57 Overview to Account Setup
This chapter contains these topics:
57.1 Objectives
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To understand level of detail assignment on accounts
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To understand posting edit codes assignment on accounts
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To create your master chart of accounts
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To duplicate your chart of accounts to business units, as needed
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To understand subledger accounting
57.2 Overview
After you set up your companies and business units, you need to set up object and subsidiary accounts for each business unit. These accounts form your chart of accounts.
The object and subsidiary is the "what" portion of the account number. They describe "what" kind of transaction you are working with, for example, rent expense, paper supplies expense, or sales revenue.
Figure 57-1 Object and Subsidiary Accounts
Description of "Figure 57-1 Object and Subsidiary Accounts"
Account setup consists of:
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Creating your chart of accounts
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Working with accounts
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Generating account description search
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Reviewing your chart of accounts
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Working with subledgers
57.2.1 How Are Objects and Subsidiaries Related?
The object, or major, account is required for transaction entry. The object account can be up to six alphanumeric characters. To make data entry easier and faster, you can use only numbers for the object account.
The subsidiary, or minor, account is an optional part of the account. Use the subsidiary when you need more detailed accounting activity for an object account. The subsidiary can be up to eight alphanumeric characters.
The following example shows how you can associate an object account (1110 for Cash in Bank) with several subsidiary accounts:
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1110.BEAR (Bear Creek National Bank)
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1110.FIB (First Interstate Bank)
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1110.FRANCE (First Bank of France)
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1110.LONDON (First Bank of London)
57.2.2 How Should You Design Your Chart of Accounts?
Begin your initial design with the major headings of your transactions. Then, add your detailed transaction descriptions. The following shows examples of major title accounts and the types of headings they include.
| Account | Types of headings for balance sheets |
|---|---|
| Balance Sheet Accounts | Types of headings for balance sheets include:
|
| Income Statement Accounts | Types of headings for income statements include:
|
After you have a complete list of transaction descriptions, you can assign numeric values to each. Allow for growth and change by leaving numeric spaces in the account structure.
Define the operating income account as the last balance sheet account. For example, if revenues begin at 5000, define object 4999 as the operating income account. This account must be a non-posting account. The system calculates the operating income amount on your balance sheet.
An account can have several formats. You are not limited to one account format when you enter data.
The following shows the types of account formats you can use:
| Account | Format |
|---|---|
| Short account ID | This number is created by Next Numbers when you add accounts. It is commonly referred to as the "short account number" and can never be changed. |
| Business Unit.Object.Subsidiary | This is the standard JD Edwards World account format. It can be in either of the following formats:
The business unit designates the accounting entity to charge. The object (or object and subsidiary) designates the type of account to receive the amount, such as asset, liability, revenue, and expense. |
| Third G/L account number | This number consists of a free-form code, often referred to as the "third account number." Typically, the account number from a prior system is used as the third account number. There are no limitations to the characters you can use, for example, dashes and dots. |
| Flex account number | This flexible format is user defined. Account numbers can consist of up to 12 segments, totaling up to 34 characters. You control the nature, meaning, and validation of each segment. This format is frequently used to comply with the chart of accounts for a regulatory agency or parent company. |
To enter account numbers in a format other than the standard JD Edwards World format, you must use the prefix character that is defined in general accounting constants.
57.2.3 How Are Accounts Grouped and Totaled for Reports?
Use account category codes to group your accounts for reporting purposes. These codes provide for selective reporting. You use category codes for accounts the same way you use category codes for business units.
There are 23 alphanumeric category codes for accounts:
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3-character codes (20 available)
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10-character codes (3 available)
The 10-character category codes are useful if your business requires an alternate chart of accounts for statutory reporting. You can use the category code and the description rather than the account number and description on trial balance reports, the general ledger, and general journal. These category codes let you build summarization logic into your reports.
Use a level of detail (LOD) for each account to control how amounts are rolled up into a balance for reporting purposes.
Follow these guidelines when assigning level of detail to accounts:
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Do not skip any levels of detail. Non-sequential levels of detail cause rollup errors in financial reports that are run at a skipped level.
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Assign a level of detail 3 to title accounts for the balance sheet - "assets" and "liabilities and equity."
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Assign either level of detail 3 or 4 to title accounts for the income statement, depending on whether you want the next level underlined. Examples include:
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Revenues
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Direct costs
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General and administrative expenses
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Other income and expenses
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Example: Rollup Totals for Reports
You generate a financial report with a level of detail of 5, so that the system summarizes the amounts for level 6 and 7 into the balance for Cash.
Use level of detail 3 through 9 for object accounts. Level of detail 1 is reserved for companies and level of detail 2 for business units. The system underlines level of detail 3 on balance sheet reports and levels of detail 3 and 4 on income statement reports.
57.2.4 What Determines Whether an Account Posts?
You assign a posting edit code to every 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).
With posting edit codes, you can designate an object or object.subsidiary account as:
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Posting
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Non-posting (or title)
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Budget
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Inactive
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Machine-generated
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One that requires units, not monetary amounts
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Subledger and type
For example, you could assign posting edit codes (PC) as follows:
57.2.5 Differences Between Subledger and Subsidiary Accounting
Subledgers and subsidiary accounting both provide for detailed accounting activity. Subsidiary accounts are a subdivision of your object account. Subledgers are linked to your business unit.object account or business unit.object.subsidiary account.
With subledgers, you get accounting detail without adding accounts to your chart of accounts. For this reason, subledgers are often used for transaction classifications that are not a permanent part of your chart of accounts, such as detailed travel expenses for each account representative.
Subsidiary accounts are permanent. If you want to track revenues and expenses by account representative using subsidiary accounting, you must create a subsidiary account for each account representative and attach it to each appropriate object account for revenues and expenses. This could mean adding several hundred accounts to your chart of accounts.
Subledgers differ from subsidiary accounts in the following ways:
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Subledger transactions post to the same major account, rather than to different accounts.
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Subledgers do not create additional records in the Account Master table.
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Subledgers can create additional records in the Account Balances table, depending on the posting edit code you assign to the account.
When you use subledgers to track expenses for account representatives, the system creates a record with a unique subledger for each account in the Account Ledger table. The Account Master table contains only the account, not the subledger.
In the above example, the subledgers represent McLind's and Jackson's address book numbers.
Example: Subsidiary Accounting
When you use subsidiaries to track expenses for account representative, the system creates a record with a blank subledger for each account in the Account Ledger table. The Account Master table contains an account for each account representative.
Figure 57-5 Account Master Table (Subsidiary Accounts)
Description of "Figure 57-5 Account Master Table (Subsidiary Accounts)"