Accounting Guide

This document explains how accounting entries in the POS system work in a simple, user-friendly way. Each section includes:

  • What happens in the business scenario
  • Which accounts are affected (Debit and Credit)
  • Easy-to-understand explanation
  • Real-life example

The goal is to make it clear for both accounting and non-accounting staff to understand the impact of each transaction.

POS Accounting Entries

Account Types

  • Asset
  • Liability
  • Equity
  • Income
  • Expense

Chart of Accounts

Asset (1) Liability (2) Equity (3) Income (4) Expense (5)
1151 – Input - Sales Tax 2151 – Output - Sales Tax 5555 – Opening Balance Adjustment 5401 – Stock Adjustment (Gain) 5100 – Cost of Goods Sold
1152 – Input - Tax 2152 – Output - Tax 3100 – Income Summary 4200 – Discount Received 6100 – Salary Expense
1153 – Input - Tax 2153 – Output - Tax 3200 – Retained Earnings 4100 – Sales Revenue 6190 – Other Staff Expense
1154 – Input - Excise Tax 2154 – Output - Excise Tax 4150 – Sales Return 6110 – Bonus Expense
1150 – Input 2200 – Salary Payable 6140 – Travel Allowance Expense 5400 – Stock Adjustment (Loss)
1050 – Cash 2100 – Accounts Payable 5300 – General Expense 5900 – Round Off
1100 – Accounts Receivable 2150 – Output 5200 – Discount Given 6120 – Commission Expense
1200 – Inventory 7010 – Loan Payable 6130 – Festival Bonus Expense
1060 – Bank 6160 – Food Bill Expense
6170 – Advance Salary Expense
6150 – Mobile Bill Expense
6160 – Food Bill Expense
7000++ Loan Interest Account On
6170 – Advance Salary Expense

1. Purchase Order

Main Purchase of Goods

What happens: When goods are purchased from a supplier on credit.

Debit (Inventory 1200): Stock increases (you now have more goods to sell).

Credit (Accounts Payable 2100): Liability increases (you owe the supplier).

Example: Buy goods worth UGX1,000 on credit → Inventory +UGX1,000, Payable +UGX1,000.

Input Tax on Purchase

What happens: Tax paid on purchases which is claimable as Input Tax Credit.

Debit (Input Tax 1150): Claimable tax is recorded as an asset.

Credit (Accounts Payable 2100): Increases liability to supplier.

Example: Purchase UGX1,000 goods + UGX100 tax → Input Tax +UGX100, Payable +UGX100.

Discount Received

What happens: Supplier gives you a discount.

Debit (Accounts Payable 2100): You owe less money to supplier.

Credit (Discount Received 4200): Recorded as income because you saved money.

Example: UGX50 discount → Payable -UGX50, Discount Income +UGX50.

Round-Off Adjustment

Sometimes totals are rounded to nearest value. Two cases:

  • Positive Round-Off: Payable decreases, income increases.
  • Negative Round-Off: Payable increases, expense increases.

Example: Final bill is UGX999.70, rounded to UGX1,000 → Round-Off Expense +UGX0.30.

Purchase Order Accounting Table

Scenario Debit Account Credit Account When it happens
Main Purchase Inventory (1200) Accounts Payable (2100) Main purchase of goods
Input Tax on Purchase Input Tax (1150) Accounts Payable (2100) Tax paid on purchase (claimable)
Discount Received Accounts Payable (2100) Discount Received (4200) When supplier gives discount
Round-Off Positive Accounts Payable (2100) Round Off (5900) If round-off reduces payable
Round-Off Negative Round Off (5900) Accounts Payable (2100) If round-off increases payable

2. Purchase Return

Goods Returned

What happens: Return goods purchased earlier to supplier.

Debit (Accounts Payable 2100): Liability decreases.

Credit (Inventory 1200): Stock decreases.

Example: Return goods worth UGX200 → Inventory -UGX200, Payable -UGX200.

Reverse Input Tax

Debit (Accounts Payable 2100): Payable decreases.

