How a trade-in affects the General Ledger depends on how the following AR to GL interface parameters are set.  Go to:

• Accounts Receivable (Module 2)
  • System Management Functions (Task 32)
    • Modify Parameter Files (Sub-task 22)
      • Interface (Option 3)

STR'INV'ACT=120               The starting inventory asset account.

END'INV'ACT=131              The ending inventory asset account.

TRA'ALL'ACT=524              The trade-in account.

Any account falling within the STR-END range will automatically be changed to the trade-in account.  This forces the value of trade-ins to a single account.

Note: There normally are no distributions to an asset account except for trade-ins.

When all three parameters are set as shown above, the interface would look like this for Division 1 (01):

Account #        Account Name           Debit           Credit       Explanation

112-00-01       AR – Trade                  835.00                          Total Net Sale from Sales History                                                                                   

524-00-01       Sales – Parts                                   1000.00      Sales Revenue

661-00-01       Freight                                              100.00  

524-00-01       Sales – Parts                300.00*                        Sales Revenue 

911-00-01       Handling Charges                              35.00

                                                                                ______             ______

                                                            1135.00      1135.00      Division Sales sub-totals             

124-00-01      Inventory – Parts                             700.00        Net change in inventory

624-00-01        COS - Parts                    700.00                         Cost of Sales

                                                                                ________       _________

                                                             700.00        700.00        Division Cost Sub-totals

* NOTE:  The $300 debit to the 524-00-01 account is the amount allowed to the customer on the trade in.  The debit reduces the Sales account, using the account specified in the TRA'ALL'ACT setting.  Also, the Inventory account is reduced for the item that the customer bought.  Notice the lack of a distribution to the Inventory account for the trade-in.  The parameter settings above can be used when a company doesn't intend to resell the item traded in and carrying the item as an asset on the Balance sheet isn't required.  It can also be used to make all trade-in items have their value booked to a single GL account, for tracking purposes.  

However, if tracking of the asset traded-in on the Balance Sheet is needed, set the parameters as follows:

STR'INV'ACT=999            Starting inventory asset account.

END'INV'ACT=999           Ending inventory asset account.

TRA'ALL'ACT=999           Trade-in account.

Account #        Account Name             Debit                Credit       Explanation

112-00-01       AR – Trade                  835.00                                  Total Net Sale from Sales History                                                                                   

124-00-01       Sales – Parts                300.00                                  Trade-in’s Purchased

524-00-01       Sales – Parts                                       1000.00         Sales Revenue

661-00-01       Freight                                                  100.00  

911-00-01       Handling Charges                                  35.00

                                                                                ______                  ______

                                                            1135.00           1135.00       Division Sales sub-totals             

124-00-01       Inventory – Parts                                     700.00     Net change in inventory

624-00-01        COS - Parts                    700.00                                Cost of Sales

                                                                                ________             _________

                                                             700.00               700.00       Division Cost Sub-totals

NOTE:  Setting the parameters to 999 effectively disables them, and causes the system to treat the transaction normally, using the ‘Siamese’ GL accounts to book the Asset, Sales, and  Cost figures.  The debit to the 124-00-01 (Asset account) increases the Inventory Value by the amount the customer was allowed for the trade, the 524-00-01 (Sales account) reflects the sale as it should, and the 624-00-01 account reflects the cost.