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How to Transfer Funds Between Financial Accounts

Contents

Objective

There are many situations in which a Company needs to transfer funds to modify or adjust bank and/or cash accounts balance:

In Openbravo bank and cash accounts are represented as Financial Accounts.

There are several kinds of funds transfers depending on the financial account type used and the organization for which the transfer of funds takes place:

Recommended articles

Transferring funds between financial accounts requires a clear understanding on how to create a G/L Item.

It is highly recommended as well to understand how Financial Accounts and Account Combination work in Openbravo.

Execution Steps

In Openbravo, the company in the example will have to withdraw money from one bank or cash account and get it deposited into another bank or cash account.
In other words, the company needs to alter either bank or cash accounts balance whenever it is required. That action could or could not have fees.
Anyway, the steps to follow are:

G/L Item creation

A GL Item is the accounting item to use for accounting "in-transit" funds. It is key to configure the GL item with the right debit and credit accounts in the Accounting tab. The way to to that is:

For instance, the sample account combinations which could be used are:

Creation of the "Withdrawal" transaction

A withdrawal transaction needs to be created in the Financial Account where the funds are going to be taken from. This step in the process could or could not have fees.

The company in this example needs to:

This new transaction is then shown in the Transaction tab of the Financial Account window. Openbravo clearly shows the "Withdrawal Amount" recorded.

The next step is to post the withdrawal transaction. It is possible to manually post it by using the process button Post or it could be automatically posted if the Accounting Server Process is enabled in the Process Request window.

The posting will look like:

Account Debit Credit
GL Item Debit Paid Out Amount
Bank A - Withdrawal account Paid Out Amount

Creation of the bank fee

The company in this example needs to create the withdrawal transaction as described previously and an additional transaction to reflect the bank fee. The way to do that is:

Bulbgraph.png   A bank fee can also be registered in a financial account by using a previously created G/L Item named "Bank Interest".
Bank Interest accounting could be configured as '7010 Interest income' for credit and '7020 Interest expense' for debit.

In this example, there will be two transactions created in the Transaction tab of the Financial Account, one for the withdrawal and one for the fee.

Fee transaction can also be posted same way as the withdrawal transaction.
Fee posting will look like:

Account Debit Credit
Bank A - Bank Fee Account Paid Out Amount
Payment Out - Withdrawal Paid Out Amount

Creation of the "Deposit" transaction

The final step is to create a deposit transaction in the Financial Account where the funds must be deposited.

The company in this example needs to:

This new transaction is then shown in the Transaction tab of the Financial Account window. Openbravo clearly shows the "Deposit Amount" recorded.

The next step is to post the deposit transaction. It is possible to manually post it by using the process button Post or it could be automatically posted if the Accounting Server Process is enabled in the Process Request window.

The posting will look like:

Account Debit Credit
Bank B - Deposit Account Received In Amount
GL Item Credit Received In Amount

Transfer of funds between "Cash" accounts

The company in this example needs to follow exactly the same execution steps. The only difference is the Financial Account Type to use. This time a "Cash" financial account type will be used while creating the withdrawal transaction and the deposit transaction.

Transfer of funds between different organizations

The company in this example needs to follow exactly the same execution steps. The only difference is the Organization to be used. This time:

Withdrawal transaction posting in Organization A will look like:

Account Debit Credit
GL Item Debit Paid Out Amount
Bank A - Withdrawal account Paid Out Amount

Deposit transaction posting in Organization B will look like:

Account Debit Credit
Bank B - Deposit Account Received In Amount
GL Item Credit Received In Amount

Result

This completes the transfer of funds between financial accounts. As a result:

Above scenario is just a transfer of funds between financial accounts of the same organization.

In the case of transfer of funds between financial accounts of different organizations:

Above scenario would somehow mean an expense in the Organization A and a revenue in the Organization B.

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