Accounting Principles

Lynx contains literally hundreds of functions to help you run your propane business more efficiently and more profitably. While many of these functions are "accounting" in nature, every effort has been made to make them usable to the non-accountant whenever possible.

If you use Lynx for your Billing and Accounts Receivable only, there is no particular need to know anything at all about formal accounting. That is, you will not have to deal with debits or credits nor will you need to do journal entries. In fact, you probably have an outside accountant who takes care of this kind of thing. They might also do your taxes, depreciation schedules, governmental reporting, year-end processing and other accounting functions. This leaves you free to focus on running the office, dealing with customers, and getting the bills out.

If this describes how you use the system, the following information does NOT apply.

However, if you use Lynx for General Ledger, Accounts Payable, and/or Journal Entries, it's important that you understand the following principles and at least a minimum amount of accounting. Every effort was made to make the system non-technical but in some cases it's simply not possible to eliminate all accounting references.

GENERAL LEDGER . . .

1. The General Ledger accounting module is automatically available to you and does NOT have to be "turned on".

2. The General Ledger is where the results of all your other processing eventually is kept. It is organized by account number and a strict debit-credit balance is maintained. When you "post" your accounts receivable, accounts payable, journal entries, or , this is where the data goes. All of your financial reports (like the Income Statement or Balance Sheet) are produced from this file.

3. The first thing you need to do when you begin using the General Ledger module is to set up your Chart of Accounts. A "typical propane company" Chart of Accounts is provided with the system but you will undoubtedly want to modify it to fit you particular needs. Your owner(s) and/or accountants will undoubtedly play a key role in this.

4. You can use your existing account numbers if you wish but it is suggested that you use four digit numeric account numbers.

5. It is also suggested that your Chart of Account numbers are structured as follows. You can use any four digit account numbers you like but they should adhere to this format:

Account Number(s)		Account
1000 through 1099		Bank Accounts × Bank Accounts These are usually set up with a separate account for each of your checking and each of your savings accounts. For instance: 1000 - First checking account 1001 - Second checking account 1010 - Savings Account 1011 - Money Market account
1100		Accounts Receivable × Accounts Receivable This is a single account that is used to keep a running total of the amount you have billed your customers but not yet collected. This is a required account and it is suggested that you use account number 1100.
1101 through 1599		Assets × Assets As opposed to the expense accounts, these accounts are used for major purchases (like trucks) and the accumulated depreciation associated with each. For instance: 1201 - Bobtail # 1 1202 - Accumulated Depreciation on Bobtail # 1 1301 - Service Truck # 7 1302 - Accumulated Depreciation on Service Truck # 7
1600 through 1999		Inventory × Inventory These accounts are used for those items for which you want to maintain an inventory. The amounts are the value of the inventory at any point in time, not the quantity which is found elsewhere in the Lynx system. For instance: 1601 - Propane 1701 - Tanks 1801 - Parts and Fittings
2000		Accounts Payable × Accounts Payable This is a single account that is used to keep a running total of the amount you owe to vendors but have not yet paid. This is a required account and it is suggested that you use account number 2000.
2001 through 2999		Liabilities × Liabilities These accounts are used to keep track of money owed by the company. Typical examples are sales tax and bank loans. For instance: 2001 - State Sales Tax Owed 2010 - FUTA Payable 2020 - ABC Bank Loan
3000 through 3999		Owner's Equity × Owner's Equity This is an account (or multiple accounts) that contains the retained earnings of the company. Retained earnings are simply the difference between Assets and Liabilities on the Balance Sheet. For instance: 3001 - Owners Equity
4000 through 4999		Sales × Sales These accounts are used to keep track of your sales and are typically organized to reflect each of the types of products that you sell. For instance: 4001 - Propane (Residential) 4002 - Propane (Commercial) 4010 - Tanks 4100 - Service Labor (Shop)
5000 thru 5999		Cost of Goods Sold × Cost of Goods Sold These accounts are used to record the cumulative cost of the various products you sell. For instance: 5001 - Propane (COGS) 5002 - Appliances (COGS) 5003 - Tanks (COGS)
6000 thru 9999		Expenses × Expenses These are your detailed expense accounts. As opposed to large purchases which are depreciated, expense accounts are used to keep track of on-going costs (generally smaller amounts) and are not depreciated. For instance: 6001 - Office Supplies 6002 - Utilities 6003 - Insurance

6. You will be asked to supply the appropriate account numbers to your products and some of your transactions. The system will usually help you with this by supplying selected lists of accounts to choose from. However, it's important to understand that the computer system can not distinguish between accounts that are "right" versus those that are "valid". It can only insure that they are "valid". For an example of this, left-click here.

ACCOUNTS PAYABLE . . .

1. Before you can use the Accounts Payable accounting module, you first need to "turn it on". This is done from the Company Preferences window (left-click on "Company" on the Main Menu title bar). For help on this, go to Activate the Accounting Modules.

2. When you "post" an Accounts Payable (or Accounts Receivable) batch to the General Ledger, the system automatically creates the proper double entry accounting entries.

JOURNAL ENTRIES . . .

1. Journal Entries are actually a part of the General Ledger module. So, when you use the General Ledger, you automatically get the ability to do journal entries.

2. Of all the parts of the Lynx system, doing journal entries probably requires more knowledge of accounting than any other. Journal entries provide you with a way to directly go into the General Ledger without going through Accounts Receivable or Accounts Payable. They are always entered as two part transactions (a debit and a credit) and they must balance. The vast majority of your financial transactions that reach your General Ledger will automatically be correctly formatted for you by the system. However, while there aren't very many, there are still some entries that must be done by Journal Entries (like once-a-year depreciation, for instance). If you use an outside accountant, they can undoubtedly help you with this.

Accounting Principles

Bank Accounts

Accounts Receivable

Assets

Inventory

Accounts Payable

Liabilities

Owner's Equity

Sales

Cost of Goods Sold

Expenses

Valid vs. Right