advanced accounting guide - constructor...

119 - 121 Myers Street Geelong Vic 3220 03 5221 4900

[email protected]

ADVANCED ACCOUNTING GUIDE

Advanced Accounting Guide

14/08/2015 Page - 2

11 CCoonntteennttss

1 Contents ................................................................................................................................................................ 2

2 Overview ................................................................................................................................................................ 4

3 Subsidiary Ledger Journals ................................................................................................................................... 5

3.01 Creating a new subsidiary ledger journal – Example 1: stock transfer ................................. 5

3.02 Example 2: Apportionment of construction risk insurance premium to a specific job. .......... 7

4 Correcting erroneously posted transactions .......................................................................................................... 9

4.01 Editing a locked invoice ......................................................................................................... 9

4.02 Using the Subsidiary Ledger Journal to correct an invoice ................................................. 11

5 Payment of wages in Constructor ....................................................................................................................... 13

5.01 Payment of wages with on-costs - Method 1 ....................................................................... 13



5.04 Effect on BAS and project budget. ...................................................................................... 16

6 Dissecting direct wages to a specific Cost of Sales account .............................................................................. 17

6.01 Creating the general ledger account ................................................................................... 17

6.02 Linking cost centres and components to a specific general ledger account. ...................... 17

6.03 Directing Constructor to use these links instead of the default. .......................................... 19

7 Payment of GST and Withholdings. .................................................................................................................... 21

7.01 Method 1 – single line remittance – DO NOT USE! ............................................................ 21

7.02 Method 2 – multi line remittance balances off GL. .............................................................. 21

7.03 Method 3 – using clearing account ...................................................................................... 22

8 Retentions ........................................................................................................................................................... 23

8.01 Setting General Ledger defaults for retentions. ................................................................... 23

8.02 Assigning Project retention settings .................................................................................... 24

8.03 Setting retention release notifications.................................................................................. 25

8.04 Entering a “Retention” invoice. ............................................................................................ 25

8.05 Paying retention releases .................................................................................................... 27

8.06 Retention reports. ................................................................................................................ 27

9 Example transactions .......................................................................................................................................... 29

9.01 Creating a “Contra” account ................................................................................................ 29

9.02 Writing off a bad debt using the “Contra” account. .............................................................. 29

9.03 Payment of vehicle loan ...................................................................................................... 29


14/08/2015 Page - 3

9.03.1 GST IS creditable on the purchase ..................................................................................... 31

9.03.2 GST IS NOT creditable on the purchase ............................................................................. 31


14/08/2015 Page - 4

22 OOvveerrvviieeww

This document is a collection of more advanced accounting topics such as the payment of direct wages with on-costs, dissecting project expenditure to specific Cost of Sales accounts, tips on payment of GST and withholdings, retention management, sub-journals and the correction of locked transactions.


14/08/2015 Page - 5

33 SSuubbssiiddiiaarryy LLeeddggeerr JJoouurrnnaallss

Constructor provides a transaction type called the “Subsidiary Ledger Journal”. The intention of this transaction type, and its name, is to imply the capability of moving balances between subsidiary ledgers. However, Constructor doesn’t actually use subsidiary ledgers as such; all subsidiary ledgers are logically contained within the general ledger.

To explain this structure it may be useful to think back to the “pencil & paper” accounting days when, for example, the “creditors ledger” was a separate book. When reconciled at the end of the period, this balance was transferred to the “general ledger”. In Constructor, creditor transactions (and all virtual subsidiary ledger transactions) are applied directly to the general ledger.

The need for a “subsidiary ledger journal” capability becomes apparent when it is required to move balances from a GL account, say “Stock on Hand”, to a specific project and cost centre – which don’t exist in the GL. I.e. the subsidiary ledger journal can emulate, for example, a “job costing subsidiary ledger” account in a transfer journal. Constructor currently provides this in accounts payable only.

We will use the example of journaling an item from stock to a particular project and cost centre to demonstrate.

Sub Journals (for short) are accessed similarly to general journals:

Click Accounting on the main menu bar, (refer image at right)

Click the General Ledger option in the Accounting menu,

Click the Subsidiary Journals option in the General Ledger sub-menu.

The “Subsidiary Journals Summary” screen opens as below.

As with the General Journals Summary screen, the Subsidiary Journals Summary screen provides the usual New, Open, Print, Preview and quick filter bar facilities. In addition, the “Account” lookup has been extended to include to project and cost centre lookup filters. Remember, as with many summary screens in Constructor, you can use the text search facility from the quick filter bar on the note field to perform any custom filtering / searching.

3.01 Creating a new subsidiary ledger journal – Example 1: stock transfer

The following example demonstrates the use a subsidiary ledger journal to move an amount from the GL account “Stock on Hand” to “”Cost of Sales” and to a specific project and cost centre.

2 Select line type – S for Stock

(Component) or C for Cost Centre.

3 Click the ellipsis

( ) to look up a link

1 General Ledger links


14/08/2015 Page - 6

Click the “New Creditor Journal” button on the Subsidiary Journals Summary screen toolbar.

A new sub journal screen opens with a system defined ID number, accept this or overwrite it with your own transaction ID, so long as it is unique.

Enter the transaction date and notes as required.

Click the Add button at bottom left of this screen to add a detail line, (or Alt+A).

All fields on a detail line, except for the GL (General Ledger) Account ID and Debit / Credit amounts are optional.

If only the GL links are used, then this transaction would be identical in function to a general journal. Therefore, think of the subsidiary journal as being a general journal that is extended to link with one or more of the additional project, creditor and / or stock/cost centre details.

