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Using Compiere

  • Kenneth Tsang
    Kenneth Tsang

    Hi all,

    My name is Ken and I am a new Compiere user.  I am trying to use compiere to generate accounting reports for my company.  I am having a lot of trouble.  I already read the manual and still there are many things unclear in my mind, specially, the accounting issues.

    Can someone explain to me how to account for a loan or a lease in Compiere?  Should I create a vendor invoice?  Say, the company for which I work for has just started its operations.  I don't have revenue yet and is financed by a shareholder's loan.  The only expenses that I have are:  salaries, leases, rent, and other general expenses.  However, I would like to make a maximum use of Compiere's capacity as the company is growing.  Am I right to say that Compiere is different from the other accounting packages as the accounting entries are generated by the invoices?

    How do I account for salaries in Compiere?  Do I have to create a vendor invoice for each employee?
    How do I deduct the tax paid by the employee from his gross pay?

    I would be delighted if some of you could help me on these issues. 



    • Colin Rooney
      Colin Rooney

      Hi Ken

      In the case of a shareholders loan and salaries you can simply make a manual GL Journal postings.  Again for the salaries, you could I suppose generate individual invoices (this is how the expense reimbursement works), but I think most people would simply make a combined posting rather than post individually.  By that I mean they would simply post the total for salaries paid to the salaries account & the relevant bank account.  Keep in mind that if you use the main bank account to pay the salaries – well this account will typically be flagged as document controlled account, which would mean you cannot make manual postings to it. So you would need to unflag this first. Likewise for the taxes, you could simply make a combined posting for the totals of whatever the taxes you are required to withhold.  I would guess that most people use a separate payroll package and simply post the totals from this.  Unless you are in the US, where the default Chart of Accounts is probably sufficient, you will most likely need to create the necessary accounts for the different taxes & insurances etc that are often withheld 

      General expenses such as rent & leases you can create vendor invoices for. You should probably create "charges", that would point to the relevant expense accounts in GL. You can then enter these charges on the invoices (as line items).

      I would also make the general comment that; compiere will not simplify the accounting processes required by a typical company to the extent that the users of the application will not still need a good understanding of basic accounting!  Yes, it does automatically handle the posting required for the day to day business of buying and selling goods, but it’s the tricky questions of leases and loans (like the examples you asked about) that cause most problems.

      Good luck


    • ADAXA

      As Colin says, 'Charges' will solve most of your issues. Because Compiere supports multiple account schemas (effectively parallel charts of accounts) simultaneously, it follows that you can not post an entry straight to a specific GL acount in one chart of accounts if that trx needs to be reflected in all Charts. Compiere's solution to this is to create this intermediate thing called a 'Charge'. The 'Charge' record stores which account code in each Chart should be debited/credited if some amount is put against this 'Charge'

      So, a Charge is just a proxy for a GL account code.  Now if you raise a 'journal entry' you are selecting a specific GL account code combination so it follows that the entry will be in one chart of accounts/schema only... This is obviously not a problem if you are using only one chart of accounts. 

      The question then arises as to whether to take things up as journals or vendor invoices. You should maybe think in these terms.. If the transaction will affect a tax account (ie sales tax, VAT, GST etc) then take up via a Vendor Invoice to a Charge(s) then raise/allocate a Payment to clear the invoice... This will then get the taxes on the invoice lines displayed in the "Invoice Tax" report which collects details of the tax on each sales/purchase invoice.  If it is a payment but has no tax implication and only *one* expense line then you can put the payment directly to a Charge pointing to the relevant GL account.
      If the payment affects multiple GL accounts and you need to nominate the amount per GL account (and can't use GL Distribution) then take up a vendor invoice with multiple charge lines then allocate the payment against the invoice.
      For a salary payment you can take up a single vendor invoice to a fake BP called, say, 'salaries clearing'. Line 1 might debit the gross salaries account, line 2 might credit the tax deduction liability account (etc) so that the net amount of the invoice equalled the payment made out of your bank account. When you remit your taxes, take up a vendor invoice to the tax authority with a charge line that debits the Charge pointing to the tax liability account that you credited when posting the salary payment and it will clear nicely.

      In general, if a payment is involved do *not* take up by general journal .. it creates the same sort of problems as posting GL journals to AR and AP Control accounts.

      Explore the 'copy lines from' functionality on AP invoices, I use it for salary payments a lot. Just create an invoice header, copy the lines from the previous salary invoice, change the $ and post. quite quick and simple... and usable for your loan  payments .. just change the split between principal and interest on each one if you dont want to pre-calculate and import a monthly series of invoices in one hit as discussed in a previous post.

