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GL – Chart of Accounts – OneSource: Inventory for QuickBooks Online GL – Chart of Accounts – OneSource: Inventory for QuickBooks Online

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GL – Chart of Accounts

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Overview of the Chart of Accounts screen

  • The Chart of Accounts screen is where General Ledger (GL) accounts are created and managed.
  • The GL Accounts you create are generally used in these places in OneSource:
    • On the Company Setup & Preferences screen, Accounting tab.
    • Each company that you designate as a Supplier (on the Suppliers & Vendors screen) will have your Inventory (Asset) account set as their default GL Account (when using the Enter Bills and/or Check Writer screen to pay bills from that Supplier).
    • Each company that you designate as a Vendor (on the Suppliers & Vendors screen) will have whichever default Expense account that you plan to use ((when using the Enter Bills and/or Check Writer screen to pay bills from that Vendor).
    • Each Inventory Item that you set up (on the Inventory Management screen) will have a default Inventory account, a default Cost of Goods Sold (COGS) account, a default Sales account, and a default Sales Discounts account.
    • Each Inventory Item that you set up (on the Inventory Management screen) that is a ‘Service’ (rather than a tangible item) will have a default Sales account, and a default Sales Discounts account.
    • When creating General Ledger journal entries, when using the Create Journal Entries screen.

Chart of Accounts Screen – Common Tasks

How to open the Chart of Account screen

  • Using the OneSource Menu bar click: Accounting Chart of Accounts

How to Add a new GL Account

  • Open the Chart of Accounts screen.
  • Click on the New button.
  • Click on the Account ‘Type’ tab that you want to add, such as Asset, or Expense, etc.
    • IMPORTANT NOTE: If you are not sure which type of Account to select, please consult with your Accountant or someone that you trust to help you get this right.  If you choose the wrong type of Account your Financial Statements (such as your Income Statement) will more than likely be incorrect. On the other hand, if you do choose the wrong type of account, when you change it later to get it right it will retroactively fix all GL transactions entered automatically–so you are not going to ‘hurt’ anything if you end up guessing at the start.
  • Fill in the following fields (where applicable):
    • Account Type: (If you clicked on one of the Tabs, such as the Assets tab, this value will fill in automatically).
      • If you are unclear of which one to select please see the section below, called Explanation of the Chart of Account Types (the tabs on the Chart of Accounts screen)
    • Account Sub Type: There are a few pre-determined Account Sub Types in OneSource, such as Cash or Accounts Receivable or Inventory, etc.  If the account you are setting up seems to match one of these Sub Types please select the appropriate Account Sub Type.
      • These Sub Types tell OneSource if the GL Account you are setting up is one of the special Sub-Type of accounts, such as an Accounts Receivable so OneSource can provide a warning to the user if that account is used improperly when making Journal Entries, etc).
    • Account: Enter an Account Number of your choice. (This field is required but can be changed any time in the future without any restrictions).
When you can ‘change’ the GL Account Number or GL Account Description

When you create a new GL Account an internal system GL ID is automatically created as well.  This ID is visible in the top right hand corner of the screen and cannot be edited. This is the actual # that gets stored in the tables when GL Accounts are used throughout the system.  What this means to you is you can change ANY GL Account Number or Description at ANY TIME without causing ANY harm to your General Ledger.

Setting Up Default GL Accounts

Several of the GL Accounts you set up need to be set up (one time only) using the Company Setup & Preferences screen (on the General Ledger tab).  See the section below called Setting up important GL Accounts in the Company Setup & Preferences.

