Introduction to Brightpearl accounting (1) Video Lecture | Using Brightpearl: Accounting and Bookkeeping - Data & Analytics

this video is going to give you a broad
overview of the concepts of Brightpearl
accounting there are a number of videos
that go into more detail on each topic
so make sure you watch those two I'm
going to give you an introduction to
double-entry accounting the balance
sheet and the income statement which is
called a profit and loss report in the
UK we're going to look at the chart of
accounts bank accounts journal types see
which transactions are made
automatically by Brightpearl
and see which transactions you'll need
to make manually because Brightpearl has
a full accounting system built in a lot
of processes that would otherwise be
done by your bookkeeper can be automated
for this reason we describe two types of
financial processes the first is
operational accounting which is
recording the financial information
related to your day-to-day process of
buying selling and updating inventory
levels ropal does most of this for you
but it's important to know what's going
on behind the scenes the second type of
financial operation is bookkeeping which
is manually recording information that's
not directly related to day-to-day
operations things like entering wages
rent interest payments and making
Corrections and adjustments Brightpearl
makes operational accounting features
such as payment allocation available
under the customer and supplier menus
while the bookkeeping tasks are under
the accounting menu using permissions
you can give more control to your
operational staff while reserving the
bookkeeping for your qualified
bookkeeper let's start with the
operational accounting we'll take a set
of 7 business transactions for a typical
retailer and show the accounting that's
going on in the background and how it
relates to your management reports the
balance sheet and the income statement
or profit and loss first of all you
place a purchase order with a supplier
to let them know you want some inventory
no accounting transactions take place
next the inventory arrives and you
receive it into stock it's worth $10 so
brightful automatically records the fact
that you now have 10 dollars of assets
Brightpearl is a double entry accounting
system which means that every
transaction contains at least two parts
which we split into debits and credits
as you add a number in one place you
have to remove it from somewhere else
you can't just magic money from nowhere
so when we increase inventory or
assets we have to record a matching $10
elsewhere technically we still owe the
supplier but we've not yet received a
purchase invoice so we'll use the
inventory received not invoiced for the
other half of this double entry
transaction each of these transactions
is called a journal made up of debits
and credits in any journal the total
value of debits must equal the total
value of credits each amount is assigned
to an account code or nominal code at
any point in time the balance of an
account or nominal code is the sum of
all the debits less the credits for that
code so here for example we'll have a
balance of $10 on the inventory and -10
on inventory receive Murray invoiced you
can see the current balance of all your
account codes on the trial balance
report and here we've got the $10 on
both sides the balance sheet shows the
balance of your asset and liability
codes here's what the balance sheet now
looks like after we've received
inventory
we've got $10 of asset and $10 of
liability when the purchase invoice
later arrives from the supplier we'll
assign it to the purchase order this
creates a purchase invoice journal the
purchase invoice journal transfers the
$10 balance across from the inventory
not received account on to the accounts
payable or creditors our balance sheet
now records that we still have ten
dollars in inventory but we now owe our
supply as $10 instead of having the
inventory received not invoiced next we
make a sale the first thing that happens
in a retail scenario is that the
customer pays for it we record an
increase on our bank account of $20 and
until we confirm the sale and raise an
invoice we technically oh the customer
their money back so he put the balancing
$20 on the accounts receivable or
debtors this is a sales receipt journal
at this point you'll see negative
balances on the accounts receivable or
debtors screen because you owe the
customer the sales receipt also shows as
a negative asset on the balance sheet
but we do have the positive asset of the
credit card payment so the two cancel
each other out
when we ship the goods out note we need
to
decrease our inventory asset by $10 this
is the cost of goods sold value which is
recorded on the other half of the
journal as an expense this is the first
time we see a transaction affecting a
profit and loss or income statement
recording the cost of goods sold as soon
as you ship the sale is called cost of
sale accounting and is the default
option in Brightpearl because it lets
you report on your profits at any time
you like the other option is periodic
accounting which does not record changes
to assets automatically when you receive
or ship goods have a look at the
accounting for inventory video for more
detail we've not yet recognized the
revenue by raising a sales invoice so on
the income statement or profit and loss
we see with made a $10 loss due to the
goods shipped it's only when you invoice
the sales order that you confirm the
revenue of $20 by inserting a sales
invoice journal this is recorded as
sales revenue on the income statement
using the product account code which for
this product is merchandise sales just
like the purchase invoice recorded an
amount on the accounts payable or
creditors a sales invoice records an
amount on the accounts receivable or
debtors because this amount has been
prepaid buy another matching amount on
the accounts receivable raising the
sales invoice simply cancels the balance
on the accounts receivable and you can
see the other side of the journal here
recorded as sales revenue the negative
asset on the balance sheet has now
disappeared and the accounts receivable
report is empty you now have two
transactions on the income statement the
$20 revenue and the $10 cost of sale
these two give a $10 profit you should
invoice your sales orders on the same
