Sage 50 Accounting Basics

Slideshow 1A

• Two types of accounting software 3

– Modular System 3– Integrated System 5

• Sage 50 Accounting Basics 9

– Session Date 10– The Sage 50 Accounting HOME Window

12– Classic View 12– Enhanced View 13

– Dashboard 15– The LOOKUP Button 16– Using HELP 17– Drilldown 18– Graphs 19

• GAAP 20-29

Contents

Slideshow 1A

GeneralLedger

Accounts Receivable

Accounts Payable

Payroll

Inventory

Order Entry

There are two types of computerized accounting systems: modular and integrated.

Modular SystemModular System

In the modular system, each component of the accounting software works independent of the General Ledger and of each other. This is commonly used in large companies, especially when company operations are conducted in separate departments.

Study the illustration at right.

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GeneralLedger

Accounts Receivable

Accounts Payable

Payroll

Inventory

Order EntryFinancial Statements

Modular System Modular System (continued)(continued)

At the end of an accounting period, or whenever financial statements are required, the data from the various modules are consolidated with the General Ledger.

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It is only when the data from the subledgers have been consolidated with the General Ledger that accurate financial statements may be produced.

Examples of this type of system are ACCPAC ERP series, Great Plains, Solomon, etc.

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Integrated SystemIntegrated System

An integrated accounting system works very differently. Although there are different modules, they are connected as one united system, with the GENERAL LEDGER as the hub.

Sage 50 Accounting is a good example of an integrated system

Study the basic structure of Sage 50 Accounting at the right.

Click to continue.General Ledger

Accounts Receivable

Accounts Payable

Payroll

Inventory & Services

Projects

General Ledger

Payroll

Inventory & Services

Projects

ReceivablesClient Sub-Ledgers

PayablesVendor Sub-Ledgers

Integrated System Integrated System (continued)(continued)

When a transaction is entered in one module, all other related modules are updated.

For example, if you enter a sale of merchandise on credit in the Sales Journal of the RECEIVABLES module,

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…the ACCOUNTS RECEIVABLE account in the General Ledger is increased,

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…and the corresponding client’s record is updated.

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General Ledger

Employees & Payroll

Inventory & Services

Projects

ReceivablesClient Sub-Ledgers

PayablesVendor Sub-Ledgers

Integrated System Integrated System (continued)(continued)

Similarly, when the company pays for a purchase on credit, you would enter the payment in the Payments Journal of the PAYABLES module.

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The vendor’s record is updated,

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…and the CASH and ACCOUNTS PAYABLE accounts in the GENERAL LEDGER are updated accordingly.

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General Ledger

Employees & Payroll

Inventory & Services

Projects

ReceivablesClient Sub-Ledgers

Payables Vendor Sub-Ledgers

Financial Statements

Integrated SystemIntegrated System (continued)(continued)

As in the modular system, financial statements are printed from the General Ledger module. The integrated type of accounting software is commonly used in small-to-medium-size companies, especially when all accounting functions are done in one office. Examples of this type of accounting software are Sage 50 Accounting and QuickBooks.

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Sage 50 Accounting Sage 50 Accounting BasicsBasics

The standard modules in Sage 50 Accounting include:

- COMPANY (contains G/L)

- Customers & Sales (Receivables)

- Vendors & Purchases (Payables)

- Employees & Payroll

- Inventory & Services

- Projects

- Banking

You can change the name of any module, if desired. Study the relationship of the various modules to the COMPANY module and to one another.

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Another module, Time & Billing, is also available to record details of hours spent on clients in order to determine billable hours for invoicing. Time & Billing is in Appendix S.

The features illustrated in the slides that follow apply to all modules. Other special features will be shown in relevant chapters where they can be used to best advantage.

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COMPANY

Employees & Payroll

Inventory & Services

Projects

Receivables Payables

Time & Billing*

Client Sub-Ledgers

Vendor Sub-Ledgers

Banking

Sage 50 Accounting Basics:Sage 50 Accounting Basics: Session DateSession Date

Session date is the current working date. Never click the box for “Do not show this message again “ if you wish to keep track of the session date. When you click the CALENDAR beside the Session Date box...