The “Type” drop-down field specifies whether the line “Item” field is to be used to link to either an “S” (Stock or Component) or “C” (Cost Centre) item.

The Project ID, Creditor ID and Item ID may be either entered directly if known, or browsed for using the look-up button.

Click the ellipsis ( ) button on the appropriate field; refer callout 3, to look up one or more of the Project, Creditor or Item links as required.

When entering an “Item” link, first select the item type as shown in callout 2.

Select the General Ledger account to which the detail line is to be linked, refer callout 1. All detail lines must be linked to a GL account and the journal must be balanced before the system will allow you to save.

When your sub journal is completed and balanced, click the “Save” button.

The Budget screen (Project Status by Cost Centre) now includes a Journal column, which displays the sub journal posted against the project and cost centre.

To view a project’s budget screen:

Click the “Projects” button on the main screen toolbar.

Locate the required project, apply filters if required, and single click to select the project.

Click the “Accounting” tab in the centre of the tab strip below the project summary grid.

Click the “Budgets” button at the lower left of the accounting tab.

The “Project Status by Cost Centre” screen opens as above. The example shows the effect of the journal on the project budget. As with the “Orders $”, “Invoices $” and “Payments $” cells, the “Journals $” cell may be double-clicked to jump to the sub-journal summary screen filtered on the project and cost centre.

The table below uses “T” accounts to demonstrate the effect on the general ledger accounts of the above example and extends it to include the three transactions: invoice to stock, the sub-journal from stock to the job and the payment of the invoice.

1. Invoice to stock is a normal invoice with a “G” line type except that it is posted to the asset account “Stock” instead of the usual “Cost of Sales”.

2. The sub-journal then moves the stock amount to cost of sales. Note that GST is not effected by the sub-journal. In practice the amount invoiced to stock may be for many hot water services (as in the example). The sub-journal balances off the stock account as the items are used on projects.

3. The Payment balances off creditors to your bank account as usual.


14/08/2015 Page - 7

As far as the GL is concerned, all of this could be achieved with a general journal. However, unlike a sub-journal, the general journal cannot specify the project or cost centre to which the stock is to be moved.

3.02 Example 2: Apportionment of construction risk insurance premium to a specific job.

Construction Risk Insurance is an example of an expense which is generally more a business overhead than a project-specific expense. Construction Risk Insurance is usually paid as an annual premium whereas warranty insurance is usually project-specific. In this example we will look at how a subsidiary ledger journal may be used to apportion this general lump-sum premium to specific jobs.

Firstly an annual construction risk insurance premium would be posted to an expense account. In this example an account, COS Insurance, has been created as a dissection of Cost of Sales.

Secondly, on each project, part of this premium may be apportioned to the project’s insurance cost centre using a “subsidiary ledger journal”.

Create the sub-journal from: Accounting | General Ledger | Subsidiary Journals.

Transaction Effect of transactions on General Ledger accounts

Creditors GST paid Stock Cost of Sales Cash at Bank

Dr Cr Dr Cr Dr Cr Dr Cr Dr Cr

1. Invoice to stock 847 77 770

2. Sub-journal to project

770 770

3. Payment 847 847


14/08/2015 Page - 8

Add a line and link it to the GL account to which the premium payment was posted; in this case COS Insurance.

Credit this line by the amount of construction risk premium you wish to apportion to this job.

Add a second line and link it to the job, select line type “C”, link to the required cost centre, in this example Preliminaries | Insurance.

Lastly, link this line to the same GL expense account and debit by the same amount.

The net effect in the GL is nothing, but the portion of the insurance premium has been attributed to a specific project.

The Project Budget screen below shows the sub-journal posted to the insurance cost centre. This budgeted figure includes warranty and construction risk insurance allowances. The warranty insurance has been ordered and invoiced as it is project-specific but the construction risk is a company overhead which has been apportioned to the cost centre via the sub-journal.


14/08/2015 Page - 9

44 CCoorrrreeccttiinngg eerrrroonneeoouussllyy ppoosstteedd ttrraannssaaccttiioonnss

A problem occasionally encountered in a project based accounting system is where an invoice has been posted to the wrong project and / or the wrong cost centre. By the time the error is detected, the invoice is locked as it has been paid, and the payment is locked because it has been reconciled.

Constructor provides two methods for correcting these erroneously posted invoices. One is a “workaround” and the other is the “subsidiary ledger journal”.

4.01 Editing a locked invoice

The following process is a “workaround” method of editing a locked transaction by temporarily breaking the link to its locking transaction. This method is applicable to both accounts payable invoices that are locked by payments or credits and accounts receivable invoices (claims) that are locked by receipts or credits.

To work through this example you will need a paid invoice that you can play with. It is not necessary for the payment to have been reconciled for the exercise.

Open the invoice summary window. You will need to change the invoice status filter from the default of “Entered” to see paid or partly paid invoices; set to “All” for this exercise.

Select the invoice that is in error in the invoice summary grid.

Right-mouse click the invoice to open the context menu as shown below at callout 1.

Select the “Payments” option (or Credits if this is required).

The payment summary screen opens as below, filtered on the invoice ID (invoice identification number) in question.

The invoice ID filter indicated by callout 2 is applied automatically by the function above, which automates the jump to the linked transaction. Callout 3 shows the linked payment in the grid.

During the following process we are going to remove the detail line in the payment that is linked to the invoice. In order to retain the payment in the grid during this process, we will change the filter to use the payment ID, and clear the Invoice ID filter. If the invoice ID filter weren’t cleared, the payment would be “filtered out” of the grid, as it would no longer contain a reference to the invoice.

