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Accounts, Overview, Terminology

Invoices

Invoices are debts (sometimes called “Debit Notes”) or reasons why you should receive or pay money. They are held in “ledgers” where the ones relating to your income (or sales) are called “Sales Invoices” and are stored in the “Sales Ledger”. The ones relating to your outgoing (or purchases) are called “Purchase Invoices” and are stored in the “Purchase Ledger”. Typically you’ll use sales invoices to record commission due from insurers and for invoices to clients for general insurance policies or fee work. Again typically you’ll use purchase invoices to record pay-aways to sales people, the purchase of general insurance net premiums and the purchase of everyday goods and services, such a rent, telephones, etc.

Credits

Sometimes you have to issue a refund, for example where you have mistakenly overcharged one of your customers, or for commission clawback. This is effectively a negative sales invoice, and is known as a “Sales Credit” or “Sales Credit Note”. Likewise you may request a refund from one of your suppliers for some faulty goods. In this case the negative purchase invoice is called a “Purchase Credit”.

Orders

Orders are identical to invoices, just at an earlier stage. They are used, for example, to check the price of goods you wish to buy. Before buying you might for example, confirm with your supplier that a box of paper will cost £20, and create a purchase order on your own system for one box. Subsequently, when the box arrives with an invoice from the supplier, you can confirm the supplier’s invoice matches the agreed price on the order, and then amend the order to reflect the extra details on the supplier’s invoice, such as for the invoice date (as compared to your order date) and the supplier’s invoice number (as compared to your internally generated order number). All orders should thus end up being converted into invoices. The use of “orders” is entirely optional.

Cashbook Receipts & Payments

All the receipts and payments that resolve outstanding invoices are recorded in a “Cashbook”, which nowadays in addition to “cash” also includes for settlement by cheque, credit card, direct debit and so on. All such monetary receipts are called “Cashbook Receipts”, while all such payments are called “Cashbook Payments”.

Bankbooks and Cashing-up

In real life, after you have received a number of cheques, you add them up and take them to your bank, where you might have a number of different bank accounts. This process is known as “Cashing-up”. The computer system allows you to have as many bank accounts as you like, all of which may be viewed via the “Bankbook” button, though only one at a time. The main purpose of the computer’s bankbook is to allow you to reconcile your real life bank statements with those on the computer. Ideally therefore, your computer bankbooks should exactly match your real-life bank statements, both with regard to banking dates and the grouping of receipts cashed-up together.

Table of Transaction Types

Sales Ledger

SI

Sales invoice

Someone owes this money to you

SC

Sales credit

You need to refund this money to someone

SO

Sales order

Someone will owe this money to you, when confirmed

Purchase Ledger

PI

Purchase invoice

You owe this money to someone

PC

Purchase credit

You need to get a refund for this money from someone

PO

Purchase order

You will owe someone this money, when confirmed

Cashbook

CR

Cashbook receipt

All money you have received

CP

Cashbook payment

All money you have paid

Bankbook

Bank transactions

Those receipts and payments for a given bank account