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Knowledge Center > Finance > Z-Finance > Chart of Accounts > Assign Accounting Codes

Assign Accounting Codes

Overview

In order for Zuora to provide you with revenue accounting data, you'll have to assign accounting codes to the various revenue transactions (invoices, payments, credits, refunds). This page explains the process in detail.

Before you begin, be sure that your chart of accounts has been correctly configured for your business.

Add or Change Codes

If you don't use accounting codes, your transactions are recorded with a blank code. If you later start using accounting codes, new transactions created after the change will reflect the accounting codes, and old transactions will still have the blank code.

The same principle generally applies when making other changes as well:

  • If you make edits to the codes you're using, transactions recorded before the edits will still have the old codes, and new transactions will have the new codes.
  • If you change an accounting code assignment for a particular type of transaction, the change applies only to new transactions. For instance, if you assign a different accounting code to a product rate plan charge, any new invoices that you create will use the new accounting code. Existing invoices will not be affected by the change and will still have the old accounting code. 

Allowing Blank Accounting Codes in Configuration

You have the option of allowing blank accounting codes when configuring accounting codes for transactions and product rate plan charges. By default, blank accounting codes are not allowed. For steps on how to allow blank accounting codes, see Configure Accounting Rules.

How accounting codes are derived and defined in Zuora

The following chart summarizes where accounting codes are derived and defined in Zuora.

Transaction Where the Accounting Code is Derived From Where to Define the Accounting Code in Zuora

Invoice Item

Rate Plan Charge

  • If Z-Finance is enabled:
    Product Catalog Rate Plan Charge > Finance > Accounting Code
  • If Z-Finance is not enabled:
    Product Catalog Rate Plan Charge > Name > Accounting Code

Invoice Payment

Payment Method

Tax Item

Tax Code

Settings > Z-Finance Settings > Configure Accounting Codes

Credit Balance Payment

Z-Finance Settings: Configure Accounting Codes

Settings > Z-Finance Settings > Configure Accounting Codes

Payment Refund

Payment Method

Settings > Z-Finance Settings > Configure Accounting Codes

Credit Balance Refund

Z-Finance Settings: Configure Accounting Codes

Settings > Z-Finance Settings > Configure Accounting Codes

Credit Balance Adjustment

Z-Finance Settings: Configure Accounting Codes

Settings > Z-Finance Settings > Configure Accounting Codes

Invoice Adjustment

Note: Invoice Adjustment is deprecated on Production. Zuora recommends that you use the Invoice Item Adjustment instead.

Invoice Adjustment Transaction

When creating an Invoice Adjustment, go to Additional Fields > Accounting Code

Invoice Item Adjustment

Invoice Item: Rate Plan Charge

  • If Z-Finance is enabled:
    Product Catalog Rate Plan Charge > Finance > Accounting Code
  • If Z-Finance is not enabled:
    Product Catalog Rate Plan Charge > Name > Accounting Code
  • When adjusting an invoice item, go to Advanced Options > Change Accounting Codes. See Override Invoice Item Adjustment Service Periods and Accounting Codes for more information.

 

Assigning Accounting Codes for Transaction Types

This section discusses the best accounting codes to assign to the various transaction types.

Invoice Items

For invoicing, the accounting code maps to an income or revenue GL account in your accounting system.

An invoice can include multiple items, such as subscription fees, support fees, and professional services fees. The GL account that you would associate with each of those items corresponds to the Zuora accounting code to assign at the product rate plan charge level. In Zuora, each invoice item will be tracked by the accounting code from the product rate plan charge.

You can use the same accounting code for any product rate plan charges that have the same revenue attributes. For example, subscriptions that contain quarterly billing schedules may have the same accounting codes as subscriptions that contain annual billing schedules.

Setting finance rules for rate plan charges

When creating a rate plan charge, select the revenue recognition rule that you want to use with the charge: 

  • Recognize upon invoicing: Select this rule so revenue will go straight against the Recognized Revenue accounting code – revenue is recognized all at once when the charge is invoiced.

    Recognize Upon Invoicing with Deferred Revenue Selected

Optionally, you can select the Advanced: define a different Deferred Revenue accounting code check box. When selected, you can select a different Deferred Revenue accounting code than the Recognized Revenue accounting code. Revenue will go against the Deferred Revenue accounting code – allowing you to manage all revenue through the same deferral process. Clear this check box to revert back to the default behavior.

  • Recognize daily over time: Select this to include the charge in the Z-Finance standard deferred revenue report, which recognizes revenue over a period of time using a daily recognition calculation. When closing an accounting period, Zuora will group all invoice items using the Deferred Revenue General Ledger account.

    Recognize Revenue Daily Over Time

Using discount specific accounting codes and rules to manage revenue

When creating or editing a discount charge, select this option to define the finance information (including revenue recognition rules and accounting codes) for this discount charge. If you do not select this option, the discount charge uses finance information from the regular charge where the discount is applied. 

Configuring accounting codes

Use the accounting codes to map to the GL accounts you use to create journal entries. Depending on how you choose to recognize revenue, you might need to enter either a recognized revenue account or both a recognized revenue account and a deferred revenue account.

If you have any existing accounting codes, we have automatically migrated them to the recognized revenue account. This has not changed any existing functionality of the accounting codes. 

The accounting code represents the offsetting account to your accounts receivable (AR). We now automatically select accounting codes for you based on the revenue recognition rule that you have selected.

If you recognize revenue upon invoicing, we populate the accounting code with the value from the recognized revenue account. If you recognize revenue daily over time, we populate the accounting code with the value from the deferred revenue account. 

Invoice Item Adjustments

The accounting code and accounting period for an invoice item adjustment automatically map to the same revenue GL account that was used for the original invoice item. If you have a direct integration with your accounting system, invoice item adjustments will reduce your corresponding accounts receivable balance. An invoice item adjustment can increase or decrease the invoice balance.

Invoice Payments

Accounting codes for invoice payments are defined under Z-Finance Settings > Configure Accounting Codes, and typically map to a bank account in your accounting system.

Credit Balance Payment

Accounting code for credit balances are defined under Z-Finance Settings > Configure Accounting Codes. A credit balance payment is created from an overpayment. The accounting code for a credit balance payment typically maps to a bank account in your accounting system and is generally different from the accounting code you would use for a normal payment.

Payment Refunds

Accounting codes for payments are defined under Z-Finance Settings > Configure Accounting Codes. The accounting code in a payment refund typically maps to a bank account in your accounting system. A refund also updates the accounts receivable in your GL. You would then process an invoice item adjustment to the extent that the accounts receivable needs to be removed from your financial statements.

Credit Balance Refunds

Accounting codes for your credit balances are defined under Z-Finance Settings > Configure Accounting Codes. A credit balance refund occurs when you refund a credit balance payment. The accounting code for a credit balance refund is typically a bank account in your accounting system.

Credit Balance Adjustment (Increase)

The accounting code for a credit balance adjustment typically maps to a cash-on-account GL account in your accounting system. This transaction type is used when creating a credit balance from a negative invoice, which results in an increase to the credit balance amount on a customer account.

Credit Balance Adjustment (Decrease)

The accounting code for a credit balance adjustment typically maps to a cash-on-account GL account in your accounting system. This transaction type is used to transfer funds from the credit balance to a positive invoice, thus reducing the invoice balance.

Last modified
22:37, 12 Jun 2016

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