1 Right-mouse click the invoice and select payments or credits

4 Enter the payment ID here to retain the link during the edit process

3 The payment linked to the invoice

2 Invoice

ID filter


14/08/2015 Page - 10

Enter the transaction ID of the linked payment into the “ID quick filter” indicated by callout 4 above.

Clear the Invoice ID filter indicated at callout 2.

The payment summary grid is now filtered on the payment ID instead of the invoice ID. This is simply for convenience, so that we don’t lose the payment from the grid after removal of the invoice-linked detail line.

Double click the payment to edit the transaction.

The “Accounts Payable Remittance” window opens as above.

Click the “Add” button indicated by callout 5.

A new empty detail line is inserted into the transaction as indicated by callout 6. A “direct” payment line can only have a “G” type, that is, linked to a GL (general ledger) account, therefore the “G” is assigned by default. The “T” in line 1 indicates it is linked to a transaction.

This new line is a temporary “fudged” line whose sole purpose is to allow us to save the transaction after deleting the original invoice-linked line, and to retain the value of the transaction during this process. Note that a reconciled transaction cannot be deleted in Constructor, but its value may be changed, so it is important to ensure that the final value and date of the transaction is unchanged at the end of this process.

Link the new detail line to an appropriate GL account. In this case use “Cost of Sales”; either enter the account code, if known, directly into the “Item” cell or browse for it using the ellipsis lookup button as shown at right. 5.1001 is the “Cost of Sales” account code in the sample database.

Enter the value of the temporary line. Use the “Tax Calculator” as shown at right by clicking the cell immediately to the right of the “Description” cell (in the column with the “#” heading). Enter the line amount including GST and press enter to apply (or click OK).

Using the Tax Calculator in this case has the same effect as entering the GST inclusive amount directly into the “Total $” cell at the end of the detail line.

Select the original invoice-linked detail line as indicated by callout 7.

Click the “Remove” button, indicated by callout 5, to delete this line from the payment.

The payment now has the “Cost of Sales” line instead of the original invoice-linked line, the same creditor, value, date and transaction ID as originally.

Close and save the transaction.

The “Accounts Payable Remittance” window now displays the transaction matching the ID in the quick filter. If we hadn’t changed this filter, and the summary screen was still filtered on the invoice ID, the grid would be empty as there would be no longer any transactions linked to the invoice.

The invoice is no longer locked by the payment and can now be edited to correct the error.

7 Detail line linked to invoice

6 Added “fudged” detail line

5 Add / Remove lines


14/08/2015 Page - 11

The invoice summary window should still open in the background as we left it.

Bring the invoice summary window to the foreground. If you can see the invoice summary window similarly to callout 8, below, click its title bar to make it active. Otherwise, if your windows are maximised, select the invoice summary window from the window menu as per callout 9.

Edit the invoice as required to correct the error and save.

Switch back to the payment summary screen.

Double-click to open the payment.

The transaction opens similarly to that below. The corrected invoice appears in the outstanding authorised invoices grid at top right as indicated by callout 10.

Double-click the invoice to copy it into the payment detail grid, or select it and click the “Remit” button indicated by callout 11.

Remove the temporary detail line indicated by callout 12 with the “Remove” button below the grid.

Verify that the transaction is as it was originally and close and save.

The invoice has now been corrected.

4.02 Using the Subsidiary Ledger Journal to correct an invoice

Below is a sub-journal which moves $500 from project 3, cooker cost centre to project 4, rangehood cost centre. This could be used to correct an invoice which has been incorrectly posted to the wrong project and / or cost

9 …or select from the window menu.

8 Click Invoice Summary window Title Bar to bring it to the front…

10 double-click the outstanding authorised invoice…

11 …or click to copy selected transaction into payment

12 Remove temporary detail line


14/08/2015 Page - 12

centre. In this case the journal credits, then debits the cost of sales account by $500, so the net effect in the GL is nothing.


14/08/2015 Page - 13

55 PPaayymmeenntt ooff wwaaggeess iinn CCoonnssttrruuccttoorr

Constructor does not include a payroll capability, however, most payroll accounting functions can be handled within the software. Following are three suggested methods for payment of wages, including on-costs, to projects. There are advantages and disadvantages with each approach, so the chosen method will depend on your requirements.

In all cases, posting wages against projects requires the entering of a wages invoice. Constructor does not enable posting of wages to a project through a direct payment. Any of the following invoices can be used as a “template” and copied forward week-by-week, or scheduled to create a recurring wage invoice. The resultant invoice would then need to be edited to reflect the period’s work, i.e. specific projects, cost centres and hours.

In the following discussion “GST code” and “BAS code” are used to refer specifically to the more generic “Tax code”. Essentially they are the same thing, although a BAS code of “SW” for salaries and wages withholding is not a GST item.

Chapter 6 follows the treatment of direct wages with instructions on dissecting direct wages to specific cost of sales account(s) in the GL rather than lumping them into general cost of sales.

Chapter 7 then provides some tips on payment of GST and PAYG.

5.01 Payment of wages with on-costs - Method 1

The first method is the simplest.

On the first detail line in this example, the gross wage is posted to the GL account “Salaries & Wages” with a BAS code of “SW – Salaries & Wages Withholding”. This is simply a straight wages payment, which is not applied to a project.

The BAS code, “SW”, is set by the GL account to which you are posting, although, in this case the creditor’s GST code is also set to “SW”. Also, when the creditor’s GST code is set to “SW”, the creditor’s withholding rate will be applied to the transaction line i.e. –22.38% in the following examples. Irrespective of the creditor’s withholding rate, either the percentage or amount can be edited on any individual invoice.

Only transaction lines with a BAS code of “SW” will be included in calculating the PAYG withholding amounts on the BAS, i.e. W1 for the gross wage and W2 for the withholding amount.