Credit (Input Tax 1150): Input Tax decreases.

Example: Return goods with UGX20 tax → Input Tax -UGX20, Payable -UGX20.

Reverse Discount Received

Debit (Discount Received 4200): Income decreases.

Credit (Accounts Payable 2100): Liability increases.

Example: UGX10 discount earlier, now reversed → Discount Income -UGX10, Payable +UGX10.

Purchase Return Accounting Table

Scenario Debit Account Credit Account When it happens
Goods Returned Accounts Payable (2100) Inventory (1200) Goods returned to supplier
Reverse Input Tax Accounts Payable (2100) Input Tax (1150) Reverse Tax claim
Reverse Discount Received Discount Received (4200) Accounts Payable (2100) Reverse supplier discount
Round-Off Positive Accounts Payable (2100) Round Off (5900) If round-off reduces payable
Round-Off Negative Round Off (5900) Accounts Payable (2100) If round-off increases payable

3. Sales Order

Main Sale

What happens: Goods sold to customer on credit.

Debit (Accounts Receivable 1100): Customer owes money.

Credit (Sales Revenue 4100): Revenue increases.

Sell goods UGX500 → Receivable +UGX500, Revenue +UGX500.

Output Tax on Sale

Debit (Accounts Receivable 1100): Customer owes tax.

Credit (Output Tax 2150): Liability increases.

Sale UGX500 + UGX50 tax → Receivable +UGX550, Output Tax +UGX50.

Cost of Goods Sold

Debit (COGS 5100): Expense increases.

Credit (Inventory 1200): Stock decreases.

Goods cost UGX300 → COGS +UGX300, Inventory -UGX300.

Sales Discount Given

Debit (Sales Discount 5200): Expense increases.

Credit (Sales Revenue 4100): Revenue decreases.

UGX20 discount → Sales Discount +UGX20, Revenue -UGX20.

Round-Off Adjustment

Positive → Receivable increases, Round-Off income recorded.
Negative → Receivable decreases, Round-Off expense recorded.

Invoice UGX499.60, rounded to UGX500 → Round-Off +UGX0.40.

Sales Order Accounting Table

Scenario Debit Account Credit Account When it happens
Main Sale Accounts Receivable (1100) Sales Revenue (4100) Main Sale Entry
Output Tax on Sale Accounts Receivable (1100) Output Tax (2150) Tax liability collected
Cost of Goods Sold COGS (5100) Inventory (1200) Record cost of goods sold
Sales Discount Given Sales Discount (5200) Sales Revenue (4100) Discount given to customer
Round-Off Increase Accounts Receivable (1100) Round Off (5900) Receivable increases due to rounding
Round-Off Decrease Round Off (5900) Accounts Receivable (1100) Receivable decreases due to rounding

4. Sales Return

Main Sales Return

What happens: Customer returns goods, reversing the original sale.

Debit (Sales Revenue 4100): Revenue decreases.

Credit (Accounts Receivable 1100): Customer owes less.

Example: Return UGX100 goods → Revenue -UGX100, Receivable -UGX100.

Reverse Output Tax

Debit (Output Tax 2150): Liability decreases.

Credit (Accounts Receivable 1100): Customer owes less tax.

Example: Return UGX10 tax → Output Tax -UGX10, Receivable -UGX10.

Reverse COGS

Debit (Inventory 1200): Stock increases.

Credit (COGS 5100): Expense decreases.

Returned goods costing UGX60 → Inventory +UGX60, COGS -UGX60.

Reverse Discount Given

Debit (Sales Revenue 4100): Revenue increases (discount removed).

Credit (Sales Discount 5200): Discount expense decreases.

UGX5 discount reversed → Revenue +UGX5, Sales Discount -UGX5.

