Chart of Accounts
Purpose of the Chart of Accounts
Chart of Accounts Design
- a Chart of Accounts (COA) means literally a list of accounts that are available in the system. Some of these accounts may be postable and others may not - such as summary accounts or those accounts controlled by the system.
- However, managers think of COAs as more than just a list of accounts. In practise, they think of all of the controlling data structures that (should) reflect the informational needs of the business. These should answer questions like what is the loan default rate on various portfolios of mortgages, how much revenue do we make per kilometre of optical fibre owned/operated, or simply what is our revenue this month/quarter/year from this product, product group business area. Whilst these are all legitimate informational requests, I often find that businesses' financial system are unable to serve quality data to report users.
- ADempiere users may import their COA using an excel spreadsheet that users may adapt to their own format. This file can then be saved as a comma separated value file or accting.csv and imported into ADempiere.
- Daniel Tamm has created a nice COA Editor to access that csv file to change or create a new COA without looking at the excel file.
- The COA follows accounting classifications underlying General Accepted Principles of Accounting (GAAP) in practice throughout the world.
- Most GAAP are based on the following principles
- Historical Cost Accounting - it means if you pay rent of $200 per month but the value of the rent in that area is $400, you still show it as an expense of $200 and not $400.
- Matching rule - you should match income to an expense in the same accounting period. In order to generate income, you most likely need to spend (an expense). So both income and expense should be posted to the same accounting period so that one can compare the net effect of doing business.
- Prudence - when it comes to income, you should not post to P&L unless you sure of getting it. When it comes to expense, if there is a possible chance that it may happen, you should post it to P&L. Basically a pessimistic way of looking at things. Sometimes, it contradicts the Matching rule but then accounting is full of contradictions.
- Materiality - principles only apply to items of a material value, which is judgemental. Things of immaterial value need not follow GAAP.
GAAP is the foundation of accounting and in each country there are Accounting Standards which are intended to expand on the GAAP, and address very specific areas of accounting.
Recommendations and Pitfalls in COA Design
Here is an image of the COA as inherited by us from the Compiere GPL project.
This section is designed to provide assistance with COA design and provide you with a few examples of what to do and what not to do when implementing your chart of accounts. A chart of accounts is different for every organisation because:
- in many countries there is no hard and fast rule requiring COAs to be conforming to a specific structure (however there are suggested forms like the EU level 7 schedule of accounts which has been adopted to various degrees of prescription in EU member states)
- the chart of accounts should reflect the informational needs of the organisation which include the needs of the regulatory environment(s) in which the operation (industries, countries, etc), the needs of the share holders & stakeholders (private, public owned businesses, banks, private equity firms etc) and the needs of management and various other reporting/informational requirements.
- account element
- business partner
- sales region
Summary List of COA
- Here we lay out the general structure of the COA by displaying only the top level summary elements.
|Account Value||Account Name||Account Type|
|3||Owner's Equity/Net Worth||Owner's Equity|
|5||Cost of Goods Sold||Expense|
Example Charts of Accounts
Standard chart of accounts for UK government entities, funds, public corporations and reporting funds
The fields below are from the I_ElementValue table. I_* tables provide a 'staging area' for importing data before this data is tested against business rules and if found to be conforming to these rules, is imported in to the C_ElementValue table. These tables describe 'element values' which might otherwise be described as the members of the element dimension - and most notably the Accounts dimension known to accountants as the chart of accounts.
|i_elementvalue_id||ID for import processing|
|isactive||Is Active flag|
|createdby||Adempiere core field|
|created||Adempiere core field|
|updated||Adempiere core field|
|updatedby||Adempiere core field|
|i_isimported||Flag for import processing|
|i_errormsg||Error message if import failed|
|c_element_id||Element ID - see c_element|
|c_elementvalue_id||Internal Element ID|
|value||Account "Natural" code|
|accounttype||Account classification - A = Asset, L = Liability, E = Expense, R = Revenue, O = Owners Equity, M = Memorandum|
|accountsign||Indicates the Natural Sign of the Account as a Debit or Credit|
|isdoccontrolled||If the account is document controlled, users are unable to post directly to the account (you must post documents and they post to the account)|
|issummary||If the account is a summary account then it is a header / total of the children accounts|
|parentvalue||Key of the Parent|
|parentelementvalue_id||The parent (summary) account - Parent node reference|
|postactual||Is the user allowed to post actual values? (Y/N)|
|postbudget||Is the user allowed to post budget values? (Y/N)|
|poststatistical||Is the user allowed to post statistical values? (Y/N)|
|postencumbrance||Is the user allowed to post commitments / encumbrance values? (Y/N)|
|default_account||Name of the Default Account Column|
|ad_column_id||Column in the table|
|processing||Flags for import processing|
|processed||Flags for import processing|
COA Import File
The COA import file is a file provided to assist end users in importing their chart of accounts. The data contained in the spreadsheet is imported in to the I_ElementValue table and once validated, this is imported in to the C_ElementValue table where is is accessible via the element tree editor. The spreadsheet includes a number of fields to assist with the creation of report dimensions.
|Account value||unique ID of the account|
|Account name||short name of the account|
|Account description||a description of the account|
|Account type||type of the entries written to this account (Asset/Liability/Owner's Equity/Expense/Revenue/Memo)|
|Document controlled||if yes, then it is not possible to post manually to this account|
|Summary account||No entries can be posted to this account, this is a summary of the subaccounts. All entries have to be submitted to the subaccounts|
|Default account||Name of the Default Account Column - this is a link to a system controlled default account|
|Account parent||Summary account where the entries of this account are summarized to|
|Balance sheet||If this item appears in the balance sheet report - it's identifier|
|Balance sheet name||If this item appears in the balance sheet report - it's name as displayed in the report|
|US 1120 Balance Sheet||If this item appears in the form 1120 (US tax balance sheet) report - it's identifier|
|US 1120 Balance Sheet Name||If this item appears in the form 1120 (US tax balance sheet) report - it's name as displayed in the report|
|Profit&Loss||If this item appears in the profit and loss report - it's identifier|
|Profit&Loss Name||If this item appears in the profit and loss report - it's name as displayed in the report|
|US 1120 Income Stmt||If this item appears in the form 1120 (US tax profit and loss) report - it's identifier|
|US 1120 Income Stmt Name||If this item appears in the form 1120 (US tax profit and loss) report - it's name as displayed in the report|
|Cash Flow||If this item appears in the cash flow report - it's identifier|
|Cash Flow Name||If this item appears in the cash flow report - it's name as displayed in the report|
- tri (only in definition csv/xls) - ?
- reference in regards to US tax return form 1120: http://www.irs.gov/pub/irs-pdf/f1120.pdf