Customer OrderCompany

Product ARM1,2

Purchase Order(Supplier)

ReceiptRM Stock (increase)

Purchase Invoice (From Supplier)Payment (To supplier)

Manufacturing (product A)RM Stock (decrease - RM1.2)FG Stock(Increase - Product A)

Delivery of FGSales Invoice (To customer)Payment (from Customer)

Steps RECEIPT OF STOCK RMPURCHASE INVOICEPAYMENT

Overall Txn RM Stock Db $100 Bank Account Cr $100

Break-up RECEIPT OF RM STOCKRM Stock Db $100 Received Not Invoiced (Clearing) Cr $100 (internal Operational Accounting)

PURCHASE INVOICEA/P Cr $100 Received Not Invoiced (Clearing) Db $100 (internal Operational Accounting)

PAYMENTA/P DbBank Account Cr

RM StockA/P

RM StockBank Account

Steps DELIVERY OF STOCKSALES INVOICEPAYMENT (from Customer)

Overall Txn FG Stock CrBank Account Db

Steps DELIVERY OF STOCK (Service)FG Stock CrDelivered Not Invoiced (Clearing) DbIntermediate Operational Accounting

SALES INVOICEA/R DbDelivered Not Invoiced (Clearing) CrIntermediate Operational Accounting

PAYMENT (from Customer) A/R CrBank Account Db

$100 $100

FG StockA/R

FG StockBank Account

PurchaseSelection of suppliersRequest for Quotation to suppliers for one productReceipt of quotationsSelection of supplier for purchase orderSending Purchase Order (desired delivery date)Receipt of RMsQuality TestingConfirmation on Purchase Invoice valuePayment (credit memo, contract)1000 Products - partial deliveries - one time payment

Internal OperationsPayroll - Employees, LabourBank Reconciliation(Updating on a regular basis - monthly)

INCOME STATEMENTSales RevenueCOGS - Cost of goods soldProfitExpenses (office expenses - salaries to emp, coffee, computers, trip)Operating IncomeInterest expenseEarning before taxesIncome TaxNet Income

Sales Quality TestingReceipt of request for quote QA of RMsSending Quote to customer (transport, Sales commission)Receipt of customer order (desired delivery date)Sending Sales InvoiceReceiving Payment

Cross Checking the your invoices with actual payments Variances

INCOME STATEMENT$20

FG - RMs, Machine costs, labour overtime, electricity $10 $10

Expenses (office expenses - salaries to emp, coffee, computers, trip) $5 $5

($2)$3

($1)$2

ManufacturingRMs to Manufacturing siteBOM (Bill of materials) review - selection of RMs through QAManufacturing process

In-house Work-in-progressSubcontracting

Increase of FG stock, Decrease of RMDelivery of FG to customer

Freight charges (transport) - Third party service

Bank charges, wastage, spillage, overhead charges

Freight charges (transport) - Third party service

PURCHASE Db CrReceipt

INV - Raw Materials 5Received Not Invoiced (clearing) 5

Purchase InvoiceA/P 5Received Not Invoiced (clearing) 5

PaymentA/P 5Bank Account 5

SALES Db CrDelivery

INV - Finished Goods 10Cost of Goods Sold 10Sales Revenue (Clearing) 12Shipped Not Invoiced (Clearing) 12

Sales InvoiceA/R 12Sales Revenue 12Sales Revenue (Clearing) 12Shipped Not Invoiced (Clearing) 12

PaymentA/R 12Bank Account 12

MANUFACTURINGWIP

200200

INV - Raw Materials 50200

150

INV - Finished Goods (as per valuation)INV - Work-in-Progress (as per valuation)

INV - Work-in-Progress (as per valuation)INV - Semi-Finished Goods (as per valuation)