Creating a Chart of Accounts
Creating a Chart of Accounts
The DockMaster module is delivered with a complete GAAP compliant chart of accounts and all standard parameters defined with them. In most cases there is very little need to maintain them other than personalizing the descriptions or additional accounts for payroll etc.
In all but the very simplest accounting systems, a number is assigned to each general ledger account. Such a numbering system permits easy reference to accounts even though the account title may contain several words. Hence, the account Cash - Bank Operating might be referred to simply as account 1000.
To facilitate the analysis of transactions and the formulation of journal entries, a Chart of Accounts is usually prepared. The Chart of Accounts is a listing of the titles and numbers of all accounts found in the general ledger. The account titles should be grouped by, and in order of, the five major sections of the general ledger (assets, liabilities, owner's equity, revenue, and expense). Exhibit 1 shows a sample chart of accounts.
Exhibit 1
Chart of Accounts
Assets Revenues
1000 Cash 4000 Sales - Parts
1100 Accounts Receivable 4100 Sales - New Boats
1300 Parts Inventory 4150 Sales - Used Boats
1350 Boat Inventory 4200 Sales - Retail Labor
1360 Used Boat Inventory 4250 Sales - Warranty Labor
1600 Land 4300 Sales - Sublet Labor
1650 Equipment 4400 Late Fee Income
1700 Accumulated Depreciation - Equip. 4500 Dry Storage Income
1800 Prepaid Insurance 4600 Wet Storage Income
1900 Notes Receivable - Officers 4700 Interest Income
Liabilities Cost of Sales and Expenses
2000 Accounts Payable 5000 COS - Parts
2100 Payroll Taxes Payable 5100 COS - New Boats
2150 Sales Tax Payable 5150 COS - Used Boats
2200 Customer Deposits 5200 COS - Retail Labor
2300 Loans Payable 5250 COS - Warranty Labor
5300 COS - Sublet Labor
Equity 6000 Rent Expense
6100 Wages Expense
3000 Common Stock 6200 Utilities Expense
3100 Additional Paid-in Capital 6300 Advertising Expense
3200 Income Summary 7000 Depreciation Expense - Equip
The method of assigning account numbers usually involves a grouping technique so that all accounts in a major section of the general ledger start with the same digit. In the above example, all asset accounts begin with 1, liabilities with 2, and so on. Very involved accounting systems may use three- or four-digit account numbers and may even employ prefixes to designate various cost centers or companies.
Format Rules for a G/L Account Number
A general ledger account number in the DockMaster application is composed of three (3) basic components - a company portion, a cost center portion (sometimes called a department or profit center), and a detail portion. Each account must contain all three components. The length of each of the components may be any number of digits, but the resulting combination MUST be at least three (3) digits and may not exceed fourteen (12) digits in length. Once the length and position of each of the three components has been defined the structure of the G/L account is "locked" and may not be changed.
For example, assume that you wish to have a one-digit company, a two-digit cost center, and a four-digit detail account. The chart would then consist of accounts ALL having seven (7) digits. You determine the order of the components within the account. You may have the account in company, cost center, detail order or in company, detail, cost center order, etc.
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Important: Prior to loading the software, a DockMaster representative contacted your system administrator to discuss your general ledger account format. Your account number format was set up using your specifications; you can review the existing format in the General Ledger Parameters. If you did not specify a particular format, a seven-digit (7) default format was used. If after reviewing this section, you decide to change your format, please contact DockMaster immediately. Do not process any further.
The following explanations will assume the default format of (7) digits.
Creating a General Ledger Account
The seven-digit account number (1-23-4567) is broken down as follows:
Company Cost Center Detail
1 23 4567
STEP 1. CREATE THE COMPANY PORTION - the first digit is the Company number.
Note: The training representative usually creates company 1 for you during the installation process.
A one-digit company number allows you to enter information for up to 9 separate companies. Each company can be reported on separately or on a consolidated basis (as long as the companies involved have the same number of accounting periods in their fiscal years).
See the Company Table section for a detailed explanation on inputting a new company.
STEP 2. CREATE THE COST CENTER PORTION- the next two digits represent the Cost Center or Profit Center.
A two-digit cost center number allows you to enter information for up to 99 separate cost centers. A cost center is described as any specific area of business for which you wish to produce a separate Profit and Loss statement. A sample list of two-digit cost centers is shown below:
10 FUEL DOCK 40 SHIP'S STORE
20 SERVICE 50 BOAT SALES
30 DOCKAGE/STORAGE
See the Cost Centers section for a detailed explanation on inputting a new cost center.
STEP 3. CREATE THE DETAIL ACCOUNT PORTION - the next four digits represent the Detail Account. This is the actual account number that differentiates one account from another.
Each company and cost center number is unique unto itself, however, the Detail or descriptive component may be common to all companies and cost centers. For example, a telephone expense account may have the Detail account number 6500. This account may exist in Cost Centers 10, 20, and 30 in Company 1. Under the standard account format, the 7-digit account number for each telephone expense account would be as follows:
1106500 Company 1, Cost Center 10, Telephone Expense
1206500 Company 1, Cost Center 20, Telephone Expense
1306500 Company 1, Cost Center 30, Telephone Expense
See the Detail Accounts section for a detailed explanation on inputting a new detail account.
STEP 4. CREATE THE CHART OF ACCOUNTS - Once each portion of the G/L account number (company, cost center, and detail) is created, you must now inform the system of the valid combinations which can be used to create account transactions.
The Chart of Accounts program is used to combine a company, cost center, and detail account, and to define the account type (asset, liability, equity, revenue, or expense).
See the Chart of Accounts section for a detailed explanation on inputting your Chart of Accounts.