Click calendar now (see red arrow)

…you can select one of the dates by clicking on it.

Click 30 on the April calendar.

A warning appears.

Click OK.

The new session date will display. You may change it if desired.

Click OK now.

Notice that the current session date automatically becomes the default transaction date for all transactions until you change the session date. However, you may change the transaction date when necessary.

You will learn more about session dates in the next slideshow.

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Session Date Session Date (continued)(continued)Changing the Session Date Changing the Session Date while in Sage 50 Accountingwhile in Sage 50 Accounting

The Session date box automatically comes on as soon as you open a company file in Sage 50 Accounting. You may accept the current session date or change it to a new date by clicking the calendar beside the current session date at the upper right corner of the Home window (see red arrow).

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The The Sage 50 Accounting Sage 50 Accounting HOME Window – HOME Window – ClassicClassic View ViewThere are two options available to view the HOME page: The CLASSIC or ENHANCED View. Study the Sage 50 Accounting Home window in CLASSIC view below. Notice that all the modules are displayed.

As in any other Windows applications, the Sage 50 Accounting window has a title bar, a main menu bar, and a toolbar with icons on top of the screen. The module titles are shaded, followed by the corresponding ledgers. The various journals provide windows where you would input transactions.

The history (quill) symbol indicates that the module is ready to accept historical transactions, but not new transactions.

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The The Sage 50 Accounting Sage 50 Accounting COMPANY Module Window – Enhanced ViewCOMPANY Module Window – Enhanced ViewIn the ENHANCED View, only one module is displayed at any one time. This is the ENHANCED View of the COMPANY module which includes the Chart of Accounts and the GENERAL JOURNAL (see red arrows).

You may change the name of any of the modules to suit your company’s setup. Study the COMPANY window now.

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modules

You can find detailed information about the Home Window in a 7-minute tutorial at the LEARNING CENTRE. Study what tutorials you can find in the Learning Centre.

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The RECEIVABLES module contains the customer files and keeps track of sales and payment transactions with customers.

The PAYABLES module contains the vendor (supplier) files keeps track of money owed and paid by the company to vendors

The INVENTORY & SERVICES module contains the Inventory files and keeps track of Inventory quantities and costs.

The EMPLOYEES & PAYROLL Module is used to keep track of employee records, income and deductions. Sage 50 Accounting automatically keeps track of taxes and remittances due to specified payroll authorities.

The The Sage 50 Sage 50 ModulesModules

Click each of the modules below from top to bottom and read the corresponding explanation at the right.

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The BANKING module is where BANK (or CASH) transactions are tracked. It also allows you to perform Bank Reconciliation with the company records (referred to as ACCOUNT RECONCILIATION).

The PROJECTS module allows you to allocate assets, purchases, revenue and expenses for particular business activities to or to projects, division, department or job sites.

It is in the COMPANY module that you would create company files including the Chart of Accounts. General Journal transactions are entered in the Company module.

DashboardDashboardThe Dashboard offers you a visual snapshot of your company's performance and activities that enable you to make informed decisions in a timely manner. The Dashboard button (see below) is above the module listing on the Home page.Click each circled number below and study the explanation of eachpart of the Dashboard.

The Performance dashboard displays critical business information in a graphical format using your company's current financial data. Each individual section is referred to as a widget.

The other type of dashboard is Trends Forecast dashboard. This type is available only in the Quantum version of Sage 50 Accounting.

Revenue: Year to Date. Shows your company's net income and how it is derived from your revenues and expenses. Use this widget to determine how well your business is doing year-to-date.

Account Balances. Active accounts and their balances. You can display how much cash your business has, what is owed to your business, and what your business owes.

Aged Sales Invoices. Displays the invoice amounts owed to your company based on the aging periods that you've set up in Sage 50 Accounting.

