Accounting Rules

Accounting Rules

The Financial Controller (FC) determines how transactions are posted to the General Ledger (GL) module using established accounting rules. Based on the type of transaction a user processes, the NCAS attaches the appropriate accounting rule to the transaction. When the transaction reaches the Financial Controller, the accounting rule is used to generate the appropriate entries that are passed to the General Ledger.

Accounting rules are established for all NCAS modules and are used for all transactions. If a document requires a specific type of transaction, an accounting rule is established. For inventory transactions, accounting rules are established by company. If a specific rule has not been established for a company, a default company 9999 inventory rule is applied to that transaction.

The BC module is the only NCAS module in which accounting rules can be applied, changed, or added. In all other modules, the accounting rules default.

Accounting rules are established and maintained by the Office of the State Controller. Contact your system accountant at the OSC to add, delete or change accounting rules for your company.

Accounting rules specify whether transactions entered are:

Passed to the GL as originally entered
Passed to the GL with a different accounting distribution than originally entered
Used to generate offset transactions
Used to generate additional sets of two-sided transactions
Used to send combinations of the preceding transactions to the GL

Unlike accounting rules in other modules, inventory accounting rules are generally not used to generate offset or additional transactions or to send transaction combinations to the GL. In other words, inventory accounting rules are generally straightforward, either forwarding the transaction to the GL as originally entered or with a different accounting distribution. Accounting rules in the Inventory module are simpler because of the group accounting feature which generates the necessary offset and additional entries before the transaction reaches the Financial Controller.

Inventory accounting rules provide two major benefits:

They allow users to enter 59XXXX expense accounts on inventory orders. The system uses the applicable accounting rules to change the account to 89XXXX (Encumbrance) and generates the offset entry to the Reserve for Encumbrance (890000) account.
They allow users to enter full accounts and centers on documents. Accounting rules can be used to roll up these entries before posting them to the GL module.

Because accounting rules are established by company in the Inventory module, inventory accounting rules can also be used to override the accounting distributions attached to an item via the group account. For example, an items group account might define accounts to the subaccount level (more than six digits). Your company can choose not to account for the item to the subaccount level by using an accounting rule to pass the transaction to a six digit account in the GL.

Refer to the job aid, the Accounting Activities Table, to view the accounting rules that apply to each inventory transaction. Recall that each of the accounting rules reflected on this table can be established by company. In other words, your company can define how these rules pass the transaction from the Financial Controller to the General Ledger. If you do not establish the rule for your company, the default company 9999 rule is applied to the transaction.

Example: Intercompany Internal Replenishment

The following example shows how accounting rules are used to post an intercompany internal replenishment transaction to the GL.

Your warehouse (XXTRN5) has just ordered 20 tubes of ointment from warehouse XXTRN3 in your agency. XXTRN3 belongs to a different company than your warehouse. The tubes have been shipped to your warehouse. The average cost of a tube is $2.00 at the time of shipment.

Warehouse XXTRN5 uses group account XXTRN5 to account for burn ointment. XXTRN3 is the central or the issuing warehouse and your warehouse, XXTRN5, is the subsidiary or receiving warehouse.

The following table displays the group account entries generated for your warehouse at the time of shipment and the accounting rules applicable to those transactions:

Intercompany Internal Replenishment Group Account Entries for Subsidiary Warehouse at Shipment Time

Event ID	Account Name	Company	Account	Center	DR/CR	Amount	Accounting Rule
A010	Inventory	XX02	116800	10003000	DR	40.00	21
A020	Reserve for Inventory	XX02	321101	10003000	CR	40.00	25
A040	Purchases for Resale	XX02	533800006	10003000	DR	40.00	26
A080	Intercompany Payable	XX02	27XX01	10003000	CR	40.00	23

Your agency has not defined accounting rules 21, 25, 26 and 23 for company XX02. In other words, the default rules for the master company 9999 will apply to this transaction. Each of these default accounting rules is explained below:

Accounting rule IN/21 (Inventory 21) is used to post the internal replenishment transaction to the Inventory asset account. IN/21 instructs the NCAS to keep the original debit (or credit) and to retain the original accounting distribution.
Accounting rule IN/25 (Inventory 25) is used to post the asset offset entry to the Reserve for Inventory account. IN/25 instructs the NCAS to keep the original credit (or debit). However, only the first four digits of the center are retained in the accounting distribution.
Accounting rule IN/26 (Inventory 26) is used to post the expense entry to the Purchases for Resale (53) account. IN/26 instructs the NCAS to keep the original debit (or credit) and to retain the original accounting distribution.
Accounting rule IN/23 (Inventory 23) is used to post the expense offset to the Intercompany Payable account. IN/23 instructs the NCAS to keep the original credit (or debit). However, only the first four digits of the center are retained in the accounting distribution.

Based on the preceding accounting rules, the FC posts the transactions to the GL as follows:

Intercompany Internal Replenishment Financial Controller Generated Transactions

Event ID	Account Name	Company	Account	Center	DR/CR	Amount	Original or Generated Transaction
A010	Inventory	XX02	116800	10003000	DR	40.00	Generated
A020	Reserve for Inventory	XX02	321101	1000	CR	40.00	Generated
A040	Purchases for Resale	XX02	533800006	10003000	DR	40.00	Generated
A080	Intercompany Payable	XX02	27XX01	1000	CR	40.00	Generated

This example demonstrates that inventory accounting rules are not complicated. The above entries had already been generated by the group account. The accounting rules did not generate any offset, additional or combination accounting entries; they only changed the accounting distributions where necessary.

Inquiring on Accounting Rules

The contents of the Financial Controller Accounting Rule Master File can be viewed in a report called C-U-FC-ACCT-LIST written in Information Expert (IE). This report lists all accounting rules and can be printed by company.

C-U-FC-ACCT-LIST can be accessed through the FCPUBLIC Library in IE. For more information on accessing IE reports, refer to Viewing and Printing IE Reports Step-by-Step.

You can also view online the established accounting rules used by NCAS on the Financial Controller Accounting Rule (220) screen. You can only use the Financial Controller Accounting Rule (220) screen to inquire on accounting rules. This screen provides an explanation of the particular accounting rule that you are inquiring on. For example, you can determine the following by using this screen:

If the original transaction is retained
If the original company, account and center are retained. If the company, account and center are changed, you can determine the changes from this screen.
If the original debit or credit is reversed

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