Understanding Chart of Accounts

 

TABLE OF CONTENTS

What is a Chart of Accounts?                                                                                                      1

Settings the Chart of Accounts up in JDE                                                                                    1

POSTING EDIT CODES (PEC)..................................................................................................................................................... 2

LEVELS OF DETAIL...................................................................................................................................................................... 3

REQUIREMENTS......................................................................................................................................................................... 4

RECOMMENDATIONS............................................................................................................................................................... 4

UNDERSTANDING A MODEL CHART OF ACCOUNTS.......................................................................................................... 4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

What is a Chart of Accounts?

A chart of accounts provides the structure for your General Ledger accounts. It lists specific types of accounts, describes each account, and includes account numbers. A chart of accounts typically lists asset accounts first, followed by liability and capital accounts, and then by revenue and expense accounts.

An account is a title that defines the types of transactions that are contained within it. The Open Accounts Receivable Trade Account is where all of the unpaid Accounts Receivable transactions reside. Once they are paid, the same transactions are then recorded as Revenue and Cash.

Settings the Chart of Accounts up in JDE

  • Business Units describe where in your organization the transaction will have an impact. It represents the lowest organizational level within your business where you record all revenues, expenses, assets, liabilities, and equities. Business units typically represent a location, department, work center, or job, etc.
  • The Object Account is the type of monies. It could be Cash or Open Accounts Receivable or Transistor Sales. It will be used as the description of the transaction. It is strongly recommended that the same numbering and description be consistent for all companies and business units for consolidation roll ups. More on that later…
  • The Subsidiary Account is the optional part of the Account Number. It is used in the General Ledger as a further breakdown of the Object Account; Cash as the Object with a subsidiary dividing up the different bank accounts, for example, Cash in Bank of America. In Job Costing, the Subsidiary is used to define the Phase of a Job and that discussion is out of the scope of this document.

For Example;


 

Subsidiary

  
 

Object Account

  
 

Business Unit 

  


 

 

POSTING EDIT CODES (PEC)

Posting Edit Codes are used to indicate the different usages of the accounts for functions such as headings, accounts reserved for budgeting only or system-generated amounts only.

Assign a posting edit code to every object or object.subsidiary account in the chart of accounts. This code determines whether the account posts to the General Ledger and whether it updates the Account Balances table (F0902).

Valid Posting Edit Codes and their purpose are defined in this table:

JDE Help Text explaining the Codes listed above:

LEVELS OF DETAIL

Levels of Detail are JDE’s way of allowing great flexibility across any different types of corporations all over the world without requiring to have the same COA. That way your COA matches the needs of your company rather than the COA that JDE dictates you use. Level of Detail is used to summarize and classify accounts in the General Ledger.

The chart below illustrates how the Levels of Detail work:

  1. Level 9 is the most detailed and Level 1 is the least detailed.
  2. Levels 1 and 2 are reserved for company and business unit totals.
  3. Levels 8 and 9 are reserved for posting accounts in the Job Cost system.
  4. Level 3 is assigned to title accounts for the balance sheet
  • Assets
  • Liabilities and Equity
  1. Levels 3 or 4 are assigned to title accounts for the income statement. Title accounts include:
  • Revenues
  • Direct costs
  • General and administrative expenses
  • Other income and expenses

REQUIREMENTS

  • Balance Sheet must be first
  • Last Balance Sheet account must be Net Income with a Posting Edit Code of ‘N’, Non-posting. The system calculates Net Income on the Balance Sheet.
  • Next to last Balance Sheet account needs to be Retained Earnings. This must have a Posting Edit Code of ‘M’, Machine Generated.
  • Account Numbers are sequential – Balance Sheet from 1000 – 4999, Income Statement from 5000 on up.

RECOMMENDATIONS

  1. Take advantage of JDE’s standard functionality and create a Model Chart of Accounts first

  2. Set up both a Model Company and a Model Business Unit
  3. Set up the Model Chart of Accounts within that Model Company and Business Unit
  4. Models can be specific to a particular type of business (Water, Energy, Construction)
  5. Use the Models to set up the Chart of Accounts for all other Business Units needed
  6. This will insure consistency across all Business Units of the same type
  7. Keep the Model current to business needs
  8. Set up PEC’s to be consistent across all companies
  9. Use Category codes (Segments of the business: External Sales (110), Internal Sales (120) etc.) for different reporting needs.
  10. Provides reporting flexibility without changing the Chart of Accounts
  11. Record Category Code usage in the Model and in documentation available to personnel that will be responsible for maintenance of the COA

UNDERSTANDING A MODEL CHART OF ACCOUNTS

Create one master model business unit that includes the complete chart of accounts or create a model business unit for every business unit type and assign object accounts to it. You can then use these models as a basis for your actual chart of accounts.

  • By creating a model chart of accounts, you ensure that when you copy the accounts from the model business units into your actual (or production) business units, the accounts are standardized across business units and companies.
  • You should create your model chart of accounts using a consistent numbering scheme for your object accounts so that they can be copied across all business units.
  • After you enter the business unit, object account, and subsidiary information for a new account, you can add a comment, memo, or other text.
  • Carefully proofread your model chart of accounts to ensure that the descriptions, spelling, level of detail assignments, and posting edit codes are accurate. The model chart of accounts provides the basis for your entire chart of accounts. Revise accounts as needed to correct errors before you copy the model accounts to business units. Copying the model reproduces any errors in multiple business units.
  • Some businesses need an alternate way to set up a chart of accounts. For example, some countries require businesses to submit reports using a government-defined (statutory) chart of accounts. You can use account category codes to set up an alternate chart of accounts that accommodates government requirements.