Aged Purchase Invoices. Displays amounts owed to your vendors based on the aging periods that you've set up in Sage 50 Accounting.

Revenue versus Payroll Expenses. Provides a side-by-side comparison of your company's revenue and your payroll expenses. Used to determine if your company's month-to-month payroll costs are reasonable relative to revenues earned.

Items on Order. Displays the number of items currently recorded on sales orders or back-ordered in sales invoices, and the number of items currently recorded on purchase orders or back-ordered in purchase invoices. Use this widget to quickly see how many items you have on sales orders, and decide if you have enough inventory to fill your orders or whether you should order more.

The LOOKUP ButtonThe LOOKUP Button

Whenever you see the LOOKUP button beside a field, you can click it…

Click the LOOKUP button beside the INVOICE field (see arrow)

… a Search box will appear that will allow you to specify what you are looking for. In this example, because the field where the LOOK UP button is for INVOICE, the LOOKUP window for Purchase Invoices (see where arrow is pointing) will appear.

Click to continue.

Using HELPUsing HELP

HELP in Sage 50 Accounting works very much like Help in other Windows applications.

Click the circled numbers on the Home window and study the various ways you can get HELP.

Type your question here, then click HELP SEARCH and a help screen would appear, providing a number of HELP resources (see below).

HELP on the main menu allows you several options.

Allow you to do a Basic or Advanced search based on certain criteria.

DrilldownDrilldown

In Sage 50 Accounting, you can go deeper into an entry in many of the reports or parts of financial statements to see more detail.

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Move your pointer around the report (without clicking). Any time the mouse pointer changes to a magnifying glass with a plus sign in it (see red arrow), you can see more details about the specific entry. For example, if you wish to view the details of the HST Charged on Sales of Santos Luggage as shown on the statement, you would place your mouse over the entry (see the magnifying glass) and double-click on it.

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The corresponding document will then display.

This feature is available in any report.

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GRAPHSGRAPHS

A picture is worth a thousand words. If you wish to display data in graphic format, Sage 50 Accounting provides some graphing capabilities. Study the list that displays by clicking GRAPHS on the Main Menu (see right).

Click Sales vs. Sales Due now.

…you can then enter the specifics for the report.

Click SELECT ALL to view the resulting graph.

This is a column bar chart. Sage 50 Accounting provides various types of graphs. HELP gives you a description of all graphs available in Sage 50 Accounting.

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GAAP

A set of policies, procedures and guidelines that direct accounting practitioners to record and report financial information.

GAAP is published in a handbook GAAP is published in a handbook by the Canadian Institute of by the Canadian Institute of Chartered Accountants (CICA).Chartered Accountants (CICA).

Generally Accepted Generally Accepted Accounting Principles Accounting Principles (GAAP)(GAAP)

How would you know how to interpret and record a business transaction? Processing transactions in Sage 50 Accounting is no different from what you have already learned in your Accounting course using Generally Accepted Accounting Principles (GAAPGAAP).

Click and study the definition.

GAAP not only guides you in determining how to treat transactions and communicate financial information but it can also help interpret financial statements between companies.

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Representational Faithfulness

Accounting information must be complete, neutral (truthful, factual, unbiased), and it must be reliable (without material errors/supported by objective evidence).

GAAP (Review):GAAP (Review):

Representational Representational FaithfulnessFaithfulness

Click and study the Represenational Faithfulness principle, then read the example below.

Example: A company should use and file relevant source documents (invoices, cheques, memos, etc.) that can be verified and are free of any personal bias and judgment. These source documents should be part of the audit trail.

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Historical Cost Principle

Items are recorded at their acquisition cost transacted with an outside party.

GAAP:GAAP: Historical Cost Historical Cost PrinciplePrinciple

You will apply GAAP when you complete the exercises in the various modules. The slides that follow discuss the principles that apply to ALL types of transactions.

First is the Historical Cost Principle.

Click and study the principle, then read the example below.