To apply wages plus additional “on-costs” to a project, add additional lines to the invoice as below.

The next two lines (2 & 3) are posted to cost centres (“C” line type) and to specific projects for the value of work done including on-costs, but the tax code is set to “NA – Not Applicable” as there is no GST effect from these lines when used in conjunction with the following line.


14/08/2015 Page - 14

The next line (4) is posted to the general ledger (“G” line type) cost of sales account for a negative amount equal to the sum of the project cost centre amounts, also with an “NA” tax code.

Again, there is no GST effect from this line when used in conjunction with the preceding lines. This line has the effect of “balancing off” the cost of sales account to zero for this transaction, while at the same time; the project incurs the full value of work, including on-costs. Note that if the cost centres used in the preceding lines are linked to alternative “cost of sales” accounts, the reversal entry must be posted to this account.

A disadvantage of this method is that the project wages costs are not posted to your cost of sales, rather to the “Salaries & Wages” GL account, as would overhead (non-project related) wages.

The effect of this invoice in the GL is summarised in the table below. You can view the journal generated by a transaction in Constructor by clicking the “Journal” button on the toolbar on any of the accounting summary screens.

Line no Effect of transactions on General Ledger accounts

Creditors Salaries & Wages PAYG withholding Cost of Sales

Dr Cr Dr Cr Dr Cr Dr Cr

1. Wage 621.00 800.00 179.00

2. Project labour 900.00 900.00


4. COS reversal 1800.00 1800.00


Method 2 extends the method above to use component (“S” line type) detail lines to make time sheet entry easier.

In this example, components 2427, 2430 & 2431 have been created to reflect carpenter wage rates, including on-costs, and linked to the appropriate cost centres and suppliers. These components have been set-up with an “NA” GST code as their use will not effect GST or be reported on the BAS. If you choose to use this method, you will need to be careful to ensure that these components are not miss-used where GST should be included.

To enter this invoice:


14/08/2015 Page - 15

Set an “S” line type for each project detail line; select the required project and component.

Enter the quantity to multiply the unit rate by to apply the labour cost, including on-costs, to the project and cost centre.

Next, add a detail line to reverse the total amount of the project detail lines out of the appropriate cost of sales account as shown in line 4 above.

Add the wages line as in method 1.

The same disadvantage applies to this method as to method 1; that the project wages costs are not posted to your cost of sales, rather to the “Salaries & Wages” account.

Line no Effect of transactions on General Ledger accounts

Creditors Salaries & Wages PAYG withholding Cost of Sales

Dr Cr Dr Cr Dr Cr Dr Cr


2. Project labour 1125.00 1125.00


4. COS reversal 2675.00 2675.00

5. Wage 621.00 800.00 179.00


This method overcomes the problem with wages not being posted to cost of sales, while ensuring the PAYG worksheet reports the actual value of wages paid, and the project also incurs the total wages plus on-costs. The disadvantage is that it is a little more complex, requiring two lines for each project and cost centre line instead of one in the foregoing methods.

The project / cost centre lines are posted using either the straight cost centre amount as in method 1 or using the component rate times quantity as in method 2. If the component rates are set-up for this method, the rate will be excluding on-costs as apposed to method 2 which included on-costs. I.e. to set-up the labour rate will be the tradesman’s gross weekly wage divided by number of hours worked per week. Also, for this method, the GST code will be “SW” as apposed to “NA” in method 2.

Each project / cost centre entry will need two detail lines, one for the wage amount excluding on-costs (i.e. with “SW” BAS code), and a second line for the on-cost amount. In the example below, two projects have been worked on during the week; 12.5 hours for framing on project HO5, and 27.5 hours for fixing on project WB1.


14/08/2015 Page - 16

To create the example invoice below:

Enter the first “S” detail line to the project and the component. The component will determine the cost centre and GST code as shown. Enter the quantity; in this case hours worked on project HO5 (12.5) times the hourly gross wage rate for framing carpentry ($20) equals $250. The “SW” GST code is determined from the component; therefore the creditor’s withholding rate is applied to the line.

This line could also be entered as a “C” type where $250 is posted directly to framing carpentry cost centre for project HO5, similarly to method 2.

The second line is similar to the first except 27.5 hours to a different project and different component (therefore cost centre; as determined by the component – cost centre link).

The third and fourth detail lines are where the on-costs are posted directly to the project and cost centres for each of the lines above, only with the GST code set to “NA”. The amount for these lines must be worked out from total of wages including on-costs less the gross wage for the project and cost centre.

The last line is the reversal of the total on-costs from the lines above against the appropriate GL cost of sales account.

Line no. Effect of transactions on General Ledger accounts

Creditors PAYG withholding Cost of Sales

Dr Cr Dr Cr Dr Cr

1. Wage 194.05 55.95 250.00

2. Wage 426.95 123.05 550.00

3. On-cost 687.50 687.50

4. On-cost 312.50 312.50

5. COS reversal 1000.00 1000.00

5.04 Effect on BAS and project budget.

The effect of these three invoices on the PAYG worksheet is that the gross wages, 3 x $800 = $2400, appears at W1 and the total withholding, 3 x $179 = $537, appears in W2. None of the other invoice detail lines effect either the BAS or the PAYG work sheet as they all have been entered with “NA” BAS codes.

However, the project / cost centre lines have been posted in full to the project, as required, as shown by the screen shot of the “Project Status by Cost Centre” screen below. This shows the combined effect on project “WB1” of the three invoices used in the above examples. The frame & lock-up amounts are single cost centre lines including wages and on-costs with “NA” BAS code from methods 1 & 2. The fixing carpenter amount demonstrates the combined effect, from method 3, of the component line (“S” type) with “SW” BAS code for wages and the cost centre line for on-costs with an “NA” BAS code.


