Configuring the Reclassification of Expenses

Because correct classification of expenses affects the accuracy of reporting, in many organizations, authorized accountants later review the entered documents for approval and reclassification of expenses.

MYOB Acumatica provides support for expense reclassification, which you can enable if in your company expense reclassification is a separate stage of bill processing. With this functionality activated, the releasing of the bills and quick checks is performed in two stages:

  1. Pre-Release: A data entry worker enters a bill or a cash purchase and pre-releases it. All the expenses specified in the document are temporarily recorded to the reclassification account.
  2. Release: An authorized accountant reviews the pre-released document, specifies the correct expense accounts and subaccounts (the system allows no other changes), and releases the document.

Configuration of Support for Expense Reclassification

The Expense Reclassification feature must be enabled in the system before you can use this functionality. You can check whether the feature is enabled in your system by using the Enable/Disable Features (CS100000) form. For details, see Preparing an Instance for Implementation.

If the feature is enabled, you can specify the account and subaccount to be used to temporarily record non-classified expenses for each existing vendor on the Vendors form. To facilitate assigning such accounts to new vendors, you can select the default account and subaccount for expenses pending reclassification for each vendor class on the GL Accounts tab of the Vendor Classes (AP201000) form. Once you do this, each new vendor assigned to the class will have the reassignment account and subaccount specified for the class.

Note:
If for any reason, your organization decides to disable the Expense Reclassification feature, you should first perform expense reclassification for all documents with the Pre-released status and then release them.

Possible Workflows

Pending expense reclassification is allowed for cash purchases and bills entered manually. Pending expense reclassification is not supported for bills based on purchase receipts or the lines of purchase orders, or for bills automatically generated from purchase orders.

Once the Expense Reclassification feature has been enabled, your company can use one of the following scenarios:

  • Standard scenario: If a data entry worker who enters a bill or cash purchase knows the correct expense accounts and subaccounts for the document, this user enters the document and releases it.
  • Two-step Scenario: If when entering a bill, the data entry worker is not sure which expense accounts to select, this user does not change any of the expense accounts and subaccounts that appear as the default accounts and subaccounts in the document lines; the user pre-releases the document by clicking Pre-Release on the form toolbar. Later, the document will be reviewed by an authorized accountant who will assign the correct expense account and subaccount to each line and release the document.

For the two-step scenario, the system generates two batches of transactions. During the first step of the scenario, once the bill has been pre-released, the system generates the Pre-Releasing batch (the reference number of this batch is shown on the Financial tab of the Bills and Adjustments or Cash Purchases form), which includes the following transaction.

Account Debit Credit
Accounts Payable account 0.0 Amount
Reclassification account Amount 0.0
Note:
Although the expenses related to a bill are actually recorded to the reclassification account (as shown by the pre-releasing batch), notice that the document lines keep the default expense accounts and subaccounts that were associated with the vendor specified in the document summary or the inventory item specified in the line.

During the second step of the scenario, once the reclassification account is replaced by specific expense accounts, the system generates the following transaction.

Account Debit Credit
Specific expense account Amount 0.0
Reclassification account 0.0 Amount

Depending on the policies established in your organization, you can configure the system so that users with a data entry role will not be able to release the entered documents and instead must pre-release them. For more information on roles, see User Roles: General Information.

Reclassification of Expenses

An authorized accountant can reclassify the expenses for each document pending reclassification by using the Bills and Adjustments (AP301000) form for each bill and the Cash Purchases (AP304000) form for each cash purchase. On either form, the accountant selects each document with the Pre-Released status, reviews it, and assigns a specific expense account and subaccount to each document line, according to the classification of expenses used in your organization. For each line, the accountant can leave the expense accounts and subaccounts that appeared by default, if they are correct, or replace them with the correct ones and release the document.
Note:
For a document with the Pre-Released status, only the branch, expense account, and expense subaccount may be changed. The document totals and tax amounts cannot be changed.

Approval and Application of Bills Pending Reclassification

If approval of bills for payment is required in your system, the pre-released bills also require approval before they can be paid. The bills with the Pre-released status can be paid at any time before or after their final release.

Visibility of the Pre-Released Documents

The Pre-released bills and cash purchases appear on AP reports and inquiries as Pre-Released documents. Also, by using the Bills and Adjustments (AP301000) form, the users can view the Pre-Released bills, and by using the Cash Purchases (AP304000) form, they can view the Pre-Released cash purchases.

Rules for Voiding the Pre-Released Documents

A bill with the Pre-released status can be voided if no payment has been applied to the bill. If a payment has been created for a pre-released bill that you want to void, first void the payment and then void the bill. Cash purchases can be voided while they have the Pre-Released status.