Our mutual customer has been working on our Chart of Accounts and we would like to do some reading on our own related to the Dynamics GP base product on the Chart of Accounts. I can't find anything on the base Microsoft Dynamics GP product. Is this documentation available for download?
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Excellent article for points to be kept in mind while designing chart of accounts
WennSoft,
I should have marked this as a suggested answer, but I was in too big of a hurry. If you think it answers your question, please mark it as answered. If it doesn't, please let me know the kind of information you need. Do you need more information on how to fill out the windows, etc. ? The article below is about creating a chart of accounts in general. This will become part of Accolade Publications new book on the General Ledger:
Designing an effective chart of accounts - a poorly designed account structure can put your system, even your company, in jeopardy. For sure, it will put your job in jeopardy!
Planning is the key to everything; the COA is no different. Recognize that creating a COA is not only one of the first things you need to do when setting up your system, but it is also perhaps the most critical.
“…Begin with the end in mind...” Probably the best advice you could heed when designing your COA is to follow the advice of Stephen Covey from The Seven Habits of Highly Effective People.
Don’t just forge ahead and use whatever format that was used in the past. Now is your opportunity to design an account format that really works for your company. To help with the decision, be sure to involve the consumers of the reports from your new system. Don’t forget about the IRS and other regulatory agencies, they need reports too.
There is no such thing as a ‘standard’ chart of accounts. Not all companies need the same accounts. An accounting firm needs to record income from accounting and tax services; a distributor doesn’t need those accounts, but probably needs more detail about shipping charges and landed costs.
Ask questions; be sure you understand the metrics management uses to evaluate the company’s performance. Find out what information they need (or wish they could have) to make business decisions. Don’t go this alone; your new COA should involve input from everyone who will be analyzing these numbers. Make sure you are able to capture information required by banks, audit firms, stockholders, regulatory and governmental agencies, as well as management.
Understand how management evaluates the performance of your company’s responsibility so that you can provide better information on budgets and results.
Most companies err on the side of having an account format that is too small. Don’t make that mistake. Use the number of segments you need to separate the departments, cost centers, locations etc. Remember, it’s a lot easier to combine segments later than to separate them.
Under no circumstances should you use a single segment to represent two things. For instance, don’t use the first two characters of the main account to mean department for expense accounts and product type for income accounts. This is not a good plan; it’s a nightmare when it comes to reporting.
Additionally, the same main account should be used across departments to represent the same thing. For example, department 40 shouldn’t have 405000 as the main account for travel expense and department 50 have 502000 as the main account for travel expense. In this example, the department should be a segment and the main account for travel expense should be the same for each department. In our example, the accounts would look more like 40-65000 for one department and 50-65000 for the other one. If you think you need to structure your accounts in such a way that doesn’t conform to the previous example, you are likely missing a segment.
Another common mistake is creating too many accounts. Don’t run your business from the general ledger. The subsidiary modules are there to track the detail. You don’t need a general ledger income account for each one of your products; you can get product sales information from Sales Order Processing or Invoicing. Projects should be managed using some kind of project accounting system, NOT using a segment in the COA. If your projects are small and short-lived, consider using Multi-Dimensional Analysis or Analytical Accounting instead of a full-blown project cost system.
Strive to keep your chart clean while still providing enough detail to generate robust financial statements.
Start your design by gathering management and regulatory reports and then work backward to create an account structure that can produce those reports. Look for the spreadsheets people update every month and endeavor to eliminate them.
Microsoft Excel is a powerful analytical tool, but it should never be used to produce data that ought to be available from your accounting system. Instead, design a system that can produce those spreadsheets. Let your accounting team spend their time creating analysis tools, not creating the data they are trying to analyze.
Here’s an example. My fictional company operates in 6 regions that are broken down into four areas. Each area has an area manager who is responsible for that area’s performance. There are several departments within each region, and 4 distinct product lines, each with a product line manager. How many segments should make up the chart of accounts? While there is no ‘right’ answer for every situation, this would be a good place to start (listed in no particular order).
Information about product line can be retrieved from subsidiary modules such as Inventory or Sales Order Processing. Notice there is no segment for ‘sub account’. There should never be a sub account; either your main account isn’t long enough or you need another segment. Both Management Reporter and FRx were designed for an account structure with a single main (also called ‘natural’) account and no sub account. You will do yourself a huge disservice if you create a so-called sub account.
What about the length of the account? There are a couple of things to keep in mind regarding the length of the account number. The physical size of the account number field will display about 27 numeric characters. If your account number is longer than that, the entire account number will not display in the account number field on the Dynamics GP windows.
To overcome this display limitation, Dynamics GP provides horizontal scroll arrows so that you can scroll left to right in order to see the whole account number. You can activate these scroll bars on the User Preferences window where indicated below:
Alternatively, you can widen the account number field on each window using the Modifier tool. Neither is a fun solution, but they are available.
Another thing to keep in mind is that the account number is an alphanumeric field; you can use both letters and numbers. Letters make it easier to read, but much harder to key. If you need letters, consider creating numeric account aliases. In addition, letters can be wider than numbers. If you find that your letters are being cut off, go into the Account Format Setup window and change the Display Width of the segment. You can choose from three different widths, depending on the widest letter in your account number. The Account Format Setup window is shown below with the Display Width field marked:
Four different widths are available, Standard, Expansion 1, Expansion 2 and Expansion 3. Below are the suggested widths for the characters you might use in your COA.
Even after all of your careful analysis, the chart of accounts will continue to evolve. Don’t forget to give yourself some room for growth. It’s likely not to be perfect the first time. With the aid of the Professional Services Tools Library (PSTL), you can always combine accounts if you have too many, it is much harder to split one apart if you have too few. Like most things in life, it’s a balancing act.
You need at least the following information to create your chart of accounts:
I hope this helps you in your mission to design a good chart of accounts for your company that will serve you for years to come.
Kind regards,
Leslie
What do you mean by 'base product'?
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