Each ledger account must be assigned an account type indicating whether it is an income, expense, asset, liability, total or calculation. Income and expenses will post to the profit and loss statement while the assets and liabilities will post to the balance sheet for use in financial reporting. There are also rules for which type of VAT can be used for different types of account (this is country specific). Transactions cannot be posted to all ‘account types’. For instance, a ‘Total’ or ‘Calculation expression’ is simply a sum or calculation and a ‘Header’ is simply a heading for a group of accounts that follows it.
The Chart of Accounts includes the following account types:
- Header (to show above a group of accounts)
- Total (to sum up a group or list of accounts. A ‘Total’ account sums all posting accounts in the list but does not include any other ‘Total’ accounts in the list.)
- Calculation expression (calculates using a formula, a ‘save in’ reference number can be applied)
- Profit and loss (income and expenses)
Income is divided into revenue and other income (Income can be divided into ‘Revenue’ and ‘Other Income’ and Expenses can be divided into ‘Expenses’, ‘Cost of Goods Sold’, ‘Costs’ and ‘Depreciation’.
- Balance Sheet/Balance (Assets and liabilities) Assets can be divided into Fixed Assets, Current Assets, Inventory, Customers (debtors), Liquid assets and Bank. Liabilities can divided into Equity and Vendors (creditors).
It is important that the correct account types are selected when creating a chart of accounts, because they will affect the bookkeeping, financial reporting and determine which VAT codes can be used.
The only accounts that can be posted to are the ones that relate to the Profit and Loss Statement or the Balance Sheet.
It might be useful to take a look at a demo-account before setting up a Chart of Accounts: Company/View a demonstration company.
Please refer to professional external learning material to gain an understanding of the technical accounting functions of account types such as revenue, costs, assets and liabilities. We do not describe, the difference between ‘Expenses’ and ‘Cost of Goods Sold’ etc. here, nor do we explain the difference between ‘Fixed Assets’ and ‘Current Assets’.
The screen view will change according to which account type is viewed. This is due to the fact that each account type requires different information to be entered.
Profit and Loss accounts
Profit and loss accounts flow to the annual income statement, which is reset each year. The difference is the year’s result, which is transferred to owners equity.
This section of the Chart of Accounts can be subdivided into revenue, expenses and their respective subtypes, or the operation type can just be used for all accounts.
VAT codes and VAT reporting (Country specific)
This function is country specific. For example, in Denmark, VAT is split into income and expense account types. This is useful for VAT coding and creating reports.
VAT codes on accounts with ‘Forced’ VAT (‘Tvungen moms’ in Danish) are specified in the detail form when creating an account:
Danish income accounts with ‘Forced VAT’ (Tvungen moms), are used for VAT payable.
Danish expense accounts with ‘Forced VAT’ (Tvunden moms), are used for VAT receivable.
Reports can be created by account type.
Balance sheet accounts
Balance sheet accounts include inventory, receivables and liabilities, which carry over from year to year and are brought forward as an opening balance each year. Subdividing the Chart of Accounts into types of assets and liabilities is optional. Subdivision can be used for reporting purposes but has no direct meaning in Uniconta. Mandatory VAT and VAT codes do not affect balance sheet items.
The “Header” account type is simply a heading for the group of accounts that follows it. Headers make for a neat and manageable Chart of Accounts and is automatically shown in bold type on the Chart of Accounts and on print outs.
A ‘Total’ account type does not require the account group to start with a ‘Header’.
A ‘Total’ account sums any range of accounts. A ‘Header’ account is not required at the beginning of the range.
Bookkeeping accounts can be added together as follows:
.. (period x 2) from/to.
; (semi-colon) and.
1010..1099 = Sums from 1010 to 1099.
1010..1099;2010..2099 = Sums from 1010 to 1099 and from 2010 to 2099.
1010;1020;1030 = Sums from 1010 and 1020 and 1030.
Note that any lines included in the range that are ‘Total’ accounts will automatically be excluded from the summing.
“Calculation expressions” are used to show totals and other calculations in the Chart of Accounts. Calculation expressions use common calculation terms such as +(plus), -(minus), *(multiply by), /(divided by), etc.
For example, highlight a calculation line item in your Chart of Accounts and click on “Edit” in the toolbar/ribbon.
The “Save in” option (at the bottom of the screen shot above) allows the user to use the same calculation elsewhere the Chart of Accounts. For example, the Contribution Ratio calculation has been saved as calculation “3” in the example above.