Charge Codes

This document delineates the configuration of Charge Codes across both the Accounts Payable (AP) and Accounts Receivable (AR) modules.

When your enterprise is required to track supplemental financial amounts—such as freight, insurance, or installation services—in addition to the standard line items on a sales or purchase order, Charge Codes provide the architectural mechanism to achieve this. By defining explicit charge codes, you dictate whether these supplementary amounts are capitalized into the inventory cost of the items or expensed immediately to specific general ledger accounts.

Conceptual Overview

Charge Codes establish the underlying accounting rules for supplemental transaction amounts. Whether you are adding a freight charge to a customer invoice (AR) or recording an installation fee from a vendor (AP), the system requires a definitive rule mapping how the debit and credit legs of that specific charge should be posted to the General Ledger.

Configuring Charge Codes for Accounts Receivable

To define the accounting behavior for charges levied against your customers:

1. Navigate to Accounts receivable > Setup > Charge codes.
2. Select New on the action toolbar.
3. Code: Enter a unique, definitive identifier for the charge (e.g., FREIGHT, INSTALL).
4. Description: Provide a comprehensive description of the charge's purpose.

AR Accounting Rules

Expand the Accounting rules FastTab to specify the automated debit and credit routing for the charge.

If you designate Ledger as either the debit or credit account type, you must explicitly define both the Posting type and the specific GL account that will absorb the financial impact.

Example Configuration: Customer pays the charge In this scenario, the charge is added to the customer's total invoice balance, and the enterprise recognises the charge as supplementary revenue.

• DEBIT:
  • Account type: Customer/vendor (This automatically routes the debit to the customer's subledger balance).
  • Posting type: Customer balance.
• CREDIT:
  • Account type: Ledger.
  • Posting type: Revenue.
  • GL account: Select the main account designated for supplementary revenue (e.g., 4100 - Service Revenue).

Configuring Charge Codes for Accounts Payable

To define the accounting behavior for charges incurred from your vendors:

1. Navigate to Accounts payable > Setup > Charge codes.
2. Select New on the action toolbar.
3. Code: Enter a unique identifier for the vendor charge.
4. Description: Provide a clear description of the incurred expense.

AP Accounting Rules

Expand the Accounting rules FastTab to dictate how the vendor charge impacts your financials.

Example Configuration 1: Charge treated as an operational expense In this scenario, the vendor charge (e.g., expedited shipping) is expensed directly to the P&L, independent of the purchased item's inventory value.

• CREDIT:
  • Account type: Customer/vendor (This routes the credit to the vendor's subledger balance, increasing the accounts payable liability).
  • Posting type: Vendor balance.
• DEBIT:
  • Account type: Ledger.
  • Posting type: Expense.
  • GL account: Select the main account for the specific expense (e.g., 6100 - Freight Expense).

Example Configuration 2: Charge capitalized into inventory cost In this scenario, the unit charge is capitalized, increasing the moving average or standard cost of the procured item.

• CREDIT:
  • Account type: Customer/vendor.
  • Posting type: Vendor balance.
• DEBIT:
  • Account type: Item (This instructs the system to distribute the charge amount across the relevant purchase order lines, capitalizing the cost into inventory).