Chart of Accounts

July 23, 2019 in General Ledger

Purpose

This function is used to enter or modify the details of Chart of Accounts available for use in the system.

The Chart of Account list is integral to all General Ledger posting functions, balance details and reporting functions. Each chart of account record holds descriptive data and must be assigned to a General Ledger Category.

Data Input

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Step 1 – Chart of Account Code

Account Code

Enter a new, unique chart of account code, that does not already exist on the system. You may select an existing chart of account to allow the adjustment of the details recorded.

Chart of Accounts codes can be alphanumeric, the length of which is set in the Accounting Format. Accounts can be consolidated on the basis of this Account Code, regardless of the Branch or Division. Every Chart of Account is available for use with a Branch and Division unless you establish rules to prevent combinations for use.  The three elements (Chart, Branch and Division) is usually referred to as a full General Ledger code or Account Posting code.

For details on the use of “codes”, see The Role of “Codes” in Online Advantage
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Step 2 – Details

Account Name

Enter the chart of account name to describe this account. Typical descriptions for Bank Accounts are “Cash at Bank” or “Cash at Bank – HSBC”. Other examples of account descriptions would be “Accounting Fees”, “Light and Power”, “Rent” etc. The account name appears on reports and displays and is a useful way of finding a chart of account to post to or enquire/report on.

For more details on descriptions, see The Role of “Names & Descriptions” in Online Advantage

Major Account

The ‘Major Account’ prompt allows you to establish your Chart of Accounts in a hierarchy of major and subsidiary (minor) accounts. Any account can be designated a subsidiary of another account by entering the Account code of the Major Account in this prompt against the subsidiary account. For example, your Chart of Accounts file could contain these entries:

Account Code     Major Account        Description
1100             1100                 Cash at Bank
1101             1100                 Cash at Bank - HSBC
1102             1100                 Cash at Bank - State

In this example, Account Codes 1101 and 1102 are subsidiaries of the Major Account 1100 (Cash at Bank) because all three accounts have the same Major Account Code. Subsidiary accounts must be in the same Category as the associated Major Account. Subsidiary accounts are kept separate from their major account, but can be treated as a group in reports.

When the account you are entering is a subsidiary of another account, enter the account code of the major account. The major account must previously have been entered in the Chart of Accounts list so that it is available for use. If the account is not a subsidiary account, the major account code should be set as the same as the account code i.e. it ‘points’ to itself. This is the default behaviour.

NOTE: The Major Account setting is also used in the Job Costing system to group costs together in reporting and displays.

Minor Account 1

Optionally enter an account code for the ‘Minor Account 1’ setting. This is used in Job Costing to group costs together in reporting and displays in a sub set (1) of all postings to a job.

Minor Account 2

Optionally enter an account code for the ‘Minor Account 2’ setting. This is used in Job Costing to group costs together in reporting and displays in a sub set (2) of all postings to a job.

Category

Select the Category this account belongs to. If the account that you are entering is a subsidiary of another account, the Category is automatically supplied by the system from the ‘Major Account’ previously nominated.

Account Sign

This setting only applies to Balance Sheet accounts. It should only be set to positive/negative to enable the use of an ‘Alternate Account’ setting. Otherwise leave it as the default setting of ‘None’.

When using the ‘Alternate Account’ facility, if the current balance of the account must be positive, you would enter a “+” in the “Sign” field. If the balance of the account became negative, then the account details (balance/history) will show under the ‘Alternate Account’ in reports and displays. When set to ‘None’ the ‘Alternate Account’ prompt will be disabled.

Alternate Account

The entry of an ‘Alternate Account’ is mandatory if the ‘Account Sign’ is set to ‘positive’ or ‘negative’. This setting only applies to Balance Sheet accounts.

The ‘Alternate Account’ code is validated against the Chart of Accounts. The account designated as the alternate must have been previously established, and must be a balance sheet item that does not already have an alternate set against it.

