MRP concept vs PO for actual Work order number

One of the Missions of the Material Management should be
1. No shortage of Material (on one hand),
2. And
3. No wastage of Material due to excess buying
4. No wastage of Material due to non moving stock
5. Minimum working capital (money) locked in Stock

Methods : There are Two methods.
1. Method 1 : SO wise
  1. Each PR, PO, MRR, Issue voucher linked to Customer Sales order, and you can see which Sales order , what status, and
  2. What not ordered ?

What not received ?

What not issued ?
Row level review ?

Method 2 : Combined factory level MRP
1. Each Work order has a Bill of Material in the ERP
2. Run the MRP for 1 day, / 1 week / 1 month / balance month / 1 ½ month for domestic purchases, and 2 ½ month or more, for long lead or imported items.

Benefits of First method
1. Each PR, PO, MRR, Issue voucher linked to Customer Sales order, and you can see which Sales order , what status, and
  1. What not ordered
  2. What not received
  3. What not issued
  4. Row level review

Demerits of First Method
1. Data entry increases too much
  1. User make 10 PO instead of 1 for common item, effectively, number of Purchase orders rises. Creates confusion at Gate Entry … which PO to knock off ?
  2. User make 10 PR instead of 1 for common item, effectively, number of Purchase requisition rises. Need to map so many indents to one PO.

User make 10 MRR instead of 1 for common item, effectively, number of MRR, Purchase vouchers, Quality Check,

Accounting entries, GST entries all rise, average 5 times.
Need more people in purchase department and accounts department, hence additional salary cost.
Additional storage space for so many additional papers.

Old stock is totally ignored.
1. Since there is automatic pressure to make separate PO for each row of each Work order., and since if PO is not made, people think that the Purchase dept is not working….. they make PO,
2. Even if stock was available

And the truth is that usually 10% extra is purchased in every order to take care of contingencies

Effectively cost of production goes up by 10%
1. Problem of “Allocation of stock”
2. If the Method 1 is used, each project is a separate Island. He wants allocation of stock.
3. So, in ERP , you will have to do allocation, … That this material belongs to me / my project…. Creates problem for Finsys, for allocation and then later de-allocation. We in Finsys do not have such a facility,

Effectively, more problems.

Problem of “Issue of too much stock” on the Production floor “weeks in advance”
1. Again, in the Method 1, each project is a separate Island.
2. The project manager has no control on his stock unless he gets it issued.

So, he does the simple thing, he gets issued every BOP of that Machine / work order… as soon as store gets it.

Even if he needs it 2 months later.
So, too much excess stock on the shop floor
And that becomes invisible to the main stores ERP

Now….. chances of Theft / wastage / breakage / etc
Need of more and more almirah’s on the shop floor ( useless “Muda” )

1. Need to buy a ball bearing, even if you have 100 in stock
  1. Merely because you already issued them or allocated them to old Work orders.
2. 1. New problem in Finsys PO and MRR
    1. You will need same PO, same item, to be populated in multiple rows against different Work orders.
    2. Similarly same problem in MRR. You will need same MRR, same item, to be populated in multiple rows against different Work orders.

This is again not very smooth process

Makes a lot of reports go wrong in Finsys
Hence please avoid.
Money
1. Normally a 50 Crores turnover per annum company should have a stock in hand of say Rs 4 crores. For a long gestation product like a machine.
2. In case of Model 1 is implemented, your stock will usually inflate to about Rs 8 Cr to Rs 10 crores. So, a large part of this becomes an “undesired investment”.
DisAdvantage of Method 2
1. None
Advantage of Method 2
1. MRP concept
2. No need of multiple PO, for same item.
3. No need of multiple PR, for same item.
4. No need of multiple MRR, for same item.
5. No need of more people in accounts department
6. No need of excess store capacity in production dept
7. No need of excess stock holding cost ( money investment ).

What if….. Customer Auditor wants ?
1. Show this video
2. Explain him
3. Tell him about Maruti, Toyota, Hyundai = Cars = FA
4. Tell him about LG, Samsung = White Goods = FA

What if….. Customer Auditor wants more ?
1. Show him MRP live
2. Explain him Digital excellence
3. Instead of just manual and mix up

MRP Material Requirement Planning Shortage Planning in Finsys ERP

Make your Planning Better. Reduce Time required. Reduce effort. Make your Purchase Requirement more scientific and reliable

Finsys ERP,MRP,MRP2,ERP,Benefit of ERP,Shortage Planning,Jaipur Marriot,Automatic Material Planning,Best MRP for Small Business,Open Source MRP Software,MRP Software in Faridabad | For Indian SME Manufacturers,AI Business Plan Generator – Be Done In 15 Minutes

Our Youtube Video on this topic

MRP Material requirement planning in Finsys ERP. How this is important. and how this is better than buying separately for each Sale order.

Link : https://youtu.be/33kcZ5GBMt0

Sale to Merchant Exporter Deemed Export, GST conditions

May 30, 2024 skgupta

Recap on conditions….Conditions and GST precautions for Sale to Merchant Exporter for 0.1%

Conditions in GST for Export indirect … via Merchant Exporter…0.1% GST is not your “Right”, unless you do these duties.