14/08/2015 Page - 17

66 DDiisssseeccttiinngg ddiirreecctt wwaaggeess ttoo aa ssppeecciiffiicc CCoosstt ooff SSaalleess aaccccoouunntt

In the above examples, project related, or direct wages have been posted to the Cost of Sales (COS) general ledger account. You may wish to dissect direct wages to a specific account instead of the “general” COS; to facilitate this Constructor enables the linking of cost centres or components to specific GL accounts. There are 3 issues to address to enable this to be achieved.

1. Creating the alternative general ledger COS account.

2. Linking the cost centre (or component) to this COS account.

3. Directing Constructor to use these links instead of the COS default.

6.01 Creating the general ledger account

Set-up the required accounts under the COS sub-heading. In the screen shot below:

5.1001 is the only COS account originally in the sample database; this is the account where all project-related expenditure is posted by default. You may wish to rename this account after setting up alternate accounts to dissect cost of sales, as it may degenerate to a miscellaneous COS account.

5.1002 is the new “Direct Wages” account created for this example. The BAS codes for this account will be “SW” for acquisitions, set the supply code to “NA” as income will not be posted to this account. On-costs will not be posted to this account, they will post to the default COS.

5.1003 (nothing to do with wages!) is set-up to illustrate that a GL account can be used for the purpose of “accumulating” all costs for a specific component. For example, enable the reporting on the total expenditure on bricks for a financial year. Cost centres and components must then be linked to this account for this to work. This point is only included here as it is relevant to the concept of re-directing component and cost centre links to alternative COS accounts.

6.02 Linking cost centres and components to a specific general ledger account.

Cost centres and components can be linked to specific GL accounts now that the required accounts have been created.

The screen shot below shows the cost centres (background screen) expanded to the “Carpenter” heading. A new cost centre, “14.11 - Frame Carpenter direct labour” has been created and positioned below the original cost centre 14.1 which has been renamed to “14.1 - Frame Carpenter sub-contractor”.

The “Cost Centre – detail” screen for 14.11 (foreground screen) shows the “GL Interface” tab at the bottom where the expense account has been linked to the new “Direct Wages” COS account. Click the binocular icon to the right


14/08/2015 Page - 18

of the expense account link to “look-up” the GL account with which you want to establish a link. Invoices posted to this cost centre will now be “re-directed” to this specific GL account instead of the COS default account.

Constructor still needs to be told to use these links instead of the COS default; this will be accomplished in the next section. However, before moving on to this section we will look at setting the component expense account link similarly to the cost centre expense link.

The screen shot below shows the component summary screen (background screen) filtered to display the labour components created for the previous examples.

The “GL Interface” section at the bottom of the Component Details screen (foreground screen) shows the GL expense account linked to the new “Direct Wages” COS sub-account. Click the binocular icon to the right of the expense account link to “look-up” the GL account to which you want to establish a link.

Note that in this example the cost centre link, displayed at the bottom of the summary screen (background screen) below, is also linked to the “Frame carpenter direct labour” cost centre. The cost centre link determines which cost centre this component will post to in the project budget and accounting reports. It also determines which cost centre the component will post to on cost centre, “C” type, invoice detail lines. However, the component GL link will override the cost centre GL link when an invoice is posted with a component, “S” type, detail line.


14/08/2015 Page - 19

6.03 Directing Constructor to use these links instead of the default.

The last requirement to activate the cost centre or component general ledger links is to tell Constructor that you want these links that you have defined, to override the defaults. This is simply a matter of ticking a couple of tick boxes on the company and any current projects.

Open the Company Details screen and select the “System Defaults” tab as shown above.

Refer to the “General Ledger Link Overrides” section at the bottom of the system defaults tab.

Tick the top tick box “Replace project accounting links with cost centre accounting links” if you have defined specific cost centre links in the general ledger and you want these to override the default COS link. If this option is selected cost centres will be posted to the linked accounts where defined, if a specific link is not defined on a cost centre then the posting is to the project default (COS). More about the project default shortly.

Tick the top tick box “Replace project accounting links with component accounting links” if you have defined specific component links in the general ledger and you want these to override the default COS link. If a specific link is not defined for a component then the posting is to the project default (COS).

These settings will automatically be applied to any new projects that are set-up within this company. Existing projects’ defaults will need to be set manually on each applicable project. These setting are also company-specific; that is, each company needs to be set-up individually. Existing accounting transactions will retain the links as at the time they were created; new transactions will use these links.

The screen shot below shows the Project Details screen, with the “GL Links” tab selected.

Tick the appropriate tick boxes as discussed previously to set a project’s GL links where the project is already set-up prior to making the foregoing changes.


14/08/2015 Page - 20

Note also that each project can have individual overrides for Asset, Revenue and Expense accounts if required. This is what was meant by “Project accounting links” previously; these links can be project specific rather than company specific or system specific. In the above screen shot, the expense link is the default Cost of Sales.


14/08/2015 Page - 21

77 PPaayymmeenntt ooff GGSSTT aanndd WWiitthhhhoollddiinnggss..

Following is a suggestion of two ways of paying GST and PAYG tax, and one way of not paying it! As always, there are advantages and disadvantages with all methods, and one that is the best.

Refer to the screen shots below of the simplified BAS and PAYG worksheets for the quarter ending 30/6/04.

In this example, there is $12,000 in GST payable (G9), $10,000 in GST credit (G20) and $537 payable from withholdings (W2).