      I hope this helps. regards..

      [We have some 'How To' information on this type of stuff on our website at www.adaxa.com.au. You need to register but that's not too intimidating.. we have gathered one of the finest collections of gmail and hotmail addresses in the world this way but I not sure for what purpose ;-) ]

      • Colin Rooney
        Colin Rooney

        excellent advice adaxa and good sensible reasoning behind it too!  I am just in the progress of my first compiere implementation myself (I was just passing on what I had had ascertained so far), but I shall take your advice on board myself to re-evaluate how I was intending to implement the financial aspects.

        ta & Ooroo


    • Kenneth Tsang
      Kenneth Tsang

      Thank you so much guys.  Its great to feel supported by others.

    • Kenneth Tsang
      Kenneth Tsang

      Dear Colin,

      I just realised that you are right.  Initially, I thought that
      Compiere simplifies the accounting processes of a typical company.
      However, this is not the case.  My company has started its operations
      since April 2005 and until now, I have kept all my accounting records
      using spreadsheets.  However, my Company is supposed to represent
      Compiere in the region of South Africa.  As being the accountant of
      the company, the boss wants to get all the accounting issues sorted
      out from Compiere.  That is, balance sheet, P & L and other reports at
      any point in time.  For a few months, I have been playing with
      Compiere.  After reading the manual, I really believe in this
      software.  To my opinion, it is indeed a very powerful software.
      While using Compiere I realised that I should stop thinking as an
      accountant.  Such as the definition of warehouse and assets in
      Compiere.  My Company does not have any stock.  Concerning salaries,
      you proposed to use manual GL Journal postings while adaxa is
      proposing to use vendor invoice.  What do you think?  My boss wants to
      see each employee as a business partner with their bank account
      number.  Btw, we only have 12 employees actually.  Concerning the
      loan, I think that the picture is clearer in my mind.  Concerning the
      other expenses, I'll try to go once through the charges section in the
      manual so as to get a better idea.

      Again thank you for your support.

      I hope that tomorrow, I'll be able to answer the questions of others too.



    • Kenneth Tsang
      Kenneth Tsang

      Dear Adaxa,

      As mentioned to Colin, I will immediately go through my manual again
      to better understand the concept of charges in Compiere.  Am I doing
      the right thing if I use only one accouting schema?  I would like to
      use compiere accounting as much as possible as default.  That is
      without making much changes in the accounting issues.  However, I
      understand that I won't have the choice concerning specific issues.
      After reading what you have mentioned above, combined with what I have
      read in the manual, I would prefer to avoid using GL journals as it
      may cause some other problems.  Do you think I am thinking the right
      way?  Say, I have received a loan of 100,000 from my sister company.
      However, when transfering this loan, I received an amount of only
      95,000 in my bank account as the sister company had to incur some bank
      charges of 5,000.  The sister company wnats me to account for the
      whole loan including the bank charge of 5,000.  Is it correct to
      create a vendor invoice in this situation?  As you said above, if
      there is no payment, I could use a GL journal.  In this case, the bank
      charge of 5,000 is not reflected in my bank account.  As mentioned to
      Colin above do you think it is reasonable to create a business partner
      for each employee.  My boss wants to have everything in Compiere so as
      he can make proper decisions concerning expenses.  He wants to make a
      maximum use of Compiere for our company.

      Once more,

      Thanks adaxa,


    • ADAXA

      Sounds like you only need one accounting schema.

      Probably easiest to take up two payments..
      100,000 put to charge> 'sister company loan account'.
      -5000 put to charge>'bank fees'. Net receipt 95000.

      [note also that you can do the same thing by taking up as Bank Statement lines to charges]

      When you do a bank reconciliation, clear both items against the 95,000 credit on the statement.

      BP for each employee? yes if it is to refund their expenses.  If it is to pay salary then think about whether you want this confidential data visible in the ledger...depends who needs to see the transactions... and it is a lot to key in.


    • Kenneth Tsang
      Kenneth Tsang

      Thank you adaxa, I did not think of accounting the loan as such.  Initially, I was thinking about creating a customer invoice for the loan as my company is receiving money.  The product was supposed to be a loan.  As if I am selling a product called loan to my sister company.  Then, I was planning to create a payment immediately to reflect the money received in my account.  When the loan is repaid, I would create a vendor invoice considering as if my company is buying a product called loan and make the AP payment.  I would like to get the confirmation that I was really on the wrong track.  Thanks for the advice.  Concerning the salaries, I'll put forward this issue to my boss as the company is growing and in one year's time the number of staff could be doubled.

      Thank you again,