    • Account Description: Enter an Account Description of your choice. (This field is required).
    • Sub Account: Enter a sub account number here, if desired.
      • You may want to enter the same Account Number and Description for several accounts of the same type with a different Sub Account and Sub Acct Description.
      • For example, suppose you had 3 checking accounts.  Each could have an Account Number of something like 100, with an Account Description of something like Checking Accounts.  Each could then have their own Sub Account number of something like 10, 20, and 30, and their own Sub Acct Description of something like ABC Bank, BBC Bank, and CCC Bank.  (This field is optional).
    • Sub Acct Description: Sub Account description. (This field is optional).
    • Group Type:  You can assign a particular Group Type letter (that you have or will define in the General Ledger Report Groups grid on the Chart of Accounts form).  The letter assigned here, (which can be changed at any time), determines which group heading the account will appear under on financial reports.  This ultimately provides another level of grouping.  This field is optional.
    • Group Sequence: Similar to the Group Type field, the Group Sequence field allows you have complete control over the order in which each GL Account will appear on Income Statements and Balance Sheets – based on the Group Type selected for the GL Account. This field is optional.
    • Cash Flow Group: OneSource contains a special financial report called Statement of Cash Flows that helps you determine where your ‘cash’ is coming from.  If you want to make use of this report you will need to select the proper Cash Flow Group for each GL Account. To learn more see: How to set up GL Cash Flow Groups.  This field is optional.
    • GL Division: This field allows you to define which ‘division’ the account is related to, so financial statements can be generated by ‘division’.
      • If you want to use this function you will need to set up 1 or more Divisions on the Company Setup > Accounting tab(). This field is optional.
    • Beginning Balance: This field displays the Beginning Balance for the GL Account if it had a Beginning Balance entered on the Beginning Balances screen.  This field cannot be edited.
    • Current Balance: This field displays the Current Balance of all debits and credits to the account. This field cannot be edited.

How to Find a GL Account

  • Open the Chart of Accounts screen. (Accounting menu > Chart of Accounts)
  • Click on the Account type (tab) on the top of the screen to locate the account, or click on the Find button at the bottom of the screen.

How to Edit a GL Account

  • Open the Chart of Accounts screen.
  • Click on the Account Type (tab) on the top of the screen. (Assets, Liability, Equity, Revenue, Etc.)
  • Locate the GL Account: and then double-click on the account.
  • Make whatever changes you would like to make, then click OK.

How to Add or Edit General Ledger Report Groups

Create General Ledger Report Groups to group one or more GL Accounts under that group heading on the Balance Sheet and Income Statement.   To create or edit a General Ledger Report Group follow these steps:

  • Open the Chart of Accounts screen: from the Accounting menu.
  • Account Type Tab: on the top of the screen to locate the account. (Assets, Liability, Equity, Revenue, Etc.)
  • General Ledger Report Groups Grid: on the bottom left corner of the Chart of Accounts screen.  (Note: Each Tab of GL Accounts has it’s own General Ledger Report Groups).
  • Add or Edit the Group Type:  Common values are A, B, C, etc (for sorting purposes on the Balance Sheet and Income Statements).
  • Add or Edit the Group Name:  This is the name of the General Ledger Report Group that will appear on the Balance Sheet and the Income Statements.

How to Assign/Re-Assign a General Ledger Report Group to a GL Account

  • Open the Chart of Accounts screen.
  • Account Type Tab: on the top of the screen to locate the account. (Assets, Liability, Equity, Revenue, Etc.)
  • Select the GL Account: that you would like to change.
  • General Ledger: Report Group Type (such as A, B, C) in the Group Type field.
  • Click OK: when finished.

Setting up important DEFAULT GL ACCOUNTS in the Company Setup & Preferences.

 

How to prevent users from having to ‘know’ the GL

The General Ledger functionality in OneSource is intended to be ‘set up’ each time you add a new Inventory Item and/or a New Supplier – so the average, everyday user doesn’t have to know or care about General Ledger in OneSource.  In some cases when Inventory Items or Suppliers are set up the user doesn’t know what to fill in for the GL account or is in too big of a hurry to fill in the correct fields.  Due to this reality, OneSource has a set of DEFAULT GL Accounts that can be set up to ‘auto’ fill the correct GL Account when necessary. This section explains how to set up these defaults.

Setting up your DEFAULT GL Accounts

  • Open up the Company Setup & Preferences screen. (Select Tools menu > Company Setup & Preferences)
  • Click on the General Ledger option on the left side.
  • Assign values to each of the following fields:
    • Use General Ledger. Make sure this is checked.
    • Use Financial Periods. This is optional.  If checked OneSource will auto fill in the Financial Period on each transaction.  (Whether this is checked or not All transactions fall into one of the Financial Periods in OneSource and is controlled by whether or not the Financial Period is open or not).
    • Log GL Unpostings. If enabled this will add a note to the system log each time a transaction is unposted by a user.
How to control who can post and unpost to the GL

In the User Security screen, you can determine, for each individual user, whether or not that user can Post or Unpost transactions to the GL.  For instance, most GL Transactions are posted in batches using the Batch Post GL Transactions screen. Once a transaction (like an Invoice) is posted to the GL certain changes to the transactions are no longer allowed–unless the user clicks on the Unpost button on the transaction.  If you want to prevent certain users from clicking the Unpost button on a transaction–which will prevent them from making any changes to the key values like the Date, the amount, etc)–then you can remove this right, user by user, in the User Security screen.