7.01 Method 1 – single line remittance – DO NOT USE!

This is only mentioned here because it is commonly done in small business. A single line remittance to the ATO is generated against the GST Payable GL account for the total GST & PAYG payable, i.e. $2537 in this example. This will keep the ATO happy, but will make a mess of your balance sheet for your accountant to fix at the end of the year. The reason is that the ATO remittance is arbitrarily balanced off against only one of the three accounts involved (in this example - you may have other withholdings and adjustments as well). This results in the balances in the GST Payable, GST Paid and PAYG withholding accounts continuing to accumulate until corrected.

7.02 Method 2 – multi line remittance balances off GL.

The remittance below shows a much better way of paying the GST & PAYG.


14/08/2015 Page - 22

The remittance is created with one detail line for each of the GST and withholding accounts involved in the BAS, usually at least 3 as above.

Each line corresponds to one of the GL accounts involved in the BAS, and “balances off” that account to zero as at the end date of the reporting period (but not at the date of the remittance).

The asset account (GST Paid) is entered as a negative line and the liability lines are entered as positive amounts. The difference between all the asset detail lines and all the liability detail lines is the amount of the remittance.

A disadvantage of this method is that at any date between the end of the reporting period and the remittance date, an account enquiry will report the total of all transactions to date, i.e. for the previous period plus the current period to date. An account enquiry later than the remittance date will include the “balancing-off effect” of the remittance, and display the correct balance at this date.

The foregoing is correct if the account enquiry includes all transactions up to a specified date. However, the problem is worse when the account enquiry is performed over a date range, i.e. the current BAS reporting period, as the remittance amount included in the account balances is for the previous period. Therefore, the reported account balances will always be incorrect when a remittance has been made, dated in the current period, to balance the accounts off for the previous period.

7.03 Method 3 – using clearing account

This method is a little more complex but avoids the above balance reporting complication. It involves creating a new GL current liability account to use as a clearing account. This is a temporary storage area in the GL into which the BAS account balances at the end of the reporting period are transferred through a journal. The remittance is then a one-line transaction to this clearing account.

The journal should only be done after bank reconciliations etc are completed to the end of the period.

The new journal is dated at the last date of the BAS reporting period, i.e. 30/6/04 as above.

The detail lines are the reverse of the way they appear in the payment but otherwise similar. Remember, in the GL, debit assets and credit liabilities to increase an account balance. Therefore, the first line to the asset account, GST Paid, is credited by $10,000 to balance it off to zero.

Add a detail line for every account involved in the BAS. At the end of this process the journal will be out of balance by the difference between all the asset lines and all the liability lines. Balance the difference to the newly created clearing account and save the journal.

Pay the GST and withholdings at the required date from the clearing account.


14/08/2015 Page - 23

88 RReetteennttiioonnss

Constructor assists with management of the withholding of retentions against contractors where this is required. On any specific project, Constructor provides for entering a percentage maximum total retention per creditor, a maximum retention per invoice, and an expected retention release date. These retention percentages are percentages of sub-contract value, which is determined by the total value of purchase orders issued to a creditor for a project. Therefore purchase orders must be used in order to use the retention management facility. The software will then manage the maximum retention held on any individual transaction and project according to these limits. The retention release date can be entered on initially setting up the project if known, or at any time thereafter, and altered as needed as the project progresses. The user is reminded by the system when the release date for a project has been reached and enables the full or partial release of retentions held. A special access permission must be assigned to limit access to retention release to specific system users. Reporting of retentions held, from the project or creditors perspective, is provided.

8.01 Setting General Ledger defaults for retentions.

If you have created a new company or just upgraded to version 2.1.8, you may need to set-up a retention account in the GL and assign this as a company default. The Chart of Accounts and the GL defaults are company specific, so you must be logged onto the particular company to set up these links.

To create the retention account:

Open your chart of accounts.

Click Accounting on the main menu bar, (refer image at right)

Click the General Ledger option in the Accounting menu,

Click the Chart of Accounts option in the General Ledger sub-menu,

Expand the Liabilities section in the Chart of Accounts,

Expand Current Liabilities (for example, to create your retention account as a current liability).

With the Current Liabilities header selected, click the “New” button at the left of the Chart of Accounts - Summary screen toolbar.

The Account Details screen opens for the new GL account.

Enter the account code as required (e.g. in the sample database, the next available number for a current liability is 2.1011).

Enter the description for the new account, e.g. “Retentions” etc.

Set the default GST codes to “NA” for both acquisition & supply, as transactions involving this account do not attract GST.

Save & Close your new account.

Use the arrow buttons to move the new account to a specific position within the GL section if desired as the new account is created at the top of the section.

Close & Save the Chart of Accounts screen.

Next, this new account must be set as the default retention account for the company.

Create a new current liability account in your GL for retentions and link it here.

GL Defaults tab


14/08/2015 Page - 24

To set this, open the Company Details screen:

Ensure you are logged onto the company for which you are setting the retention account link.

Click System on the main menu bar, (refer image at right)

Click the Company Details option in the System menu,

The Company Summary screen opens.

Click the company you wish to set-up and click the “Open” button on the toolbar (or double-click the company).

The Company Details screen opens.

Click the G/L Defaults tab,

The new Retention account default will be at the bottom of the Accounts Payable section with no linked account (note the screen shot above shows the screen after the link has been set). To link the new retention account:

Click the lookup button in the column under the ellipsis ( ) as shown at right.

The “Select Account” screen opens displaying the chart of accounts for you to select the required account.

Expand the Liabilities header,

Expand Current Liabilities,

Click to select your retention account and click OK (or double-click account).

The retention account is now set as the company default.

Close & Save the Company Details screen.

Close the Company Summary screen.

