Negative value on Expense acct is deducted from Profit

[jlinkels]

OpenERP server 6.0.3

Install a new database, install only accounting, demo data and generic accounting scheme.

Create an account "223000 Foreign Exchange losses" as Expense. Parent is 22 Expenses.

Create a custome invoice and sell a service for $1000,-
Including taxes t he invoice amount is $1150,-

When receiving the payment, receive $1200,- and use reconciliation with Write-Off.
Use "223000 Foreign Exchange losses" as Write-off acct.
Complete the payment.

Check the G/L on these accounts.
200000 Product sales is $1000,-
223000 Foreign Exchange losses is -$50,- (minus $50)

Create the P/L sheet.
Net profit shows up as $1000 - $50 = $950
Create the Balance sheet.
The Balance shows $1200 on the asset side and $1100 on the liability side

A negative expense is a gain
The negative expense should have been added to the Revenues not subtracted.
The Balance sheet should not have displayed an unequal result.

The discussion whether or not an amount on the P/L sheet is allowed to be negative is moot.
In a system with hundreds of entries, it would be impossible to find out why net profit is unequal
to Revenues minus Expenses. If a negative balance is not acceptable, an notification should be
generated

jlinkels

[Antony Lesuisse (OpenERP) (al-openerp)]

in some localizations the type of account is wrong. in the french chart of account tax account have bad user type so they are displayed at a wrong place in the BS by account.financial.report

[qdp (OpenERP) (qdp)]

Hello,

i've checked at my end and i have only found that the bank accounts were not created with the good report type (i changed in order to have it as asset in revision 6621, revision-id: <email address hidden>).

This little change do not change the overal balance of the BS as its parent account was correctly displayed, and in my case i have liabilities = assets = $1200. Can you check your P&L report? Does it shows correctly a gain of $1050?

Thanks,
Quentin

[jlinkels (jlinkels)]

What is the "Report Type" of a bank account? I have "Internal Type" and "Account Type".

Account type is set to "Asset" for all bank accounts.

I have changed the internal type for "Bank Accounts" from "liquidity" to "regular" and that doesn't make any difference.

Please see the two printouts as attached. Note also that Exchange Losses is NEGATIVE although that is not displayed.
Net profit is 950 instead of 1050 and the Balance sheet is off-balance

jlinkels

[jlinkels (jlinkels)]

I try to clarify this once more. For the case here I printed also the General Ledger.

From the G/L it appears that:
Sales Revenue = 1000
Expenses = -50 (minus 50 on expenses is another Revenue)

So the Net Profit is 1050, that should be reflected in the P/L report, but it doesn't..

jlinkels

[jlinkels (jlinkels)]

Here is the associated P/L sheet.

As you can see, all signs have been removed and the Expense of -50 (minus 50) is now DEDUCTED from the Sales Revenue, yielding a Net Profit of 950. This is INCORRECT.

I hope everyone understands that negative expenses have to be ADDED to other revenues.

jlinkels

[jlinkels (jlinkels)]

This is the INCORRECT P/L Sheet

[jlinkels (jlinkels)]

The here is the CORRECT P/L sheet. As you can see the Net Profit is now 1050, what it should be.

jlinkels

[jlinkels (jlinkels)]

Taking it one step further.

I have increased the total Expenses to 1420.
The are real expenses, not Revenues.

Then I made Sales for 2200
And I made Sales Credits for 2400
So my Revenue on Sales is -200

When I have
Expenses = 1420
Sales Revenue = -200 (minus 200)

The loss is 1420 + 200 = 1620

Please see the G/L attached to check this figures

[jlinkels (jlinkels)]

Now attached is the P/L from version 6.03.

Here again the sign is ignored.
Instead of a Sales loss of 200, I see a Sales Revenue of 200
(Really, I credited 200 more than I sold!)

The Sales Revenue is subtracted from the Expenses, so I see a Net Loss of 1220.
I hope everyone sees that this is clearly an INCORRECT result.

jlinkels

[jlinkels (jlinkels)]

Finally, this is the CORRECT version of the P/L sheet.
The Net Loss is correctly showed as 1620

jlinkels

[jlinkels (jlinkels)]

Here is a patch to the generation of the P/L sheet.

This will correctly calculate the Net Profit or Net Loss in the P/L.

If there is discussion whether or not signs should be displayed in this sheet: perhaps not, but if no negative amounts are allowed, the accountant should transfer negative account values to other accounts, to the other side of the Balance Sheet of P/L.

By ignoring the signs, a totally incorrect amount for Profit or Loss is displayed, which is IMHO unforgivable for an accounting program.

I know this has been worked on in the trunk version, and the implementation is completely different, but also contains bugs. Since this bug is extremely important with regards to correct accounting, I propose to backport this to 6.0.

jlinkels

[qdp (OpenERP) (qdp)]

Hello jlinkels,

as you said, the Balance Sheet and the P&L reports has been improved in trunk and doing so we tackled this annoying bug you're talking about. As it is depicted in our bug management policy (http://doc.openerp.com/v6.0/contribute/11_bug_tracker.html#bug-management-policy) i'm closing this bug report because it doesn't affect the trunk.

Still, if you have an OpenERP Entreprise contract you can contact our support team (<email address hidden>) that will do the necessary to fix your issue.

Thanks for your understanding and your contribution,
Quentin