Sales Return Accounting Table

Scenario Debit Account Credit Account When it happens
Main Sales Return Sales Revenue (4100) Accounts Receivable (1100) Reverse original sale
Reverse Output Tax Output Tax (2150) Accounts Receivable (1100) Reverse collected tax
Reverse COGS Inventory (1200) COGS (5100) Restock returned goods
Reverse Discount Given Sales Revenue (4100) Sales Discount (5200) Revert discount given to customer
Round-Off Increase Accounts Receivable (1100) Round Off (5900) Receivable increases due to rounding
Round-Off Decrease Round Off (5900) Accounts Receivable (1100) Receivable decreases due to rounding

5. Payments

Purchase Payment

What happens: Pay supplier for purchased goods.

Debit (Accounts Payable 2100): Liability decreases.

Credit (Cash/Bank): Asset decreases.

Pay UGX500 to supplier → Payable -UGX500, Cash -UGX500.

Sales Collection

What happens: Customer pays for goods sold.

Debit (Cash/Bank): Asset increases.

Credit (Accounts Receivable 1100): Receivable decreases.

Customer pays UGX300 → Cash +UGX300, Receivable -UGX300.

Purchase Refund

What happens: Supplier refunds us for returned purchase.

Debit (Cash/Bank): Asset increases.

Credit (Accounts Payable 2100): Liability decreases.

Supplier refunds UGX200 → Cash +UGX200, Payable -UGX200.

Sales Refund

What happens: Customer refunds us for returned goods.

Debit (Accounts Receivable 1100): Asset increases.

Credit (Cash/Bank 1050/1060): Asset decreases.

Customer refund UGX150 → Receivable +UGX150, Cash -UGX150.

Payment Accounting Table

Scenario Debit Account Credit Account When it happens
Purchase Payment Accounts Payable (2100) Cash/Bank (1050/1060) Pay supplier
Sales Collection Cash/Bank (1050/1060) Accounts Receivable (1100) Customer payment received
Purchase Refund Cash/Bank (1050/1060) Accounts Payable (2100) Supplier refund received
Sales Refund Accounts Receivable (1100) Cash/Bank (1050/1060) Customer refund settlement

6. Stock Adjustments

Stock Gain (Extra Found)

What happens: Extra stock found physically.

Debit (Inventory 1200): Asset increases.

Credit (Stock Adjustment 5400): Income recorded.

Extra stock worth UGX100 → Inventory +UGX100, Stock Adjustment +UGX100.

Stock Loss / Damage

What happens: Stock lost, damaged, or expired.

Debit (Stock Adjustment 5400): Expense increases.

Credit (Inventory 1200): Asset decreases.

Lost goods worth UGX50 → Stock Adjustment +UGX50, Inventory -UGX50.

Stock Adjustment Accounting Table

Scenario Debit Account Credit Account When it happens
Stock Gain Inventory (1200) Stock Adjustment (5400) Extra stock found
Tax on Stock Gain Input Tax (1150) Accounts Payable (2100) Tax liability on stock gain
Stock Loss / Damage Stock Adjustment (5400) Inventory (1200) Lost or damaged stock

7. Stock Transfer

What happens: Stock is moved from one branch to another. Accounting is recorded in two ways:

  • Sending branch records a Sale of stock (like sales order).
  • Receiving branch records a Purchase of stock (like purchase order).

Example: Branch A sends goods worth UGX1,000 to Branch B → Branch A records Sale, Branch B records Purchase.

Sending Branch (Sale Entry)

Scenario Debit Account Credit Account When it happens
Main Sale Accounts Receivable (1100) Sales Revenue (4100) Record sale to receiving branch
Output Tax on Sale Accounts Receivable (1100) Output Tax (2150) Tax liability collected
Cost of Goods Sold COGS (5100) Inventory (1200) Record cost of goods sold (reduce stock)
Sales Discount Given Sales Discount (5200) Sales Revenue (4100) Discount given to receiving branch
Round-Off Increase Accounts Receivable (1100) Round Off (5900) Receivable increases due to rounding
Round-Off Decrease Round Off (5900) Accounts Receivable (1100) Receivable decreases due to rounding

Receiving Branch (Purchase Entry)

Scenario Debit Account Credit Account When it happens
Main Purchase Inventory (1200) Accounts Payable (2100) Record purchase from sending branch
Input Tax on Purchase Input Tax (1150) Accounts Payable (2100) Tax paid on purchase (claimable)
Discount Received Accounts Payable (2100) Discount Received (4200) When discount is applicable from sending branch
Round-Off Positive Accounts Payable (2100) Round Off (5900) If round-off reduces payable
Round-Off Negative Round Off (5900) Accounts Payable (2100) If round-off increases payable

8. Expense Entries

Recording Expense

What happens: Book expense for utility, rent, etc.