Projects can now be set-up to withhold retentions as required.

8.02 Assigning Project retention settings

To set up a project for retentions, open the project summary screen:

Click the Projects button on the main screen toolbar,

Select the project you wish to set-up for retention, apply filters if required.

Click the “Open” button on the Project Summary screen (or double-click the project),

The Project Detail screen opens.

1 Retentions tab on Project Details screen.

2 Maximum total retention % for contract per creditor.

3 Maximum % retention per invoice.

4 Expected retention release date.

Click the lookup button in the column under the ellipsis to select account.


14/08/2015 Page - 25

Click the “Retentions” tab on the Project Details screen (refer callout 1 above).

Enter the maximum retention percentage for an individual subcontract (refer callout 2 above).

Note that the system requires purchase orders to be generated to define the value of the subcontract for an individual creditor.

Enter the maximum retention percentage for an individual invoice (refer callout 3 above).

The system will limit the retention amount on an individual invoice to this percentage up to the threshold set for the maximum allowable for the subcontract.

Enter the expected release date for retentions (refer callout 4 above).

Normally this would be set to, say, 12 months from the expected project completion date. However, it may initially be set to project practical completion date when a half retention release is to be payed, then set to the date when the balance of retentions are to be released. The date may be amended as needed as the project progresses.

8.03 Setting retention release notifications.

Constructor can alert users that retentions are due to be released when a project retention release date is reached. Unless a user is specifically nominated, only users with administrative access will receive this notification.

To nominate a system user to receive retention release notifications, open the “System User” screen to edit user permissions:

Click System on the main menu bar, (refer image at right)

Click the User Administration option in the System menu,

The System Users – Summary screen opens.

Click to select the user to whom you wish to assign the notification and click the “Open” button on the System Users – Summary screen toolbar (or double-click the user).

The System User screen opens displaying the details of the selected user. If the user’s “System Administrator” tick box is ticked, they will receive this notification without requiring further action.

To assign retention release notification to users other than administrators:

Click the “Access” tab on the System User screen for the selected user,

Expand the “Accounting” section of the user access settings (either click the “plus” sign to the left of the section or double-click the heading),

Scroll down to the item titled “Alert user when retention release due” and click to select item.

Click the “Delete” tick box to the right (Delete is the highest level of access).

Click the Save button on the System User screen to Save & Close.

Close the System Users – Summary screen when you’re finished.

8.04 Entering a “Retention” invoice.

Entering an invoice with retention is essentially the same as entering a normal invoice except that Constructor now provides a new transaction type called a “Retention Invoice” which includes additional fields for storing the retention data.

To create a retention invoice; begin as you would for an ordinary AP invoice:

Click the “Invoices” button on the main screen tool bar.

The Accounts Payable Invoice Summary screen opens.

Click the “New” button at the top left of this screen. A new “Accounts Payable Invoice” screen opens.


14/08/2015 Page - 26

Select the “Retention Invoice” option from the “Type” drop-down at the top left of the “Accounts Payable Invoice” screen (as shown at right).

Note that the invoice type can be changed after the invoice is created if this step is forgotten initially.

Enter the invoice details as normal.

To enter the retention specific details:

Scroll the invoice detail grid across to the right as shown below.

On a retention invoice detail line a “Retention$” column appears between the “Tax$” & “Total$” columns (callout 1).

Enter the amount of retention you wish to withhold into this “Retention$” column. The amount can be dissected across multiple detail lines if required, but normally withhold from the highest value line for simplicity.

This example has been constructed to demonstrate a number of facets of retention management in the Constructor software.

1. The screen shows that the current invoice value is for $9332.67 (Net figure at bottom right), but that an un-invoiced purchase order for $2101.77 is also visible in the “Un-invoiced Orders” grid at top right for the same project – as indicated by the site address (see callout 2). The total value of purchase orders for this creditor, for this project defines the “sub-contract” value. I.e. $9332.67 + $2101.77 = $11,434.44. Purchase orders may be for different cost centre(s) and, obviously, any fully invoiced purchase orders would not appear in this screen, but would still be included in the sub-contract value – as long as they are for the same project.

2. The project retention parameters on this project have been set at 10% maximum retention per invoice up to 5% maximum project retention. 5% of $11,434.44 (sub-contract value) is $571.72; therefore, in this case, the maximum project retention is less than the maximum invoice retention.

3. If an amount greater than this is entered, the system alerts you, as shown, that the amount exceeds the project retention rules. In this example, $571.73 has been entered to deliberately trigger the “retention amount exceeded” message as displayed. Clicking “Yes” to this message results in Constructor assigning the maximum allowable retention to the invoice.

Once the desired retention amount has been entered:

Authorise the invoice for the resulting amount (the original invoice net less the retention).

Close and Save.

1 Enter retention amount

2 Sub-contract amount is defined by sum of all purchase orders for project

3 Set authorised amount of retention for release


14/08/2015 Page - 27

Note: the retention amount is credited to the retention account that was set-up previously in section 8.01. Click the Journal button on the Accounts Payable Invoice Summary screen toolbar if you wish to view the GL postings generated by the transaction.

Pay the invoice for the authorised (non-retention) balance as usual.

8.05 Paying retention releases

When the project’s retention release date has been reached, the system user(s), as nominated previously will be notified that these retentions are due to be released. Retentions may also be released at any time independently of any release date that may have been specified for the project.

To process retention release payments:

Filter the invoice summary screen by project.

Select the “Unreleased Retentions” invoice status from the status drop-down as shown at right.

Apply the filter.

The invoice summary screen now lists all invoices containing unreleased retentions for the project.

