Why QuickBooks Commerce syncs each transaction to Accounting ledgers?

This article gives you an overview of why QuickBooks Commerce Sync works the way it does with your accounting integrations (i.e. QBO & XERO). It helps you understand the logic behind how each information flows between the platforms, how the integrations work together and are managed.

We will explore why QuickBooks Commerce syncs each transaction to Accounting ledgers in three sections:

1. Sales Order Management
2. Purchase Order Management
3. Stock Level Management

1Invoices

Create Invoice

Once an invoice is created in QuickBooks Commerce and is synced to Xero/QBO, the Accounts Receivables account is debited (⬆increased) and the Sales account is credited (⬆increased).

• The Accounts receivables are debited as you are awaiting payment from the customer for the goods sold, which indicates an increase in your assets.
• The Sales account is credited as your Revenue increases with the goods sold.

Payment on Invoice

Once payment is created for the invoice in QuickBooks Commerce, it syncs over to QBO/Xero as a payment for the corresponding invoice. In this scenario, the Accounts Receivable account is credited (⬇ decreased) as we have received the payment for the goods sold, while the Payments account is debited (⬇ decreased) to balance the payment owed.

Fulfill Sales Order

Once the Sales Order is fulfilled, the COGS account is debited (⬆increased) as the cost of the goods sold is taken into account once fulfilled (i.e. shipped out to buyer). Meanwhile, the Stock on Hand account is credited (⬇decreased) as the goods are taken out of your inventory and being fulfilled.

Create a Sales Return

Once a Sales Return is created in QuickBooks Commerce, a Credit note will then be created in QBO/Xero. Here, the Sales account is debited (⬇decreased) as the amount made for the sale would be returned to the customer. The Accounts Receivable account is then credited (⬇decreased) as there is no longer a payment being received.

Update Sales Return

Updating a Sales Return on QuickBooks Commerce will update the Credit Note on QBO/Xero accordingly.

Receive Sales Return

Stock on Hand is debited (⬆increased) as stock from the Sales Return is added back to your inventory. COGS is credited (⬇decreased) here to reverse the effect of fulfilling the Sales Order. 

2Purchase Order

Create Purchase Order

The Purchase Order itself is not synced to QBO/Xero due to API limitations. Instead, a bill is created in Xero/QBO to indicate that there is a payment pending - to be paid to the Supplier when goods are received or at the agreed date/term.

In context, once the Purchase Order is created, the Purchases account is debited (⬆increased) as your expenses go up, while your Accounts Payable is credited (⬆increased) to indicate an outstanding payment to the supplier.

Update Purchase Order

Updates Bill respectively QBO/Xero.

Receive Purchase Order

Once you receive a purchase order in QuickBooks Commerce, a stock journal will be created in QBO/Xero. Stock on Hand will be debited (⬆increased) as you are adding stock to your inventory, while Stock Purchases is credited (⬇decreased) to balance the increase when the Purchase Order is created.

In this case, when you partially receive Purchase Orders, the bill’s value will only be aligned correctly when the entire Purchase Order has been received.

3Stock Level Management

Stock Adjustment 

If you make a positive stock adjustment in QuickBooks Commerce, Stock on Hand will be debited (⬆increased) as you are adding stock to your inventory. The inventory adjustment ledger account is credited (⬇decreased) to account for and align with the change.

On the contrary, if a negative stock adjustment is made in QuickBooks Commerce, Stock on Hand will be credited (⬇decreased) as you are removing stock to your inventory. The inventory adjustment ledger account is debited (⬆increased) to account for and align with the change.

You can refer to these articles on how to set up inventory adjustment ledger account articles for Xero and Quickbooks Online respectively.

Stocktake

Creating a Stocktake via stock control in QuickBooks Commerce will affect the Stock on Hand value of your Products and the corresponding Cost Of Goods Sold. The increase/decrease in SOH and COGs will sync to QBO/Xero as part of a daily batch.

Creating a StockTake will always use the current MAC as the Cost Per Item which will not change the MAC.