1.4 Anglo-Saxon Accounting: Introduction Odoo Accounting

The Anglo -Saxon Accounting is suitable for small localities such as the countries in the United States, United Kingdom, Ireland, Canada, Australia, and many other countries. The 1.4 Anglo-Saxon Accounting: Introduction Odoo Accounting | Odoo 16 Accounting Book in Odoo is only available in the enterprise edition. These two accounting systems, Continental and 1.4 Anglo-Saxon Accounting: Introduction Odoo Accounting | Odoo 16 Accounting Book, have noted many differences. In Continental Accounting, we discussed that the expense account is affected by a purchase. But in 1.4 Anglo-Saxon Accounting: Introduction Odoo Accounting | Odoo 16 Accounting Book, the expense account gets affected after processing a sale order.

If you want to get the full feature of Anglosaxon accounting, you want to activate the feature from the Odoo Accounting Configuration Settings. One more significant feature of the 1.4 Anglo-Saxon Accounting: Introduction Odoo Accounting | Odoo 16 Accounting Book system is the cost distinctions between Account and Stock account properties when the inventory valuation is automated. The price difference account is applied to record the difference in price between the vendor bill and the purchase order.

Transactions in Anglo-Saxon Accounting

In some scenarios, the expense will not record when it is purchased. The purchases may be bulk purchases and will be consumed for a long period of time. Therefore, adding those as an expense to financial entries will create a greater impact on the profit and loss of the company. As a result, in order to handle those situations, it is a standard practice to record purchased items as assets and expenses at the time of consumption. The expense of consumed assets is recorded in ledgers.

We will begin with the purchase of a product.

Purchase Order:

Creating purchase orders generates only a valid document for receiving goods or services from the vendor, which will not affect any accounting ledgers.

Receipt:

Once the receipt of goods is acknowledged, the incoming assets have to be recorded in stock. Thus stock accounts get affected, both stock input accounts and stock valuation accounts.

Accounts	Nature	Increasing/Decreasing	Debit/Credit
Stock valuation account	Asset	Increasing	Debit
Stock Input account	Asset	Decreasing	Credit

Here the incoming value or stock recorded in the ‘Stock input account’, this will be considered as assets and if it is not sold out or consumed, thus it becomes a liability. So it can be either Liability or Assets. [ Liability = -Assets, as liability increases or asset decreases]

Return:

In some cases, there will be a chance of returning the purchased product due to quality issues or product damage. Thus the stock move is just the opposite of the incoming, and stock accounts are reversed.

Accounts	Nature	Increasing/Decreasing	Debit/Credit
Stock valuation account	Asset	Decreasing	Credit
Stock Input account	Asset	Increasing	Debit

Accounts	Nature	Increasing/Decreasing	Debit/Credit
Account Payable	Liability	Increasing	Credit
Tax Account	Asset	Increasing	Debit
Stock Input account	Asset	Increasing	Debit

In Anglo-Saxon, as mentioned above, the direct expense will not be recorded at the time of purchase; instead, it will be recorded as an asset. Thus here, ‘Account Payable’ and ‘Stock interim accounts’ are affected once a bill is generated. Account Payable records the amount to pay for the vendor. Thus on bill generation the payable amount to the vendor increases, which increases the liability of the company and the Account Payable credited.

Register Payment:

Registering payment makes payment or sends money to the vendor. During this process, ‘Account Payable’ and ‘Outstanding Payment Accounts’ get affected.

Accounts	Nature	Increasing/Decreasing	Debit/Credit
Account Payable	Liability	Decreasing	Debit
Outstanding Payments	Liability	Increasing	Credit

As the company makes payment to the vendor, the liability of the company decreases. Account payable records the payable liabilities of the company. Thus Account Payable, whose nature is a liability, and as liability decreases, it gets debited.

The Outstanding Payment account is the intermediary account that is used along with cash and bank journals that keeps unreconciled outgoing payments. And these outstanding payment accounts are used to reconcile with the bank statement rather than the Account payable. Thus here on registering payment ‘Outstanding Payments’ account gets credited as liability increases.

Reconciliation:

As the next level bank statement has to be matched with vendor payment. So on reconciliation, the ‘Outstanding Payment’ and ‘Bank’ accounts are affected.

Accounts	Nature	Increasing/Decreasing	Debit/Credit
Outstanding Payments	Liability	Decreasing	Debit
Bank Account	Asset	Decreasing	Credit

In this process, it will record the payment is finally sent to the vendor from the bank account. Thus asset in ‘Bank’ decreases, and hence bank is credited and liability in ‘Outstanding Payment’ decreases, and thus it is debited.

The overall journal entries of the purchase process are shown in the table below.

Operation	Accounts Affected	Debit	Credit
Purchase order	No Accounts Affected
Material Receipt	Stock Valuation Account Stock Input Accountt	XX ..	.. XX
Purchase Bill	Stock Input Account Account Payable Tax Account	XX .. XX	.. XX ..
Registering Payment	Account Payable Outstanding Payments	XX ..	.. XX
Reconciling	Outstanding Payments	XX
...	Bank Account		XX

Now let's look at the Sales Process.

The sales transaction involves different operations, including order creation, processing delivery of the product to the customer, invoice generation, and its payment and reconciliation.

Accounts	Nature	Increasing/Decreasing	Debit/Credit
Stock valuation account	Asset	Decreasing	Credit
Stock Output account	Asset	Increasing	Debit

Accounts	Nature	Increasing/Decreasing	Debit/Credit
Stock valuation account	Asset	Increasing	Debit
Stock Output account	Asset	Decreasing	Credit

Accounts	Nature	Increasing/Decreasing	Debit/Credit
Income Account	Income	Increasing	Credit
Account Receivable	Asset	Increasing	Debit
Tax Account	Liability	Increasing	Credit
Stock Output Account	Asset	Decreasing	Credit
Expense Account	Expenses	Increasing	Debit

Accounts	Nature	Increasing/Decreasing	Debit/Credit
Accounts Receivable	Asset	Decreasing	Credit
Outstanding Receipts	Asset	Increasing	Debit

Accounts	Nature	Increasing/Decreasing	Debit/Credit
Accounts Receivable	Asset	Decreasing	Credit
Outstanding Receipts	Asset	Increasing	Debit

The receivable accounts record the amount that has to be received from the customer. The nature of ‘Account receivable’ is Asset. As the customer makes payment, assets decrease and are credited. The incoming payments were then temporarily kept in the ‘Outstanding Receipts’ account and reconciled with the ‘Bank.’ The nature of the Outstanding Receipts account is Assets, and as the asset increases, it is debited.

Accounts	Nature	Increasing/Decreasing	Debit/Credit
Outstanding Receipts	Asset	Decreasing	Credit
Bank account	Asset	Increasing	Debit

The overall journal entry is as follows.

Operation	Accounts Affected	Debit	Credit
Sales order	No Accounts affected Stock valuation account	NA ..	NA XX
Delivery Note	Stock Output account	XX	..
Customer Invoice	Income Account Account Receivable Tax Account Stock Output Account Expense Account	.. XX .. XX XX	XX XX XX XX ..
Registering Payment	Accounts Receivable Outstanding Receipts	.. XX	XX ..
Reconciling	Outstanding Receipts	XX	XX
...	Bank Account	XX	..