Example: A computer bought for $3,000 is recorded as an asset at the time of purchase. If the value of that same computer decreased in price to $2,500 shortly after purchasing it, the value in the accounting records remains the same. Any change in the market value of the asset does not get reflected in the accounting records.

This principle is followed even when the value of the asset increases.

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Full Disclosure Principle

Full disclosure requires that all relevant information pertaining to the firm that may be important to the users of the information must be revealed on the financial statements.

GAAP (Review):GAAP (Review):

Full Disclosure Full Disclosure PrinciplePrinciple

Next is the Full Disclosure Principle.

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Example: A firm may report an unusually high amount of a particular expense on the Income Statement. To avoid confusion or misunderstanding, the entry should include a note explaining the high expenditure item, thus following the Full Disclosure Principle.

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Business Entity Concept

A company’s financial information is recorded and reported separately from the owner’s personal financial information.

GAAP (Review):GAAP (Review):

Business Entity Business Entity ConceptConcept

Click and study the concept of Business Entity, then read the example below.

Example: The company’s financial records should not include information about the owner’s personal belongings, such as a house or a personal car. The owner should also have his or her own bank account separate from the company’s bank account.

If the owner wants to invest more money into the business, a cheque or money transfer should be made to the company and recorded in the company books as additional investment.

If the owner takes any item that belongs to the business(e.g., computer equipment) for personal use, it should be recorded as a withdrawal.

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The economic life of a businesscan be divided into time periods.

Time Period Concept

GAAP (Review):GAAP (Review):

Time Period ConceptTime Period Concept

Click and study the principle.

According to this principle, an organization’s activities are identified with specific time periods; e.g., a month, three-month quarters, or a year.

Most companies prepare monthly (month-end) reports and use one year (year-end) as their primary accounting period.

The annual reporting period (referred to as fiscal year) is not always the same as the calendar year ending December 31. A fiscal year can consist of any 12 consecutive months.

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Comparability (Consistency) PrincipleIn the preparation of financial statements, the same accounting concepts are applied in the same way in each accounting period.

GAAP (Review):GAAP (Review):

Comparability Comparability (Consistency) Principle(Consistency) Principle

Click and study the principle, then read the example below.

Example: Owners and managers use information reported on financial statements when making decisions. Information from one year is often compared to previous years’. If accounting information is recorded and reported differently from one year to the next, the information cannot be compared.

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GAAP (Review):GAAP (Review):

Matching PrincipleMatching Principle

Click and study the principle and example below.

Example:

An accounting consultant, Faye Anderson, bought $600.00 worth of paper and printing supplies in December. In the same month, she collected $2,800.00 consulting fees from her clients.

Faye entered $600.00 for paper and printing supplies as prepaid asset at the time of purchase.

At the end of the month, she calculated that she used up $285.00 worth of the supplies she purchased earlier. When Faye prepares her monthly financial statement for December, she should report the $2,800.00 revenue and her expenses to earn the revenue, including $285.00 (not $600.00) for supplies.

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Matching Principle

Expenses are matched with revenues in the period when efforts are made to generate the revenue.

GAAP (Review):GAAP (Review):

Revenue Recognition Revenue Recognition and Realization and Realization PrinciplePrinciple

Click and review the principle and read the example below.

Example:

Some businesses sell goods or services for cash only; other businesses sell goods or services on one date and receive payment from customers on a later date.If a customer buys merchandise on June 1 and pays on July 15, the seller records the sale on June 1, not on July 15 when payment is received.

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Revenue Recognition and Realization Principle

Revenue from business transactions is recorded at the time goods or services are sold for cash or on credit.

Sage 50 Accounting Basics:Sage 50 Accounting Basics:

Other Common Other Common FeaturesFeatures

Other Sage 50 Accounting features will be illustrated as you do the exercises in the various modules.

Go back to your text and proceed from where you have left off.

If you wish to get more information about the Home window, open a Sage 50 Accounting company file, click Learning Centre at the left panel and view the 7-minute tutorial THE HOME WINDOW.

Press ESC now and click the EXIT button.

EXIT