Alternate accounts are typically used on Balance Sheet accounts where the balance might move from being a credit to a debit at any time. The Alternate account structure allows you to have the account appear in different sections (Categories) of your balance sheet based on the debit or credit balance at any time.

A good example of this is a Bank account, where a credit balance (i.e. Cash at Bank) would appear in the “Current Assets” section of your Balance Sheet, but when the bank account is in debit (i.e. Overdrawn) you want it to appear as a “Current Liability”.

The “Account Sign” and “Alternate Account” settings are used to automate the transfer of the balance between the two GL accounts and therefore between the two GL Categories, depending on the balance amount of the account. For example, Bank or Loan accounts may be transferred from the ‘Assets’ to ‘Liabilities’ section depending on whether the balance of the account is negative (‘-‘) or positive (‘+’).

When you change the ‘Account Sign’ or ‘Alternate Account’ settings, the system checks that the associated Chart of Account is also modified to reflect the change. If you change the category of an account that has an alternate account from a Balance Sheet account to a Profit and Loss account, the system will also check that associated Chart of Accounts entries are amended. The procedure always ensures that the Alternate Account record contains the reverse figures of the Chart of Accounts item you are maintaining.

Note that if the ‘Account Sign’ setting is set to ‘None’ the ‘Alternate Account’ will be removed from both accounts by this function once you save the changes.

Account Posting

Select the account posting, which defines the type of postings that can occur to this chart of account.

  • ‘Posting Allowed’ – means no restriction on posting to the account
  • ‘No Posting Allowed’ – should be used on accounts where postings are normally system controlled e.g. all control accounts like ‘Trade Receivables’ and ‘Trade Payables’
  • ‘Job Posting Only Allowed’ – should be used if you only want to allow this account to be posted to via the Job Costing system
Delete To Account

Enter the ‘Delete To’ account code. Refer to Transfer General Ledger Accounts for details on what happens when an account has a ‘delete to’ entry.

NOTE: You cannot delete (transfer) an account whilst a major account number is recorded. You need to set the major account on the account to itself to enable it to transfer.

Asset Group

Enter an ‘Asset Group’ code if you want to associate this chart to the Asset Ledger system. When sundry purchases are posted to an account that has an Asset Group present, the details of the purchase are recorded and can later be converted to assist in the creation of an Asset in the Asset Ledger via the automatic asset build utility.

BAS Reporting

Release SymbolSelect which BAS report code that figures posted to this account should appear under. For example, if an Accounts Payable invoice was posted to an account where the BAS flag was G10-Capital, then it is regarded as a capital purchase for BAS reporting. This feature is used by the GL Tax Reporting functions.

Alternate Categories

Alternate categories are used if you want to vary the structure of General Ledger reports. It provides you with the ability to have a choice of category structures available for reporting. See information on Accounting Format for more details.

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Step 3 – Branch

Branch

A list of valid Branches can be entered here nominating those branches that can be used in conjunction with this chart of account code during manual Account Postings. This is one of the ways you can control how a Chart of Account can be used.

Use the ‘Add’ icon to add branches to the list. Use the ‘Delete’ icon in order to remove branches from the list.
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Step 4 – Division

Division

A list of valid Divisions can be entered here nominating those divisions that can be used in conjunction with this chart of account code during manual Account Postings. This is one of the ways you can control how a Chart of Account can be used.

Use the ‘Add’ icon to add divisions to the list. Use the ‘Delete’ icon in order to remove divisions from the list.
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Step 5 – Branch & Division

A list of valid Branch and Division combinations can be entered here. This allows you to nominate combinations that can be used in conjunction with this chart of account code during manual Account Postings. This is one of the ways you can control how a Chart of Account can be used.

Use the ‘Add’ icon to add branch/division combinations to the list. Use the ‘Delete’ icon in order to remove branch/division combinations from the list.
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