What is a Product Class?
This lesson 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 (Inventory or Administration modules in AV 2015 and earlier).
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.
Note: Once you have assigned a Product Class to a Product record, it cannot be changed!
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.
GL Definitions Tab - Accounting for Sales & Inventory Activity
The GL Definitions tab assigns General Ledger accounts 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.
- Warehouse Name: Each of the Warehouses you have created in Acctvantage will appear in this list. To allow a Product Class for each Warehouse, click in the Active column to place an X.
- GL Inventory Account Code (A): This indicates which GL Account is used to capture the value of Inventory on-hand. This GL account must be labeled with the Setup Type A - Inventory.
- 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.
- GL Income Acct Code (I): This is the default account used to recognize revenue for the indicated Warehouse. Note that you normally use an Income type account for this purpose, but AcctVantage does allow you to use an Expense account. This account does not require any special Setup Type.
- GL Cost Account Code (E): This is the default account used for Cost of Goods sold reporting for sales in the indicated Warehouse. Normally 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 loss of Inventory Asset
- Debit to 50000-000-000 to recognize the Cost of Goods Sold
- Credit to 40000-000-000 to recognize the sales income/revenue
- Debit to Accounts Receivable, Cash, or similar depending on the Invoice payment terms.
Client Category Overrides
The Client Category Overrides section provides a mechanism to account for sales differently based on a particular Client Category.
In this example, the Product Class default would be to code the COGS to the 50000-000-000 account. However, on the Sales Order, 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.
New Product Defaults
The New Product Defaults page of the Product Class is used to assign default attributes for Products added to this 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.
Note: 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.