The chart of accounts file must contain all of the general ledger accounts that you need to run your accounting system. The accounts are made up of a number, a description, an account type, balance forward date, a balance and period balances. Only the account number, description and type can be entered, the rest is automatically maintained by the system through general ledger transactions and postings. Refer to the General Ledger section for more complete information on setting up and using your Chart of Accounts.
Some examples of accounts are escrow cash, operating cash, refunds payable, commission income, AAA Plumbing payable and retained earnings. You may create as many accounts as you need but certain accounts must exist. These required accounts are shown on the General Ledger Accounts screen of the control file and are discussed in the General Ledger section of this chapter. You must create the required accounts using the Chart of Accounts option on the Files Menu and enter then enter the account numbers into the control file screen. These are the minimum accounts that you must create. These accounts are required because the system will perform automatic journal entries using these account numbers. Normally you will create accounts in addition to the required accounts. For instance you would normally set up an individual account for all of the vendors that do maintenance on the units you manage. Vendors must be assigned a general ledger account when they are created. When you post work orders to a unit, the system will ask for the vendor or general ledger account to credit, meaning who did the work and therefore who do you owe the money that you are charging the owner. You would answer by entering the vendor or a general ledger account number. Also, any checks you paid the to vendor would use his account number. This method allows you to maintain a payable account for each vendor. Another example would be payroll accounts. If the system is to aid in tracking the payroll deductions, then each account, like FICA withholdings or state withholdings, would have to be assigned a number and added to the chart of accounts file. Once this is done, journal entries can be posted using these account numbers.
All accounts must be assigned an account type (for additional information refer to the general ledger section). These types may be selected from a drop down list. An income account, like commission income, will show on the income statement under the income heading. An expense account, office supplies for instance, will show on the income statement under the expense heading. A current asset, i.e.. cash, will show on the balance sheet under current assets. A long term asset, i.e.. building and land, and will show as a long term asset on the balance sheet. A current liability, such as AAA Plumbing payable, will show on the balance sheet under the current liability column. A long-term liability, for example bank note payable, will show on the balance sheet as a long term liability. An equity account, this is the owners’ equity, will show on the balance sheet under the equity section. Current Earnings is automatically used by the system to hold the current year to date income and shows under the equity section of the balance sheet. The current earnings account is automatically moved into the retained earnings account at year-end when the income and expenses are set to zero. This account also shows under the equity section of the balance sheet.
See Also Chart of Accounts File