Product Classes
This article will describe the Product Class set up and how it relates to accounting for Product sales, inventory value and new Product defaults.
Product Classes are found in the Warehouse Management module.
The primary purpose of the Product Class record is to provide a bridge between the sales, production and warehouse operations & the General Ledger accounting system in AcctVantage. By assigning a Product Class to each Product in AcctVantage, the staff in charge of creating new Product records or managing Inventory do not need to be well versed in the accounting operations.
The Product Class determines the Inventory (Asset) account, Sales (Income) account and Cost of Goods Sold (Expense) account for each Product assigned to the Product Class. The Product Class can also establish default attributes (e.g. Unit of Measure, Product Type, Price Breaks, etc.) for new Product records assigned to the Product Class.
Product Class setup
1. GL Definitions
The GL Definitions tab is where all of the GL accounting info is defined for the Product Class.
1.1. Warehouse Information
Warehouse Information is where General Ledger accounts are defined to be used for all activity for the Products in the Class. GL accounts are assigned for each Warehouse that the Product Class is active in. In this manner you can separate GL activity by Warehouse without having to create new Classes or Products based on location.
- Active: Denotes whether this Product Class is active for the specified Warehouse on each line.
- Warehouse Name: Each of the Warehouses you have created in Acctvantage will appear in this list. To enable a Product Class for a Warehouse, click in the Active column to place an X.
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GL Inventory Account Code (A): This indicates which GL Account is used to capture the value of Inventory on-hand.
- This GL account requires the Setup Type A - Inventory.
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GL Def Revenue Acct Code (L): Account used to capture the liability for Invoiced items that are not yet shipped. Even if you don't intend to use this feature, an account must be established. Please refer to the article on Deferred Revenue for more information on that topic.
- This account requires the Setup Type L - Deferred Revenue.
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GL Income Acct Code (I): This is the default account used to recognize revenue for the indicated Warehouse. Typically you would use an Income account for this purpose, but AcctVantage does allow you to use an Expense account.
- This account does not require any special Setup Type.
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GL Cost Account Code (E): This is the default account used for Cost of Goods sold reporting for sales in the indicated Warehouse. Typically you would use an Expense type account here, but Income accounts are also allowed.
- This account does not require any special Setup Type.
In the screen shot example above, if we were to sell an item that belongs to the Finished Goods class and ship from the Downtown Warehouse, we would expect the following entries on the General Ledger:
- Credit to 14200-000-000 to recognize the sale of an Inventory Asset.
- Debit to 50000-000-000 to recognize the Cost of Goods Sold.
- Credit to 40000-000-000 to recognize the sales revenue
- Debit to Accounts Receivable, Cash, or similar depending on the Invoice payment terms.
When setting up Product Classes for Non-inventory or Freight items, you still need to enter an account for Inventory, Deferred Revenue and Cost.
1.2. Client Category Overrides
The Client Category Overrides section provides a mechanism to account for sales differently based on a particular Client Category.
The Product Class default would normally charge COGS to the 50000-000-000 account. However, on the Sales Order example below, we've indicated the Client Category Domestic, so in this case the COGS will be coded to the 50000-000-100 account because of the Client Category Override setting. Note the Revenue account is also different for this Client Category.
Note: The Client Category assigned to the Sales Order is set by default from the Client's master record. It can be changed on the Sales Order as needed.
2. New Product Defaults
The New Product Defaults tab of the Product Class is used to assign default attributes for new Products added to this Product Class. Each field on this screen corresponds to a field on the Product Master record. When setting up a new Product, these defaults may be overridden as needed.
Notes:
- MRP defaults correspond to the settings on the Inventory tab of the Product. Set these settings to have the Minimum and Maximum Stock setting automatically calculated when Inventory Stats are calculated.
- As the title would suggest, this screen only applies to NEW Products added to AcctVantage. Changing a setting here does not affect existing Products in any way.
3. Price Break Defaults
This tab will assign Price Breaks to new Products added to the Class. Changes made here do not affect existing Product records in any way.
Assigning a Product Class to a Product
When adding a new Product to AcctVantage, the user will need to enter the name of the Product Class. Once the Product Class is assigned, AcctVantage takes care of assigning the appropriate GL mapping for any transactions related to that Product and assigns the default attributes for the Product.
Pro-tip: To get a list of Product Classes, type the "@" symbol into the Product Class field and hit tab.
Note: Once you have assigned a Product Class to a Product record, it cannot be changed as long as there is current inventory. You will need to draw ALL inventory for the Product out of stock, then change the Product Class and then add the inventory back to stock.