Terms and conditions

(i) The registered supplier shall supply the goods to the registered recipient on a tax invoice;

(ii) The registered recipient shall export the said goods within a period of ninety days from the date of issue of a tax invoice by the registered supplier;

(iii) The registered recipient shall indicate the Goods and Services Tax Identification Number of the registered supplier and the tax invoice number issued by the registered supplier in respect of the said goods in the shipping bill or bill of export, as the case may be;

(iv) The registered recipient shall be registered with an Export Promotion Council or a Commodity Board recognised by the Department of Commerce;

(v) The registered recipient shall place an order on registered supplier for procuring goods at concessional rate and a copy of the same shall also be provided to the jurisdictional tax officer of the registered supplier;

(vi) The registered recipient shall move the said goods from place of registered supplier –
(a) directly to the Port, Inland Container Deport, Airport or Land Customs Station from where the said goods are to be exported; or
(b) directly to a registered warehouse from where the said goods shall be move to the Port, Inland Container Deport, Airport or Land Customs Station from where the said goods are to be exported;

(vii) If the registered recipient intends to aggregate supplies from multiple registered suppliers and then export, the goods from each registered supplier shall move to a registered warehouse and after aggregation, the registered recipient shall move goods to the Port, Inland Container Deport, Airport or Land Customs Station from where they shall be exported;

(viii) In case of situation referred to in condition (vii), the registered recipient shall endorse receipt of goods on the tax invoice and also obtain acknowledgement of receipt of goods in the registered warehouse from the warehouse operator and the endorsed tax invoice and the acknowledgment of the warehouse operator shall be provided to the registered supplier as well as to the jurisdictional tax officer of such supplier; and

(ix) When goods have been exported, the registered recipient shall provide copy of shipping bill or bill of export containing details of Goods and Services Tax Identification Number (GSTIN) and tax invoice of the registered supplier along with proof of export general manifest or export report having been filed to the registered supplier as well as jurisdictional tax officer of such supplier

Rajesh Khandelwal, CA, CPA, DISA, LLB, MBA

Ideas Courtesy : Mr Rajesh Khandelwal, CA and learned speaker on GST matters , across India.

There are the MANDATORY conditions in GST, for sale to merchant exporter.

If you can fulfil these, then good…. Instead of 18% normal GST rate you can charge only 0.1% GST on the sale in this situation

Points to remember

MANY PEOPLE MISS SOME OF THESE POINTS… AND RISK GOES BIG

Conditions in GST for Export indirect … via Merchant Exporter…0.1% GST is not yet right, unless you do these duties.

Sales Figures vary . Different Sales Figures in different Report. Why ? How ? Logic ?

May 16, 2024 skgupta

Why are the Sales Figures different. in Different Reports ? with Logics ?

Finance for Non-Finance People

What is the logic behind this ? What is the Truth Reason ? What should I learn ?

Different Sales Figures in Finsys ERP .. How to Handle. Which figure is ok ?

Answers

Different reports are made for different users, and for different information needs
So, the reports are created on different software SQL commands, taking data from different sources

Some reasons are as follows

Due to Sales returns / debit note from customer

These are Entered in accounts by reducing sales, ( so P & L is net figure)
But online “live” status report are from the pure invoicing .
Most of the reports from the Sales and Marketing menu are also – invoice based reports
Most of the reports from the GST menu are also – invoice based reports

Both are a fact, and both are required.
And Hence this should be reconciled internally

Sales of capital goods

This is not a normal thing.. only a few transactions a year
Sale of an old machines
Sale of Old Car / Truck
Sale of old EOT Crane
Sale of scrap of old furniture
In case of sale of capital goods,
Invoice is made = yes ..
It will come in Sales auto emails = yes,
it will come in all invoice based reports. yes
But is this is sale ? = no
So, these are NOT Entered in accounts, ( so P & L is pure goods sales figure)
But online status report and most of the invoice based reports are from the pure invoicing
Both are a fact, and both are required.
And Hence this should be reconciled internally

Sales invoice for “Purchase Return”

As per GST law, & Practical reasons, it is good to make a GST invoice for purchase return
Note, in GST, it will be a part of the total
But, in accounts, it will be credited to Purchase account / purchase return account
Hence
NOT Entered in accounts in Sales, ( so P & L is pure goods sales figure)
But online status report and most of the invoice based reports are from the pure invoicing
So, some reports are made taking all these
And some other are made without these Purchase return invoices
Both are a fact, and both are required.

Any Debit note to customer ( additional income )

In case, if any debit note is entered on the customer
Entered in accounts, ( so P & L is added to sales figure)
But online status report is from the invoicing ( it is pure basic value from the invoices )
Both are a fact, and both are required.
Humbly submitted please

Debit to party for cartage, freight, insurance packing, in the Invoice
If this is taken in the invoice as an additional charge, please note that it is debited to party and sometimes credited so “other income”. ( we will prefer .. they go into Normal Sales, as per Finsys SOP )
So, in case you take it to other income, then, NOT Entered in accounts in Sales , ( so in P & L it comes separately, as other income )
But online status report and many Sales reports are GROSS from the invoicing ( it is GROSS basic value from the invoices )

Reports may have different formats

Some of these reports required and given are
Basic only
Basic of 100% invoices
Basic of Sales invoices only ( exclude the Purchase return invoices )
Export only
Domestic only ( all )
Selected series – say trading invoice only

For GST purposes

Basic + GST of 100% invoices
Basic + GST of Sales invoices only ( exclude the Purchase return invoices )
Other combinations

Show the other charges or not ?

