Every movement of cash, every invoice, sale and purchase, and every movement of stock needs to be recorded in your accounting system so that at the end of the month/quarter/year you can see exactly how much profit you have made (and how much tax you need to pay).

Transactions are assigned codes, so that you can track areas of spending, and keep an eye on your asset accounts. These numerical codes are called nominal codes – the account code that shows you the value of your stock is code 1001, for example. The list of nominal codes and their categories is called the Chart of Accounts.

As you enter transactions, you choose the date on which the transaction occurred. If at any time you need to see the balance of an account or nominal code, then Pearl will add up all the transactions from the start of your financial year to the date required for the balance. The balance itself is never stored in the system, and in this way you can enter transactions retrospectively while maintaining accurate figures.

Pearl accounting provides a book keeping tool to allow you to keep on top of your customers, suppliers and assets. It does not perform the actual transactions (it will not make the payment), it is a way to record that a payment has occurred, the date of the payment, the method, the supplier and so on.

Depending on the customer payment methods you have set up, Pearl can be configured to take credit card payments from your customers.

Every time your bank statement arrives, you should reconcile (match) your paper records with your Pearl records. This ensures that transactions are not missed, and that data has been entered correctly.

If you are VAT registered, then at the end of each VAT quarter Pearl will tell you quickly and simply how much tax is due.

Chart of Accounts & Nominal Codes

The Chart of accounts is the set of nominal codes that are used to categorize each of your financial transactions. Pearl is set up with a broad range of accounts nominal codes so that you can keep track of revenue and spending accurately. Those users familiar with Sage accounts will find the Pearl nominal account structure very similar.

Nominal codes can be added, removed or edited as you wish.

Sales, for example, are always marked with a nominal code between 4000 and 4999. Purchases are marked between 5000 and 5999.

An asset account is one that stores information about what your company owns. This may be, for example, stock on the shelves, cash in a till, money in a bank account or also the list of invoices that your customers owe you. Asset accounts are split into current assets (such as stock; assets that will be turned into cash within a year) and long term assets; such as property, vehicles and so on.

A liability account is one that stores information about what your company owes to others. This may be an outstanding loan, a list of invoices due to suppliers, VAT due to the Inland revenue and so on. Liability accounts are split into current liabilities (generally where you need to pay them within a year) and long term liabilities.

To edit your chart of accounts, ie to add or remove codes, click Accounts->Chart of Accounts from the main menu. This is where you define whether an account is due to be reconciled against statements, for example your bank current account should be set to reconcile.

Explaining the Chart of Accounts

0001-0999 : Fixed Assets
Asset account
Assets that are not expected to be turned into cash within one year. These may be items such as vehicles, property, office equipment, etc.

1000-1999 : Current Assets
Asset account
Assets that are likely to be turned into cash receipts within one year, such as stock, outstanding customer invoices, short term loans etc.

2000-2299 : Current Liabilities
Liability account
These are debts to others that are likely to be paid within one year, such as supplier invoices

2300-2999 : Long Term Liabilities
Liability account
Debts that are not likely to be paid within one year, such as mortgages, loans and directors' cash injections

3000-3999 : Capital and Reserves
Do not post transactions with these codes unless you know what you are doing

4000-4999 : Sales
All your sales should use one of these accounts. If you want, you can split sales up and allocate part of a sales invoice with one code and part of an invoice with another code.

5000-5999 : Purchases
These codes should be used for purchases that relate directly to your sales, for example Import Duty on products, Carriage invoices from your courier company, packaging costs and so on.

6000-6999 : Direct Expenses
Use these codes for payments such as advertising fees

7000-7999 : Overheads
These are the codes most commonly used for tracking all your other business expenses, such as travelling, wages, rent, utility bills and so on. There is a code here; 7501; Postage and Carriage, that should not be confused with 5100; Carriage. The 7501 code should be used for non sales related postal expenses (such as stamps for a mailshot). The 5100 code should be used for carriage expenses that relate directly to items shipped (such as postage expenses if you are a mail order company).

8000-8999 : Depreciation and Sundry
Do not use these codes unless you know what you are doing

9000-9999 : Suspense Accounts
Do not use these codes unless you know what you are doing

Journals, debits and credits

Every accounting entry made into Pearl is called a journal and has a unique numerical reference - the journal ID. This reference should be written on the paperwork for the transaction, and each piece of paperwork should be stored consecutively in a folder, allowing you to reference the original document later.

Every journal in a double entry accounting system such as Pearl requires information to be recorded in two columns (a debit and a credit), for example when you buy stock, your stock value increases (the debit), and your bank account decreases (the credit). The total value of debits and credits in any one journal must match.

