The System accounts available in the Chart of Accounts are used to automatically account for exchange rate differences, penny (rounding) differences and to transfer the year-end result to the balance sheet, etc. Many users will recognize the System accounts as ‘Parameters’ from other business management systems.
System accounts can only be used in accounts that can be posted to, i.e. accounts that flow to the income statement or balance sheet. (They cannot be used in account types such as ‘Header’, ‘Total’ and ‘Calculation expression’.)
It is easy to use system accounts for transactions that are already posted to, either manually and automatically. For example, the cost of goods sold account in the income statement can also be used to account for inventory gains and losses.
System accounts can be chosen in General Ledger/Chart of Accounts, “Add ledger account”:
|Account for transfer of year-end result||When starting a new financial year, the profit is reset to zero for the new year and the last year’s profit or loss is automatically transferred to this account. This is typically an owners capital account.|
|Duty account||(Country specific) Account used to record tax and duty. Can be used either manually or automatically by linking certain stock numbers and stock groups that include taxes and duties, to the account. This account is used purely for disclosure and reporting purposes.|
|Payable VAT||(Country specific) Account used to record VAT payable. This account is used purely for disclosure and reporting purposes. It does not affect the VAT report.|
|Receivable VAT||(Country specific) Account used to record VAT receivable. This account is used purely for disclosure and reporting purposes. It does not affect the VAT report.|
|Exchange rate difference||Used to account for exchange rate differences (calculated automatically) when buying and selling in foreign currency. Exchange rate differences usually occur when exchange rates fluctuate between the time that an invoice is sent and payment is received.|
|Penny difference||Used to account for penny (rounding) differences.|
|VAT rounding||(Country specific) This is an account created to automatically post VAT rounding differences. Upon invoicing, VAT is calculated by line. If there are several lines and some of them have many decimals then the sum of all of the VAT lines may not be exactly the same as the VAT on the sum of all amounts before VAT. There may be a small rounding difference. The VAT rounding difference will be posted to the VAT rounding system account if it is set up. This account is usually placed under incoming and outgoing VAT in the chart of accounts.|
|Stock revaluation||Used to account for stock revaluations. This System account is usually an income statement account since it will be an income or expenses. If this System account is not set up as an account in the Chart of Accounts then the revaluation is simply accounted for in the Stock journal. The System account has an ‘Offset account’ under Inventory/Maintenance/Item groups: using the “add item group” button and the”Stock Journal” field. This is typically a balance sheet account representing additions and disposals.|
|Journal entry of profit/loss||Used to account for movements from a stock-take, profit/loss or obsolete stock in the Stock journal. This System account is typically an income statement account since it will be an income or expense. If this System account is not set up as an account in the Chart of Accounts then the movement from a stock-take, profit/loss or obsolete stock is accounted for in the Stock journal. The System account has an ‘Offset account’ under Inventory/Maintenance/Item groups: using the “add item group” button and the “Stock Journal” field. This is typically a balance sheet account representing additions and disposals.|
|Import VAT||(Country specific) Not included in the VAT report. All entries that have a VAT code will be included in the VAT report.
There are three types of account with a VAT code.
1. Transaction accounts.
2. VAT accounts in the VAT list (typically VAT payable or receivable).
3. Offset VAT account.
(#3 is not included in the VAT report. It is removed from the VAT report by setting it up a System account in the Chart of Accounts as “Offset account for import VAT”.
|Purchase VAT expense||(Country specific) Used to calculate the VAT percentage (currently 25% in Denmark) of purchase VAT expense. This is offset in the import VAT account.|