  • Choose GL Accounts By. If you select Number then all GL drop-down selection boxes will be listed throughout the system with the GL Account Number in the first column.  If you select Name the GL drop-down selection boxes will be listed with the GL Account Description in the first column.
  • GL Post Date.
    • If you select Always Use Today this will post all transactions GL as of the date of the posting.
    • If you select Use Transaction Date this will post all transactions to the GL as of the date of the transaction (such as the Invoice Date) regardless of which date the transaction was actually posted to the GL.
    • Note: If you are not sure which of these values to select we recommend selecting Use Transaction Date as this is the selection to make to have to your financial statements display your financials using an Accrual basis for accounting.
  • New Inventory Item Default GL Accounts.
    • Sales. Select the default Sales account you would like to auto-fill in each time an Inventory Item is set up. This will be a Sales GL account (which will be a Revenue type of GL account).
    • Inventory. Select the default Inventory account you would like to auto-fill in each time an Inventory Item is set up. This will be the Inventory GL account (which will be an Asset type of GL account).
    • Cost of Goods. Select the default Cost of Goods Sold account you would like to auto-fill in each time an Inventory Item is set up. This will be the Cost of Goods GL account (which will be a COGS type of GL account).
  • External Accounting link. Not in use at this time.
  • External Accounting system. Not in use at this time.
  • New Sales AR/Invoicing GL Accounts.
    • Accts Receivable. Select the default Accounts Receivable account you would like to auto-fill when new Invoices are created. This will be the Accounts Receivable GL account (which is an Asset type of GL account).
    • Freight. Select the default Freight account you would like to auto-fill when new Invoices are created (which will be a Revenue type of GL account).
    • Other. If you charge some extra fee, such as a fuel surcharge you can use the Other field in the sub-total area of the Sales Order, Invoice, and Credit Memo. Alternatively, you might want to offer a blanket discount amount that you could enter in the Other field as a negative value.  (This account would typically be a Revenue type of GL Account).
    • Tax 1. This will be the Sales Taxes Payable account (which will be a Liability type of GL Account).
    • Tax 2. This is rarely used, but if so, will typically be a different type of Sales Tax (such as with the Canadian GST and PST taxes). This will also be a Liability type of GL Account.
    • Sales Discounts. This is a sales offset type of account that gets debited on the GL (rather than credited like normal Sales revenue accounts).  It could be your Sales (Revenue type) GL account or a separate Sales Discount (Revenue type) GL account.  If you want to itemize these discounts out on your Income Statement as a negative value (that subtracts from your sales) then you would want to create a separate (Revenue type) GL account to track these offsets to sales.  If you don’t care to see this you can just enter the Sales (Revenue type) GL account.
    • Pmt Type Discounts.  If you want to itemize the discounts (on the Income Statement) that you give to customers (those with payment terms that offer a discount for paying the invoice within a certain number of days) you would create a separate (Revenue type) GL account called something like Early Payment Discounts and enter that account here.  If you don’t care to itemize those figures you can also just select the Sales (Revenue type) GL account.
    • Sales Credit Memo. You can create some type of (Expense type) GL account to itemize money that you return, or you can enter the Sales (Revenue type) GL account here.
    • Undeposited Funds.  Enter your Undeposited Funds (Asset type) GL account here.
    • Sales Order Deposits. If you ever collect money from customers in advance of delivering the goods to them, and in advance of creating an Invoice for the goods (when payment is collected and posted on a Sales Order) you will need to set up a GL (Liability type) GL account called something like Sales Order Deposits and enter the GL account here.
  • New Purchasing (AP/Bills) Default GL Accounts.
    • Accts Payable. This is typically your Account Payable (Liability type) GL account.  This account will get auto-filled in (in the GL account that gets credited) when you create new AP Bills.
    • Freight. This is typically an expense type of account.
    • Other. This is typically an expense type of account.
    • Tax 1. This is typically an expense type of account.
    • Tax 2. This is typically an expense type of account.
    • Discounts. This is typically an offset to Cost of Goods sold, such as purchasing discounts account.
    • Supplier Credit Memo.  This will be the account that you want to be debited when money is created back to you by your suppliers.

