So what exactly does that mean, and how does it work? Since I'm working on a big migration to CiviCRM, and the client has "accounting integration" needs, I've been diving in and trying to understand the nitty gritty. Since I started, 4.4 is now out, and 4.5 is almost out, and I understand they've made some improvements, so this is now a bit dated, but still might be helpful.
First off, "accounting integration" doesn't mean that CiviCRM will now replace your accounting package, but the goal is to make it play nicer. The key issue for my client is that reports coming out of their current system are used as input for their accounting system, so it needs to speak the same language - i.e. things like GL account codes, and double entry accounting for things like contributions where the donor is promising to send a cheque. I like to describe it as: making CiviCRM a trusted entity within the accounting system, instead of it's current status where reports generally involve some wishful thinking, caveats, and a checklist of adjustments.
Initially I've just been going along assuming everything will take care of itself under the hood as I use Eileen's brilliant civimigrate module in combination with the Drupal migration module. But after a few failed attempts at getting what I want, I've been forced to try and understand what's really happening, and so that's what I'm sharing here.
The most useful documentation I've found so far is here:
The aha moment came after looking at the new civicrm_financial_* tables and reading that page.
My key insight was:
In the past, a row in the contribution table was playing too many roles: it was the transaction record as well as the accounting record. In this new, more sophisticated world of accounting, you still get one row in the contribution table per "contribution", but that really serves as a simplification of what are two collections of things: the collection of financial transactions that go into paying for it, and the collection of items that describe how that contribution is accounted for - where it went. In the simplest case, you get one of each (e.g. a check for a simple donation). But at it's most complicated, you might have a series of partial payments for an event ticket, some of which is receiptable as a tax donation and some of which goes towards the cost of the event. Yes, that's why they call it 'double entry'.
Implementing a system like this over top of an existing system is a bit tricky, and the developers seem to have been a little bit worried about the complexity implication for users that didn't want to know about this. So you have to dig a bit to see what's going on, and I'm probably missing some details. Patches welcome ...
One way of describing what we're doing is 'splitting' the contribution. The contribution becomes an container for a collection of inputs (financial transactions) and collection of outputs (attribution of the contribution to accounting codes). The original contribution table still contains a single entry per contribution, but the possibly multiple transactions that pay for it, and the possibly multiple attributions of that income, need to live in related tables.
One trick the developers used was to create something they call a 'financial type'. The point of this entity is to allow administrators to delegate the accounting to a set of rules for each 'financial type' - meaning, the way a contribution gets allocated to the account codes is determined by the nature of the transaction (i.e. income, expense, cost of sales, etc.), which is then looked up for the 'financial type', and that determines the accounting code. Fortunately, this is just a mechanism for calculating the actual accounting - the data gets stored fairly directly.
Now let's check out the new civicrm_financial_* tables.
civicrm_financial_item - this looks like the accounting for each entry in the contributions table. It includes entity_table and entity_id fields that link it to more information, e.g. an entry in civicrm_line_item. It doesn't provide you the accounting directly, but it gives you the financial_account_id, and you can look up the accounting code directly from the civicrm_financial_account table.
civicrm_financial_trxn - these are the financial transactions that make up the contributions. You'll see it has things like the from and to account fields (to allow for both external and internal transactions, like when a check is received and the transaction is transferred from accounts payable to your bank account), as well as transaction id's, currency, amounts, dates, payment instruments, etc., i.e. everything you need to follow the money.
civicrm_entity_financial_trxn - this is the table that joins the above two tables to the contributions table. A simple typical contribution will have two entries, one pointing to the financial item, and the other to the financial transaction.
Okay, now let's dig a little deeper:
In the financial_item table, which holds the accounting, it also has a reference to a 'more information' record, with entity_table and entity_id fields. In my install, it's pointing at the civicrm_line_item table most of the time, except for old imported from 4.2 entries that point at the civicrm_financial_trxn table.
civicrm_line_item - I'm not sure why you'd need a reference to this, but I guess it does help track back to how the financial_item got created. Specifically, it has a 'financial type id' field, which in combination with the transaction, could be used to calculate the financial account id that ends up in the financial item.
civicrm_financial_trnx - I'm guessing that the only time a financial_item references this table is when there's a direct correspondence between the transaction and the accounting. For an install that was migrated from 4.2, for example, that's the case of all the old transactions that assumed this and for which there is no intervening line item to split it up. Maybe "backend" administrative entries and adjustments end up here as well?
And now back to the other financial tables:
select * from civicrm_entity_financial_account where entity_table = 'civicrm_financial_type';
civicrm_financial_account - the list of the accounting codes for each 'account', i.e. what you want to get from your bookkeeper when you set things up.
Conclusion: it's pretty complicated, and obviously you don't want to be manually mucking with these tables. In theory, the structure allows for some nice splitting up of income into different accounting categories, but at this stage, the interface is trying to hide most of the details to keep things simple for users.