Depending on what the transaction is, a debit can either increase or decrease the balance of an account. Pearl manages this all for you, but it good to be aware of what is going on behind the scenes. An INCREASE to an ASSET account (such as a bank account) is a DEBIT.

See the section titled Correcting an Account's Entry elsewhere in the documentation for more information.

Profit & Loss

When you look at a Profit and Loss report, Pearl will check all the transactions in the Sales and Expense accounts to see how much profit has been made.

Note how the Profit and Loss report (P&L) does not include any asset information.

There are two ways to view your profit and loss report – use the main menu: Accounts->Reports->Profit & Loss, or else open the left hand accounting side menu and click the Profit & Loss link.

If you sell stock, then you will need to make sure that any change in the cost value of your stock is included in any Profit & Loss (P&L) report otherwise the figures will not be correct. Talk to your accountant or book keeper for more information on stock valuation.

Balance Sheet

When you generate a Balance Sheet, Pearl will look at all your Asset accounts and give you a net balance.

To view your balance sheet, use the main menu or open the accounting side menu and then click the Balance sheet link.

You can view a balance sheet up to any date you wish. This will include all transactions in your system to date (since the start of the financial year if you are past your first year end).

Tax & VAT

If you are VAT registered you can claim back any VAT paid on purchases (input tax), and must pay a proportion of your sales as VAT (output tax). Pearl will track the tax on your sales and purchases to provide a VAT return every quarter which is the sum of your output tax less the sum of your input tax.

Tax payable = Output tax - Input tax 

Pearl is set up with a number of tax codes that should be used for each transaction:

• T0 – Zero rated
• T1 – Standard rate : 17.5% VAT
• T2 – Tax Exempt
• T3 – Reduced rate (5%)
• T4 – Sales to VAT registered EU customers
• T7 – Zero rated purchases from EU suppliers
• T8 – Standard rated purchases from EU suppliers
• T9 – Transactions not involving VAT (such as bank transfers or staff wages)

Every sale and purchase made affects your Asset accounts, but also affects other accounts.

For example, selling 1 hour of labour at £10 cash including VAT (a standard T1 sale) will generate the following accounting journal entry in Pearl. Note how the debit in the asset account (the bank account) is an increase.

Buying some stationery for £5.00 cash (a standard T1 purchase) will generate the following journal entry;

When you generate a VAT Return, Pearl will add up all the output tax for the period and subtract the input tax from it, giving the total tax due.

Note how the debits always equal the credits in any journal, and how transfers in or out of asset accounts (such as bank accounts) are always T9 (not involving VAT).

VAT schemes

Pearl can be set up for both cash based and standard VAT schemes. The only information that this will affect is the production of the quarterly VAT return. Data is stored in the same way for both VAT schemes.

Currencies

Pearl allows for multi currency accounting as follows.

• Products can have a price defined in any number of currencies.
• Each customer can be set to a certain currency, which will define the pricing used when a sale is made.
• Each supplier can be set to a certain currency, which will define the cost price on Purchase Orders.
• Each sale or purchase is created with the current exchange rate as stored in Pearl (see below)

When the sale is posted to accounts, or an invoice is received for a purchase, the total value is converted to Sterling using the rate as shown in the order. In this way all accounting data remains in Sterling for straightforward Balance sheets and Profit/Loss reports. Once the invoice has been received (Pos) or posted to accounts (sales), the exchange rate cannot be changed.

When the invoice is later cleared, the exchange rate variance will mean that the actual amount paid/received will be different from that shown on the supplier/customer balance. The difference should be entered in the Adjust column when clearing the invoice. Pearl will allow you to allocate this difference against the Exchange rate variance account.

Pearl does not currently support foreign currency bank accounts.

The website will display prices in a number of currencies but web sales are always recorded in Pounds Sterling.

Exchange rates

Pearl has a database of currencies whose exchange rates which will need to be updated manually on a regular basis. Click Setup->Currencies from the main menu, and click update to synchronise the rates with those stored by the global currency servers XE or OANDA. This will only affect subsequent sales and purchase orders, since each sale/purchase stores it’s own currency rate.

Departments and projects

Pearl will allow you to assign a department, project or marketing campaign to each accounts transaction. This will allow you to display reports on certain areas within your business. Each till in a retail business must be assigned a department, but otherwise department and project control is up to you.

Attaching files to transactions/journals

To upload a file for a transaction, find the transaction first (use the accounts quick search box with a value, invoice reference, part of the details entered etc) and then click the journal ID on the left of the list. This will take you to the journal details screen where you can click the attach file icon.