Debit (Expense 5300): Expense increases.

Credit (Cash/Accounts Payable): Asset decreases or liability increases.

Pay UGX200 utility bill in cash → Expense +UGX200, Cash -UGX200.

Expense Accounting Table

Scenario Debit Account Credit Account When it happens
Expense Paid General Expense (5300) Cash (1050) / Accounts Payable (2100) Payment for expenses
Input Tax on Expense Input Tax (1150) Cash / Accounts Payable Tax credit claimed on expense

9. Payroll

Salary Expense

What happens: Record salary liability for employees.

Debit (Salary Expense 6100): Expense increases.

Credit (Salary Payable 2200): Liability increases.

Record UGX1,000 salaries → Salary Expense +UGX1,000, Salary Payable +UGX1,000.

Salary Payment

What happens: Salary paid to employees via cash/bank.

Debit (Salary Payable 2200): Liability decreases.

Credit (Cash/Bank 1050/1060): Asset decreases.

Pay UGX1,000 salary via bank → Salary Payable -UGX1,000, Bank -UGX1,000.

Payroll Accounting Table

Scenario Debit Account Credit Account When it happens
Salary Expense Salary Expense (6100) Salary Payable (2200) Record salary liability
Bonus Expense Bonus Expense (6110) Salary Payable (2200) Record bonus payable
Commission Expense Commission Expense (6120) Salary Payable (2200) Record commission payable
Festival Bonus Festival Bonus Expense (6130) Salary Payable (2200) Record festival bonus
Travel Allowance Travel Allowance (6140) Salary Payable (2200) Record travel allowance
Mobile Bill Allowance Mobile Bill Allowance (6150) Salary Payable (2200) Record mobile allowance
Food Bill Allowance Food Bill Allowance (6160) Salary Payable (2200) Record food allowance
Advance Salary Advance Salary (6170) Salary Payable (2200) Record advance salary
Other Staff Expenses Other Staff Expense (6190) Salary Payable (2200) Record other staff-related expenses
Salary Payment Salary Payable (2200) Cash/Bank (1050/1060) Salary paid to employees

10. Loan Module Accounting

Main Loan Transactions (Borrower Perspective)

Loan Received from Bank

What happens: You take a loan from the bank.

Debit (Bank): Asset increases (cash received).

Credit (Loan Payable): Liability increases (you owe the bank).

Example: Loan of UGX1,000 received → Bank +UGX1,000, Loan Payable +UGX1,000.

Loan Repayment - Principal

What happens: You repay part of the loan principal to the bank.

Debit (Loan Payable): Liability decreases (you owe less).

Credit (Bank): Asset decreases (cash leaves your account).

Example: Repay UGX500 principal → Loan Payable -UGX500, Bank -UGX500.

Loan Repayment - Interest

What happens: You pay interest on the loan.

Debit (Interest Expense): Expense increases (interest cost).

Credit (Bank): Asset decreases (cash leaves your account).

Example: Pay UGX50 interest → Interest Expense +UGX50, Bank -UGX50.

Chart of Accounts

Loan Accounting Entries

Scenario Debit Account Credit Account When it happens
Loan Received from Bank Bank (Asset increases) Loan Payable (Liability increases) When you take a loan from the bank
Loan Repayment - Principal Loan Payable (Liability decreases) Bank (Asset decreases) When you pay back part of the principal
Loan Repayment - Interest Interest Expense (Expense increases) Bank (Asset decreases) When you pay interest on the loan