Explanation of the Chart of Account Types (the tabs on the Chart of Accounts screen)

Each of the following section headings below represents one of the ‘tabs’ on the Chart of Accounts screen.

Asset

  • These accounts represent the different types of economic resources owned or controlled by your company.
  • Common examples of Asset accounts are cash, cash in bank, inventory, accounts receivable, building, prepaid rent, goodwill, etc

Liabilities

  • These accounts represent the different types of economic obligations by your company.
  • Common examples of Liability accounts are accounts payable, bank loans, credit cards, taxes payable, Sales Order deposits (for money collected before goods are invoiced and delivered), etc.

Equity

  • Represent the residual equity of a business (after deducting from Assets all the liabilities) including Retained Earnings and Appropriations.

Revenue

  • Represent the company’s gross earnings and common examples include Sales, Service revenue, and Interest Income.

Expense accounts

  • Represent the company’s expenditures to enable itself to operate. Common examples are electricity and water, rentals, depreciation, doubtful accounts, interest, insurance.
Contra Accounts

Some balance sheet items have corresponding contra accounts, with negative balances, that offset them. Examples are accumulated depreciation against equipment, and allowance for bad debts against long-term notes receivable.

How do I know what to debit and what to credit?

When posting to General Ledgerwhen to Debit and when to Credit will depend on 2 basic things:

  • What ‘TYPE’ of Account is it?
  • And what direction do I want that balance to go?  (Meaning up? or down?)

For example, suppose you want to put money into your bank account.  Looking at the list of Account ‘Types’ above, we know that a Bank Account is an Asset Account.  So, now we know the answer to the first question: Account Type.  Second, if I am putting money into my bank account then the answer to the 2nd question is I want the GL Account Balance to go UP.

To make the GL Account GO UP, we do the following for each of these account types:

  • Assets (Debit)
  • Liabilities (Credit)
  • Equity (Credit)
  • Sales/Revenues (Credit)
  • Cost of Goods Sold (Debit)
  • Expenses (Debit)
  • Other Income (Credit)
  • Other Expenses (Debit)

To make the GL Account GO DOWN we do the following for each of these account types:

  • Assets (Credit)
  • Liabilities (Debit)
  • Equity (Debit)
  • Sales/Revenues (Debit)
  • Cost of Goods Sold (Credit)
  • Expenses (Credit)
  • Other Income (Debit)
  • Other Expenses (Credit)
Remember…

All transactions, when posted to General Ledger must have a perfect balance of Debits and Credits.  Put another way: Assets Liabilities + Owners Equity.

How GL Accounts Flow Through OneSource

  • Put money in our Bank (to start a business)
    • Asset going up: Bank Account ($10k)
    • Credit going up: Equity Account ($10k)
      • Where in OneSource: Make an Adjustment in Check Writer. Post to GL.
  • Needed to order some inventory  ($5k)
    • Asset going up:  (N/A)  Hasn’t happened yet. Inventory
    • Credit going up: (N/A)
      • Where: Create a PO.
  • Received inventory, but haven’t received the Bill yet.
    • Asset going up:  (N/A)  Hasn’t happened yet.  I don’t actually own it yet. I haven’t even received a Bill yet. (My money is still sitting in my bank account.  I can’t say that I own $10k in cash + $5k in Inventory at the exact same time.  If someone offered to buy my business I couldn’t sell it for $15k.  I’d have to sell it for $10k (in this example)
    • Credit going up: (N/A)
      • Where: Received inventory into stock on PO.
  • Received AP Bill for Inventory:
    • Asset going up: Inventory (for 5k)
    • Credit going up: Accounts Payable (for 5k, because I owe them that).
      • Where: Enter (and Post) AP Bill.
        • Balance Sheet:
          • Bank Account (10k)
          • Inventory (5k)
            • AP Bill (5K)
  • Need to pay for Inventory
    • Asset (actually, which ‘debit’ is going up?): Debit: AP (Liability) $5k  (Debiting a Liability account makes that Liability go down.  Reduces my Liability)
    • Credit: Bank Account (Asset)  $5k  (Crediting an Asset account makes that Asset go down.  Reduces the value of it).
      • Where: Pay Bills 1 Supplier screen or Pay Bills Multiple Suppliers screen
        • Balance Sheet
          • Bank Acct (5k)
          • Inventory (5k)
            • Equity 10k
    • How:
      • Make a Check Writer – Adjustment (and then post)
  • (incomplete…)

 

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Next GL – Cost Analysis – AR
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