CRM | e-Commerce | Accounting | Inventory | PoS | Project management | MRP | etc.
I'm using OpenERP 7 and my reports are wrong. Income Accounts show a negative balance and Expense accounts show a standard balance.
For example, on a Profit and Loss report,
Income ............................................. $ -100,000
This is exactly backwards. I did some googling and discovered this http://forum.openerp.com/forum/topic30728.html (old thread) but it's not exactly my problem, because in that example the Expense balance is negative.
Has anyone else encountered this problem or know how I can get this corrected?
In accounting all Debit Balances are represented with the Positive Sign. And all Credit Balances are represented with a negative sign. Some accountants represent debit balances with a bracket. The negative sign does not literally mean only deduction. Depending on the Account type, the negative sign can mean an Increase or decrease in an account balance. for example, the negative sign for a Sales account balance indicates an Increase in the sales account balance, whereas, the same negative sign for a expense account balance indicates a Decrease in the expense account balance and vice-versa. It may not sound intuitive, but this is part of the accounting language for accountants.
Assets, which include stock, investments, plant, buildings and amounts owed to the entity the accounts relate to are all recorded as DEBIT (Dr) amounts (think Debtors, the people who owe you money - they are an asset). In double entry accounting, debit amounts are treated as positive values.
Liabilities, which include amounts of money borrowed from others, bank overdrafts, amounts we owe to suppliers (creditors), are treated as negative values.
When we sell something to a customer, the amount we receive is posted as a debit(positive amount) to the Bank Account and the other side of the double entry is posted as a credit (negative amount) to the Sales Account..
So the way your account balances are showing is quite correct.
To quote -
It was first codified in the 15th century by the Franciscan friar Luca Pacioli. In deciding which account has to be debited and which account has to be credited, the golden rules of accounting are used. This is also accomplished using the accounting equation: Equity = Assets â Liabilities. The accounting equation serves as an error detection tool. If at any point the sum of debits for all accounts does not equal the corresponding sum of credits for all accounts, an error has occurred. It follows that the sum of debits and the sum of the credits must be equal in value.
I trust you are now better informed
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