Accounting and the General Ledger

This section explains how account and subscriber accounting impacts the general ledger. For more information about the GL, see Introduction in the Accounting section of the Setup Manual.

Note:

Circulation can export GL entries to the cmgltran.d file in /dti/exchange/cm. You can pull this file into your general ledger application). Or, you can produce the GL Interface Journal, which details the Circulation GL entries for the month.

Because there are some crucial differences between the two, we present GL accounting for carrier collect and office pay billing methods in separate sections. For simplicity, assume that one of your carriers has only carrier collect subscribers, and another has only office pay.

Carrier Collect

With both office pay and carrier collect subscribers, it is important to realize that subscriber billing and payment functions independently from account billing and payment. The newspaper might have a promotional discount for its subscribers, but the carriers will receive the same amount for delivering the paper (unless the account rates are specifically tied to the subscriber rate code).

With carrier collect subscribers, the carrier delivers the papers, collects the money, and then is billed by the newspaper for the wholesale value of the papers delivered. The carrier’s revenue is what is collected (retail value) minus what is paid to the paper (wholesale value).

In regard to the general ledger, two major actions take place:

• Draw Charge. The bill the carrier receives for the papers contains draw charges. This is what the newspaper charges the carriers for papers they receive, and so it is credited to Account Revenue. Since the money is due but not yet paid, it is debited from Accounts Receivable. Other charges and credits, such as return credits and miscellaneous charges (rubber bands, etc.), also show up on the carrier’s bill. They debit or credit their own GL accounts.

• Account Payment. When the carrier sends in the payment, Accounts Receivable is credited, thus balancing it out. The Cash in Bank Account or the Credit Card Account (depending on method of payment) are debited. The net effect of the draw charge and account payment is that money has moved from Cash in Bank or Credit Card to Account Revenue.

Office Pay

With office pay subscribers, the GL accounts are a little more complex. The carrier delivers the papers, but the subscriber pays directly to the newspaper. Since this payment is usually for papers that have not yet been delivered (18 weeks into the future, for example), it is unearned revenue. As the papers are delivered, the revenue becomes earned. Earned revenue is typically calculated at the end of each fiscal period in Circulation (see Unearned Revenue).

While revenue is being earned, the carriers are earning credit. This credit, called office pay credit, is the difference between the (retail) rate the carriers are given for delivering the paper and the draw charge (wholesale value) of the paper. It is equivalent to the money the carrier collect carrier receives directly from the subscriber.

In regard to the GL account, four major actions take place with Office Pay subscribers:

• Subscriber Payment. Since the subscriber payment is for future goods and services, the Unearned Revenue Account is credited (if part of it is grace owed, however, that part is credited to the Subscription AR Account). Since the money is on its way to being revenue, the Cash in Bank Account or Credit Card Account (depending on the method of payment) are debited for the same amount.

• Earned Revenue. As the papers are delivered, the Unearned Revenue Account is debited, and the Subscriber Revenue account is credited. Subscriber Revenue reflects money earned from subscribers. Some of that money will, of course, go to the carrier.

• Draw Charge. The draw charge for the office pay carrier is the same as for the carrier collect carrier, above. The Revenue Account is credited, and the Accounts Receivable Account is debited.

• Office Pay Credit. To pay the carrier, the Delivery Expense money is debited, and Accounts Receivable credited. This might make it look like the carrier isn’t getting any money at all, but don’t worry: the money debited from Accounts Receivable is less than the money credited to it. The difference is what the carrier earns, his or her office pay credit. This amount will eventually go to Accounts Payable (where a check will be cut) or be deposited directly into a carrier bank account.

The net effect of these debits and credits is that money is being taken out of the Cash in Bank or Credit Card Accounts and going to Subscriber Revenue. Money (for office pay credits) is also being taken out of Delivery Expense and going to Account Revenue and Accounts Payable. At most newspapers, Subscriber Revenue and Delivery Expense will roughly cancel each other out, and so the true net effect will be that money is going from Cash in Bank or Credit Card to Account Revenue (newspaper share) or Accounts Payable (carrier share).

If the carrier has both office pay and carrier collect subscribers, the total draw charge for the carrier collect and office pay subscribers is subtracted from the office pay credit. If the credit exceeds the charges, a carrier will receive a check from the newspaper; if not, the carrier will have to make a payment.