Open each invoice individually and set the retention authorisation amount (Ret. Authorised$) as shown in callout 3 above. The authorisation may be for a partial retention release.

Pay the authorised retention release as you would any other invoice.

The remittance advice will advise the creditor that the remittance is for a retention release and for which project as shown below. The remittance detail line for $260 is a release of approximately half the retention on the previous

example invoice. The top and bottom detail lines show how the remittance advice shows the creditor that a retention has been held on those invoices.

Note: the released retention amount is debited to the retention account as set-up previously in section 8.01. Click the Journal button on the Accounts Payable Remittances Summary screen toolbar if you wish to view the GL postings generated by the transaction.

8.06 Retention reports.

1 Unreleased retentions by creditor Path: Creditors / Reports / Unreleased Retentions by Creditor

1.1 For all creditors in summary grid (apply filters as required).

2 Creditor invoice reconciliation Path: Creditors / Reports / Creditor Invoice Reconciliation

2.1 Displays invoices which are unbalanced (outstanding) due to retention

2.2 Identifies payments which include retention release

2.3 Can be filtered by project to show all retentions for one or more projects, by creditor.

3 Unreleased retentions by project Path: Projects / Reports / Unreleased Retentions by Project

3.1 For all projects in summary grid (apply filters as required).

4 Project invoice reconciliation Path: Projects / Reports / Projects Invoice Reconciliation


14/08/2015 Page - 28

4.1 Displays invoices which are unbalanced (outstanding) due to retention

4.2 Identifies payments which include retention release.

5 Remittance advice

5.1 Displays the retention amount and the project when an invoice has had a retention amount withheld.

5.2 When a remittance detail line is for a retention release, this is documented along with the project and amount.


14/08/2015 Page - 29

99 EExxaammppllee ttrraannssaaccttiioonnss

9.01 Creating a “Contra” account

Constructor does not have a formal capability to contra transactions between accounts receivable and accounts payable. However, many contra transactions may be performed by using a bank account specially set-up for this purpose.

Creating a contra account is the same as for a bank account:

Open the Chart of Accounts – Summary screen as below. Click Accounting on the main menu bar, select General Ledger from the accounting menu, then select Chart of Accounts from the sub-menu.

Expand the chart of accounts to locate the current assets branch and click to select the current assets branch heading.

Click the New button at the left of the Chart of Accounts – Summary window toolbar.

Enter the account code and description as desired.

Click the Postable Bank Account option to set this as a bank account.

Set the GST codes to NA for both acquisitions and supplies as there will be no GST effect applicable to this account.

If desired, enter a Last Cheque Number on the Account tab as this will start a numbering sequence for contra payments when this is used as the bank account, but the other fields are not important in this context.

Save, close and reposition the new account. Save and close the chart of accounts window.

9.02 Writing off a bad debt using the “Contra” account.

Writing-off a bad debt can be used as an example of how to use the contra account, in conjunction with a general journal.

The receipt below is receipting an outstanding progress claim that we wish to write off.

Create the receipt as usual except select the contra account as the bank account to receipt the outstanding claim.

Save and close the receipt.


14/08/2015 Page - 30

This has the effect of clearing the claim; i.e. it is no longer outstanding, but no money enters your operating bank

account.

Create a new journal. Accounting | General Leger | General Journals.

Enter the appropriate date and explanatory note.

Click the Add button at lower left to add a line

On this line, select the contra bank account you set up for this purpose, either by entering the account code

directly or browsing the chart of accounts using the ellipsis, , look-up button on the detail line.

Enter the amount of the previously entered receipt as a credit. (The receipt entered before debits the contra bank, and we want to reverse this.)

Add another line and link it to the “Bad Debts Written Off” GL expense account. In the sample database chart of accounts this is located under Operating Expenses.

Debit this account by the same amount as the first line.

Save and close the general journal.


14/08/2015 Page - 31

The funds flow resulting from the three transactions involved here is illustrated by the “T” accounts below.

Transaction Effect of transactions on General Ledger accounts

Debtors GST Collected Sales Revenue Contra (Bank acc) Bad Debts Written

Off

Dr Cr Dr Cr Dr Cr Dr Cr Dr Cr

1. Claim 2100.00 190.91 1909.09

2. Receipt 2100.00 2100.00

3. Journal 190.91 2100.00 1909.09

Hence:

1. The contra bank account always ends up with zero balance.

2. The debtor is cleared.

3. The expense account, Bad Debts Written Off, clears any previously recognised sales revenue.

9.03 Payment of vehicle loan

How a vehicle loan re-payment transaction must be handled is effected by factors such as your trading entity type, i.e. a partnership, company, trust, sole trader etc; also the way the vehicle was purchased i.e. company loan, loan from a financial institution paid into your account, or a loan paid direct to the vehicle supplier from the finance provider etc. Therefore, the following are suggestions only on the handling of these transactions; this should be advised by your accountant.

We will look at two scenarios:

1. Where the full GST is creditable on the purchase. Where you have taken a loan from a finance provider and these funds have been deposited into a loan account.

2. Where the full GST is not creditable on the purchase, but loan re-payments include GST. I.e. you are re-paying the loan directly to a financial institution.

9.03.1 GST IS creditable on the purchase

Purchase car directly from the loan account, by drawing a cheque for the full amount to pay for the vehicle.

On a regular basis, say a scheduled monthly journal from your applicable bank account to the loan account with no GST.

9.03.2 GST IS NOT creditable on the purchase

Create a payment to the loan company as a creditor from the appropriate Bank Account, against the Loan Account (debit as liability account). Schedule this payment to occur at the required repayment frequency and to continue for the number of re-payments. These monthly payments include GST.

advanced accounting guide - constructor...

Documents