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training:service_invoice_subtypes_explained

Service Invoices

This is an optional setting that can be enabled with the check box ‘Use Service Invoices’.

If you are unfamiliar with Service Invoices, here is an explanation. Imagine you have a delivery truck and you want to re-design it from a flatbed truck to an enclosed refrigerated truck, which increases its re-sale value. You are also running an auto parts shop, so you pick the parts from your own inventory. Because you have re-designed the truck, its value increases (a capital gain).

There are two types of items that can be capitalized:

  1. Shop-use equipment: such as fork lifts, trucks etc. that you use around the shop
  2. Inventory Items that you sell or rent

Capitalization Ledger Number is not commonly used. This option moves the value of the parts used from the inventory ledger and posts it to a different asset ledger account to keep it separate from the inventory value. This method increases the unit value. Once the unit is sold, the system removes the total landed cost including the capitalized value from the inventory ledger. As a result, the inventory g/l is now over drawn by the capitalized amount, so a journal entry is required to debit the capitalized amount back into the inventory account to offset it. Entering a capitalization ledger number here (asset account) is only necessary if you do not have ‘Post Service Capitalized Invoices to Inventory’ option checked.

Rental Maintenance Ledger Number: Enter the ledger number you require the Service Invoices to post to when you select the service sub-type ‘Rental Maintenance’. This should be an expense account.

Post Service Capitalized Invoices to Inventory: The majority of users choose this option to capitalize the inventory value back into the inventory ledger. In other words, with this checked, Service Invoices removes the value of the capitalized parts from the inventory ledger, and instead of writing off this value, it is posted back into the inventory ledger as a part of the landed cost of the unit.

Use Alternate Invoice Sequence for Service Invoices: a different invoice sequence from the regular invoices is enabled.

Do Not post Service Invoices to income or cost of sales: (default is checked) service invoices will not over-inflate the income or cost of sales accounts with this checked. Post Service Invoices at Cost: the price listed the service invoice will automatically be over written to reflect the cost of the item.

Service Invoice Sub-Types

What do Service Sub-Types do? In simple terms, it allows you to remove parts from your inventory and attach the value of those parts to a unit. By selecting the sub-type, you can choose where the value of those items post back to the inventory ledger (since all invoices by default remove the landed cost from inventory) or expense/written off.

Capitalization to Equipment - Capitalization to Equipment Increases the value of the unit. You have two options for where the value of the parts used to modify the unit is posted to in the ledger:

Post Service Capitalized Invoices to Inventory is the setting most commonly used. With this option, you are adding the value of the parts used back into your inventory ledger. The value of the capitalized parts is removed from the inventory ledger, and instead of writing off this value, it is posted back into the inventory ledger as a part of the landed cost of the unit.

Capitalization Ledger Number ___ is not commonly used. This option moves the value of the parts used from the inventory ledger and posts them to a different ledger account to keep it separate from their inventory value. Once the unit is sold, a journal entry is then required to debit the capitalized amount back into the inventory account to offset the complete landed cost of the unit being pulled from the inventory ledger.

Rental Income (Normal A/R) - N/A - Do not use.

Pre-Delivery Inspection - Simply a different Label. This would be used for anything involving pre-delivery inspection (Same posting options as above).

Rental Maintenance - This option does not increase/decrease the unit value. When a Rental unit is being maintained, parts and service need to be recorded. It removes the value of the parts required for the maintenance from the inventory ledger and writes this value off to a rental maintenance ledger code that is set in the setup wizard.

Devaluation to Equipment - Devaluation to equipment functions similar to rental maintenance, but instead of the value of the unit remaining the same, it decreases the value of the unit. This would typically post directly to a 'write off' ledger account as opposed to the inventory account.

Other Ledger Code - Decreases the value of the unit and allows you to remove the value from the inventory ledger and post that amount into a different ledger number of your choosing. This allows you to remove the value of the parts from the inventory ledger and select the ledger number you require the value to post to on the fly.

Click the link below to view ‘Capitalize Units’ tutorial: https://support.windwardsoftware.com/a/solutions/articles/66000519433

training/service_invoice_subtypes_explained.txt · Last modified: 2023/11/14 10:46 (5 months ago) by dlauron