Accounting Module Functionality and Expectations

1         What Accounting rules?

User must be able to select the applicable accounting rule as "none",  "cash" or "accrual" at a product level.

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Page 10 of attached accounting summary document gives useful basic distinction between cash and accrual accounting.

2         The COA

Continue having the same design with five main headers

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Question: Would be interested in hearing what COA nirantara and GK accountants use (or any other MFI in community). On document pages 23, 24 is content about the 'classification of transactions' through chart of accounts and a sample chart of accounts for MFIs. How does nirantara and gk COA differ and why would be good to know.

2.1        Scope

For simplicity (for the first cut) have COA at organization level and run accounting reports at the branch level

• So system should associate all journal entries to branch which owns the entity that caused the entry (Ex: Loan account on which a disbursal occured)
• all user defined journal entries should also be associated with a branch

3         Journal Entries

The 'accounting cycle' image provided on page 22 of attached accounting summary document provides a good visualisation of steps involved from 'economic activity step (transaction)' to closing books for a given cycle period (weekly/monthly/quarterly/yearly)

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The Journal entries view would look similar to the below mockup

3.1        Automated Journal Entries

MifosX to automatically log (log each transaction as a separate journal entry....no need of daily consolidation etc.)

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They may only be altered with events generating from the system (Ex: a user reverts a loan disbursal etc.)

3.2        Manual Journal Entries

For a manual entry, allow "m" debit and "n" credit entries for a "Journal Entry entered by a user" as long as the sums of all debits and credits match

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This means each journal entry batch must have a batch Id (so all individual entries under it can be identified for easy reversal)

4         Accounting rules

4.1        Cash based accounting Scenario:

4.1.1        COA Snippet

4.1.2        Posting Rules

4.2        Accrual Based accounting Scenario

Would only involve posting to three new accounts (Receivables "incomeType") 

4.2.1        COA Snippet

4.2.2        Posting Rules

4.2.3        Examples

4.2.3.1        Flat Interest Type

When Interest Type is flat, prepayment does not write off any interest. The entire interest is recognized and “receivable” as soon as the loan is disbursed.

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*Note: A Batch Id is shown in Brackets

4.2.3.1        Declining Interest Type

In the case of Declining Balance, we have loans involving interest recalculation. The interest is accrued at the date of each repayment.

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for recognizing the same while doing a prepayment.

4.2.4  Month end and year End Closing

We should also have an option for Month end closing and year end closing at a branch level (basically a bulk “apply accrued interest” till date job for all loans of declining Interest type)

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*This section needs to be revisited in detail

5         Closure Dates

Allow setting closure dates at branch level after which accounting transactions cannot be posted.

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