Sales Revenue Recognition and Inventory Movements

1 General Design
2 Transaction Types
3 Accounting Entries
4 Detailed Processes

General Design

Use Warehouse instead of Item to segregate inventory by GL Ledgers.
Consignment Warehouses must have 0 cost.
Use Transfer Orders to transfer inventory between warehouses with the same GL Ledger.
Use Sales Orders and Purchase Orders to transfer inventory between warehouses with different GL Ledgers.
For all Shopify Sales Orders, Payment Terms must be Prepaid, so debit will go to the Undeposited Cash Account, instead of AR.
For all Consignment Sales Orders, Unit Cost must be 0.
For all Consignment Sales Orders
- For Breaking Games (there are two consignment warehouses), we must keep the Unit Price as it is (not 0) so that when we post Sales Invoices, we can:
  - DR AR
  - CR Client Fund Payable
- For Blackbox (there is one consignment warehouse), we must keep the Unit Price as 0 so that we don’t create GL Entries in the Undeposited Cash Account.

Transaction Types

GL Ledger	Inventory Warehouse	Physical Warehouse	Revenue Sources	Transaction Type

GL Ledger	Inventory Warehouse	Physical Warehouse	Revenue Sources	Transaction Type
Ad Magic	Yongle AM Owned	Yongle	Purchase Products from Yongle	Purchase Order
			Sell to BG and others, such as CAH	Sales Order
Breaking Games	Yongle Consignment	Yongle	Increase/Decrease Inventory	Item Journal using 0 cost
			Receive Sales Orders from CAH, for customers like Target We still collect $	Sales Order
	Yongle BG Owned	Yongle	Purchase Products from Yongle or others	Purchase Order
			Receive Sales Orders from CAH, for customers like Target	Sales Order
	BG Owned	Blackbox	Purchase Products from Ad Magic or others	Purchase Order
			Receive Sales Orders from CAH, for customers like Target.	Sales Order If prepaid, must use Prepaid Payment Terms on Sales Order. Prepaid Prepaid Payment Terms points to the Undeposited Cash Account.
	BG Consignment	Blackbox	Increase/Decrease Inventory	Item Journal Transfer Order
			Receive Sales Orders from CAH, for customers like Target We still collect $	Sales Order
	Amazon Owned (FBA)	Amazon	Transfer Inventory	Transfer Orders
			Receive Orders from Amazon	Sales Invoices
			Deduct Inventory	Cycle Count?
BlackBox	BlackBox Owned	Blackbox	Purchase Boxes, Packaging Materials	Purchase Orders
			Deduct Inventory	Cycle Counts
			Fulfillment Services for Breaking Games (BG Consignment & Blackbox Consignment) and others	Sales Invoice GL Ledger = BlackBox Warehouse = Blackbox
	BlackBox Consignment	Blackbox	Must make sure on the Sales Order: Unit Cost is 0 Unit Price is 0 Source = Shopify Payment Term = Prepaid	When posting a sales invoice, the system will not create any GL Entries because the total sales invoice amount is 0.

Accounting Entries

Warehouse	Transactions	DR	CR

Warehouse	Transactions	DR	CR
Owned Warehouse	Purchase Order	Inventory	AP
	Sales Order	AR COGS	Revenue Inventory
Consignment Warehouse	Item Adjustment Journal at 0	N/A	N/A
	Transfer Orders	N/A	N/A
	Sales Order (Breaking Games)	AR	Client Fund Payable
	Sales Order (BlackBox) - Force Unit Price to 0, and Source = Shopify on Sales Order	0	0

Detailed Processes

From Opportunity, create:

Purchase Order
- Use "Yongle Owned" Warehouse
- Create a Prepayment Invoice
- Pay the Vendor.
- Receive
- Invoice
  - Debit Inventory for "Yongle Owned", $3
  - Credit AP, $3
Use Sales Order to transfer ownership to Clients.
- Use "Yongle Owned" Warehouse
- Create a Prepayment Invoice
- Get paid.
- Then Allocate and Ship
- Invoice
  - DR AR
  - CR Revenue (4190-BG Merchandise Sales), $10
  - DR COGS (5280-Cost of Goods Sold - Misc), $3
  - CR Inventory for "Yongle Owned"

You make $7

To add inventory to "Yongle Consignment"
- On the Sales Order, specify final Consignment Warehoues and Quantities
  - Yongle Consignment
    - Auto create an Item Journal to add total shipped quantities to Yongle Consignment at 0 cost.
  - Breaking Games Consignment
    - Auto create a Transfer Order to transfer inventory from Yongle Consignment to BG Consignment
    - Post the Whse Shipment
    - When the goods arrive at BG Consignment, create Whse Receipt.
Receive EDI Orders from Walmart and Target with consignment Warehouse.
- Allocate and ship
- Invoice
  - DR B/S Contra Consignment Inventory (Account COGS) $0
    - with 0 inventory value
  - CR Inventory (Consignment Warehouses) $0
  - DR AR $20
  - CR Client Fund Payable (Account Sales) $20
  - Programming Note:
    - Added Account Posting Group to Warehouse
    - Added Sales Invoice Line trigger to look for the correct APS to use based on the Accounting Posting Group defined on Warehouse
When AR is received from the client's customers, then pay the client.
- Create a Payable
  - DR Client Fund Payable
  - CR AP (to your client)
  - DR Service Fees and Expenses
    - Need more discussions on logic
      - Fixed amount
      - % of sales amount
      - Receiving, Storage,
- Create Cash Disbursement
  - DR AP
  - CR Bank Account