Accounting doesn't have to be scary!

Oct 14
We know that accounting can be a bit terrifying at times, but fear not! This Halloween season, we invite you to join us for a thrilling three-part blog series that will unravel the mysteries of accounting in Fusion.
  
In this eerie expedition, you can uncover:
 
  1. A Ghostly Guide to Accounting in Fusion: Learn about our accounting system and discover how to navigate this haunted landscape with ease.
  2. Fright-free FAQs: We'll address your most spine-chilling questions and share clever tricks to help you conquer your accounting fears!
  3. Eerie Insights: You'll learn more about recommended accounting reports and what information you can gather from Fusion.

A ghostly guide to Accounting in Fusion

In our ghostly guide today, we're going to review:

  • Fusion Accounting Methods
  • Debits and Credits...it's all about balance!
  • GL Accounts in Fusion
  • Orders, Invoices, and Payments

Fusion Accounting Methods

In Fusion, there are two types of accounting methods: Accrual and Cash. Which one you use will determine how Fusion functions, as you'll see later on. Not sure which one you use? You can see which one you have set in System Preferences > Accounting > Accounting Settings.
 
Cash-based accounting is when you account for all the revenue at time of sale. As an example, if I purchased a year-long membership for $365 on January 1st, you would account for all that revenue on January 1st.
 
On the other hand, Accrual-based accounting is a bit like the slow unveiling of a spooky story. You recognize the revenue as the service is provided. So, if that same year-long membership for $365 is purchased on January 1st, you’d account for $31 in January, $28 in February, $31 in March, and continue to unravel that revenue throughout the year.
 

It's all about balance...

In every type of transaction in Fusion, debits should always equal credits. There should never be a spooky instance where there wasn’t a debit to a credit, or that the debits and credits are different amounts on a transaction. 
 
You can check out the screenshot below for an example. In this example, Wrigley purchased a water bottle for $2.00. You can see there was a $2.00 credit and a $2.00 debit in Fusion. We'll review this more later, but you can see here that it balances out!
It's a costume party!

Let's meet the types of GL Accounts...

Asset Accounts

These are enchanted resources with economic value that an individual, corporation, or country owns or controls. In Fusion, these are tied to Payment Methods.
 
These accounts have a debit balance, meaning they increase by debiting, and decrease by crediting.
 
Examples of when debits are conjured to these accounts include when purchases happen, money is added to an account, or a payment is made on an invoice.
 
Examples of when credits are made to these accounts include when refunds occur, payment reversals happen, or you payout money. 
 
In our previous example with Wrigley, you can see $2.00 was debited to our Cash Asset account when a purchase happened.

Revenue Accounts

These represent the treasure chest of income received from your normal business operations. In Fusion, these are tied to products and services.
 
These accounts have a credit balance, meaning they increase when you credit them and decrease when you debit them.
 
Examples of when credits are made to these accounts include when purchases are made (if you’re using cash-based accounting) or when monthly accrual is run (if you’re using accrual-based accounting).
 
An example of when these accounts are debited is when refunds occur, regardless of the accounting method you’re using.
 
In our previous example with Wrigley, you can see $2.00 was credited to our Products and Equipment Revenue account when a purchase happened.

Liability Accounts

These represent the creatures lurking in the financial underworld...or the amounts owed to others. In Fusion, these are tied to Revenue Accounts (when using Accrual-based accounting), Accounts Payable, and Tax Types.
 
These accounts have a credit balance, meaning they increase when crediting and decrease by debiting.
 
Examples of when credits are made to these accounts include when taxed items are purchased, money is purchased on an account, or for the initial GL entry (for accrual-based accounting).
 
Examples of when debits are made to these accounts include when refunds occur (for accrual-based accounting), when monthly accrual is run (for accrual-based accounting), and when money is paid out to the customer.
 
In the example below, you can see $20.00 was credited to our Money in Account Liability account when Wrigley added money to her account at Point of Sale.

Expense Accounts

These are the cost of operations that a company incurs to conduct the grand experiement of generating revenue. These are typically tied to payment methods, such as Bad Debt.
 
These accounts have a debit balance, meaning they increase by debiting, and decrease by crediting.
 
Examples of when debits are made to these accounts include when you are using a bad debt write off (i.e. applying a payment using a bad debt payment method) or when you are adding money via accounts payable.
 
Examples of when credits are made to these accounts include when you remove money via accounts payable.

Last but not least...let's talk about some main characters in Fusion Accounting.

In Fusion, you might notice some numbers related to your finances, such as O-#s, I-#s, and P-#s. Let's break them down a bit below!

Orders (O-#)

One is created for every transaction, regardless of if there's a cost.
   
The order is created when the transaction takes place.

Invoices (I-#)

At least one is created for every transaction. 
 
 
The invoice is created when generated in Fusion.

Payments (P-#)

At least one per transaction.
 
 
The payment is created when a payment is made on an invoice.
Empty space, drag to resize
An example chart can be found below. You can have multiple invoices per order, and then multiple payments per invoice.
Phew! That was a lot of Accounting information...
 
Take a break, maybe grab some candy, and get ready for our next Accounting Post: Fright-free FAQs!