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How do I configure Accounting Codes?

Overview

In Zuora, an accounting code is the offsetting GL account to your accounts receivable account.  It is used to group transactions that contain similar accounting attributes. The value of accounting codes is that you can group multiple transactions into a condensed number of accounting codes. For example, you can use the same accounting code for payments and refunds, and when you aggregate both, you can get your net payment amount. This article discusses how to use and think about Zuora accounting codes to classify transactions in an accounting system.

Please note the Z-Suite product has a specific use for Zuora accounting codes and the Z-Suite documentation should be referenced to understand the best use of accounting codes for the integration.

Solution

In Zuora, there are two ways to view the summarized transactional data associated to the Accounting Code:

  • Use the premium feature, Accounting Periods, that automatically aggregates Zuora invoice and payment operations by accounting period and by accounting code so you can gain insight into your Billing and Cash information.  The Zuora payment operations include invoice payments, payment refunds, invoice item adjustments (charge and credit), and credit balance adjustments (credit balance payment, credit balance applied, credit balance transferred, credit balance refund).  Please contact support if you would like to use this premium feature.
  • Use the AR Summary by Accounting Code report to aggregate Zuora invoice and payment operations by their accounting code.  This report can be run for a specific time period to group the following payment operations: invoice items, invoice payments, payment refunds, invoice item adjustments (charge and credit), and credit balance adjustments (credit balance payment, credit balance applied, credit balance transferred, credit balance refund).

Rest assured, you can also export individual Zuora transactions slice and dice that data for your reporting needs. 

Let’s talk about how the accounting code is mapped across Zuora transactions:

Invoice Items

The accounting code maps to a income or revenue GL account in your accounting system.  If you were to create an invoice in your accounting system, you would add an item to the invoice for each component of the invoice (for example subscription fees, support fees and professional services fees).  The GL code that you would associate each item with would be the same accounting code that you would apply in Zuora at the product rate plan charge level.  In Zuora, the corresponding invoice item will use the accounting code from the product rate plan charge.  You would apply the same accounting code to 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.

Invoice Item Adjustments

The accounting code maps to the same revenue GL account that was used for the invoice item. The accounting code on the invoice item adjustment is automatically applied based on the corresponding invoice item that is being adjusted.  The charge service period for the invoice item adjustment also corresponds to the underlying invoice item.  If using a direct integration with your accounting system, invoice item adjustments will also reduce your corresponding accounts receivable balance. An invoice item adjustment can increase or decrease the invoice balance as the invoice item adjustment can bring the balance of an invoice item to zero.

Payments

The accounting code in a payment typically maps to a bank account in your accounting system.

Credit Balance Payment

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 than the accounting code you would use for a normal payment.

Payment Refunds

The accounting code in a payment refund typically maps to a bank account in your accounting system. This will also re-create the accounts receivable in your GL.  You would then process an invoice item adjustment to the extent the accounts receivable needs to be removed from your financial statements.

Credit Balance Refunds

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.

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

Invoice Payment

Payment Method

Tax Item

Tax Code

Finance Settings > Configure Accounting Codes

Credit Balance Payment

Finance Settings: Configure Accounting Codes

Finance Settings > Configure Accounting Codes

Payment Refund

Payment Method

Finance Settings > Configure Accounting Codes

Credit Balance Refund

Finance Settings: Configure Accounting Codes

Finance Settings > Configure Accounting Codes

Credit Balance Adjustment

Finance Settings: Configure Accounting Codes

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 Zuora Finance is enabled:
    Product Catalog Rate Plan Charge > Finance > Accounting Code
  • If Zuora 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.

The following transaction types are only available if you enable the Advanced AR Settlement feature. 

The Advanced AR Settlement feature is in Limited Availability. This feature includes Unapplied Payments, Credit and Debit Memo, and Invoice Item Settlement. If you wish to have access to the feature, submit a request at Zuora Global Support

Credit Memo

Finance Settings: Configure Accounting Codes Finance Settings > Configure Accounting Codes
Debit Memo Invoice Item: Rate Plan Charge
  • If Zuora Finance is enabled:
    Product Catalog Rate Plan Charge > Finance > Accounting Code
  • If Zuora Finance is not enabled:
    Product Catalog Rate Plan Charge > Name > Accounting Code

Accounting System Documentation

Please refer to the documentation for your specific accounting system when creating corresponding accounts in Zuora such as GL Accounts (Revenue, Accounts Receivable, Bank). For example, if you are using Z-Suite, you will only map over invoice item adjustments.

Sample Steps for Accounting Systems

Here are some sample high level steps for two popular accounting systems:

NetSuite

Invoices:  Create the GL Account in the Chart of Accounts
Payments:  Create the Bank Account in Setup

QuickBooks:

Invoices:  Create the Item
Payments:  Create the GL Account for the Bank Account
Last modified
23:13, 21 Apr 2016

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