day that Goods ship so that the revenue
is recognized at the same time as the
cost of sale finally we pay our supplier
invoice this creates a purchase payment
journal which decreases the bank account
balance with the other side of the
transaction going against the accounts
payable or creditors to clear the debt
and you can see here that the sum of
these two will equal zero at any point
in time you can sum the debits and
credits on any particular account such
as a bank account to give you the
current balance
after the set of journals were just
completed there's a $10 balance on the
bank account because we've got $20 come
in and $10 go out the bank activity
report in Brightpearl
is effectively just a filter on all of
your journals to just show those that
affect the chosen bank account other
reports work in a similar way by showing
only parts of the complete journal to
see all the debits and credits on all of
the journals go to the general ledger
this set of transactions is the same as
I've shown you in Excel after these
transactions we have no inventory asset
because the debits and credits cancel
each other out however if we chose to
report at the end of January the fourth
which is across here we'd see that at
that time we still had $10 in inventory
this is one of the great advantages of
double entry accounting nothing is
deleted or removed and you can create
reports for dates in the past you can
also change the sequence of events and
you'd end up with the same result it's
just as valid to invoice the sale first
and take the payment later which is more
common in a wholesale scenario if you
invoice before taking payment you'll
have a positive balance on the accounts
receivable or debtors which you use to
see who owes you money as we've seen
each debit and credit amount is recorded
against an account these accounts have
numbers which we sometimes call a
nominal code the set of codes is called
the chart of accounts for the time being
all you need to know is that there are
five main types of account code there
are assets there are liabilities its
equity there's income and expenses
changes to asset liability or equity
codes will show on your balance sheet
and changes to income or expense codes
will show in your income statement or
profit and loss report the chart of
accounts in bright pile is configurable
with the exception of a few reserved
codes such as accounts receivable you
get to the chart of accounts under the
accounting menu there's a separate video
that goes into more detail on the chart
of accounts you can nominate a few of
your asset account codes to be bank
accounts which means that they appear in
the banking screens and can be used to
clear customer or supplier debts
each of your real-world accounts that
carries funds should be added to
Brightpearl
as a bank account this includes credit
card providers who hold funds for a
while before they're cleared into your
main bank account we've seen a few
different types of journal in the
examples so far journal types are used
to show transactions in the relevant
reports Brightpearl journal types of to
character codes you've got a number of
sales journal types a number of purchase
journal types some banking and then
miscellaneous and year-end changes to
inventory levels for example are
miscellaneous journals of type JJ you
can see the journal type on the general
ledger and you can filter the general
ledger to show journals of only a
certain type you can't change your
journal type you must have a contact
associated with sales or purchase
journals whether that's a customer or
supplier and conversely you cannot have
a contact associated with banking
journals Brightpearl automates most of
the day-to-day operational accounting
entries for you it creates inventory
asset or JJ journals when you receive
goods
it creates purchase invoice p.i journals
when you record a bill against a
purchase order it enter sales receipt
SR journals when a paid order is
downloaded from a sales channel it
creates a cost of sales entry a JJ when
you ship a Goods out note and it creates
a sales invoice entry and si when you
invoice a sales order but everything is
automatic though the following
bookkeeping processes will need to be
done manually you need to enter sales
receipts for customer payments that are
not taken online and SR
you need to enter supplier or vendor
bills for rent and office supplies and
so on which is a purchase invoice you
need to record payments made from bank
accounts to suppliers for bills which
would be a purchase payment or a PP you
need to record payments from bank
accounts such as wages and contractors
and those don't have a purchase invoice
so this is a bank payment you need to
record payments from bank accounts which
are fees for card processing companies
and that would be a bank payment if
there was no supplier invoice or it
would be a purchase payment if there was
a matching purchase invoice you need to
record transfers that you make from one
bank account to another which is a B T
and then you need to record receipts
into bank accounts for things like
interest and loans
that's a bank receipt or a br here's a
typical bookkeeping task we're going to
record a payment from our bank account
for interest expense and because we're
using double entry accounting we need to
make sure that we enter the expense code
so the first half is the bank account
and the second half is the interest
expense when we enter this payment we'll
see both a decrease of 250 on the bank
account and an increase on the expense
account so assets if you remember are
shown on the balance sheet where we can
see that the bank account has gone down
by 250 and profit and loss is shown on
the income statement where we see the
250 on the expense code because the
expense code is the 7000 code it comes
below the gross profit line so
operational revenue and operational
expenses typically revenue and cost of
sales are shown above the gross profit
line and give you your gross profit all
the bookkeeping tasks typically occur
below the gross profit line and affect
your net profit now that we've covered
the basic building blocks of Journal's
balance sheet and income statement we're
ready to move on to some other concepts
take a look at these other videos next
and that concludes the first video in
the introduction to Brightpearl
accounting