Some reports will show all other charges / add-on’s upto transport charges, insurance, etc
And some will not
Reason = different needs

Show the Sales data for selected Group parties only ?

Facility available
Obviously, report will be for that 16xx series only

Can there is one single “best report” for Sales for Accounts people ?

Yes, the Sales register, in accounts, on landscape format, extra-wide on fools-scape paper is the best one.
If your company can ask all users to use this only, that will be great
(( this is a internal company decision ))

However this will not be The “best” for Despatch team or marketing team. They can select their own “best report”

Inter Plant Billings – peculiarities under GST laws

Whenever you bill, inter plant,
Say from your Noida plant to Manesar plant , or
plant 2 to plant 3,
for GST, it is a “Sale”, so invoice is made
for one plant’s Balance sheet / P & L , it is a sale
for 2nd plant’s Balance sheet / P & L , it is a Purchase
for consolidated BS / P & L, it is a contra entry ( to be cancelled against each other )

Inter Plant Billings – peculiarities if the purchase contra entry is not made

Note that, a Sale of first plant is purchase of 2nd plant
But this cannot be automatic
The goods must also be linked to a MRR of the 2nd plant
( there has to be a physical counting and QC of these goods at 2nd plant )
Thus, Note that if the 2nd plant does not pass the Purchase voucher of this MRR
Sale bill is reflected in the ERP immediately
But the Purchase side is not reflected in the ERP till the PV is passed
Hence some temporary differences can be there

Inter Plant Billings – peculiarities under GST laws

if there is a inter-state( UP to Haryana Plant), it is a sale / branch tfr of type A with GST
if there is a within state of UP, it is a sale / branch tfr of type B .. without GST Delivery challan
so, different reports need to take these differently

Sale Bills of FOC goods

For GST, they are a turnover, GST is to be paid
But they are removed / treated separately for the customer account
Hence again , different reports need to take these differently

Final submission

All the above are a fact, and all combinations are required.
And Hence should be respected
and should be reconciled internally.

Thus, Finsys team submission is that, accounts is the final repository of all financial data.
And the final report given by P & L Account or Trial balance is the best report
And that must be considered, and given best credence.

Why are the Sales Figures different. in Different Reports. What is the logic behind this ? What is the Truth Reason ? What should I learn ?

ERP for Other Industries

How to do the Accounting of Advance and Retention money ?

Category Archives: Recent News

How to do the Accounting of Advance and Retention money ?

Good control on Purchase, Sales, Stores, Site Stores, Accounts and Taxation

Accounting concept in Project Business

Accounts to open

Project Summary

Entries to be done on Advance

Entries to be done on Invoicing

Entries to be done on Adjustment of Advance

Now, adjustment of Retention money – Part 1

Now, adjustment of Retention money – Part 2

Voucher for TDS income tax and TDS GST

for the Formatted File for the Accounting entries can be Download from link below

This page was to help you with Accounting entries in the Projects Finsys Retention Money Advance set off

Videos at Goa by Finsys Sangeet Gupta

Material Requirement Planning

this is a good 180 page powerpoint. Click on the link above

This is surely Material Requirement Planning , MRP, MRP2, one of the Best MRP Software in India

Material Requirement Planning

Material Storage Prevention and Scientific Planning using ERP Software Finsys

Material Requirement Planning page demo PPT

MRP Material requirement planning in Finsys ERP. How this is important. and how this is better than buying separately for each Sale order.

Recap on conditions….Conditions and GST precautions for Sale to Merchant Exporter for 0.1%

Conditions in GST for Export indirect … via Merchant Exporter…0.1% GST is not your “Right”, unless you do these duties.

Terms and conditions

Why are the Sales Figures different. in Different Reports ? with Logics ?

Finance for Non-Finance People

What is the logic behind this ? What is the Truth Reason ? What should I learn ?

Different Sales Figures in Finsys ERP .. How to Handle. Which figure is ok ?

Answers

Some reasons are as follows

Due to Sales returns / debit note from customer

Sales of capital goods

Sales invoice for “Purchase Return”

Any Debit note to customer ( additional income )

Reports may have different formats

For GST purposes

Show the other charges or not ?

Show the Sales data for selected Group parties only ?

Can there is one single “best report” for Sales for Accounts people ?

Inter Plant Billings – peculiarities under GST laws

Inter Plant Billings – peculiarities if the purchase contra entry is not made

Inter Plant Billings – peculiarities under GST laws

Sale Bills of FOC goods

Final submission

ERP Software for Corrugation Packaging, Plastic Moulding, Auto Components, Software for Industry, Made in India.,

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