A Chart of Accounts is a list of accounts used by an entity, often following a Generally Accepted Accounting Standard (GAAP) for uniformity and understanding by third parties like analysts and auditors.
Bkper's Chart of Accounts offers the same functionality but with greater flexibility, aligning with GAAP standards like Balance Sheets and Income Statements, while also serving managerial purposes such as tracking results and cost management.
A group in Bkper's chart of accounts is a powerful tool for categorizing related accounts. It allows you to combine and calculate the total balance of all accounts within the group, simplifying data presentation and improving financial analysis.
Think of it as a container for similar accounts. For example, you can create an 'Expenses' group to gather various related accounts.
As your financial records evolve, you might need more specific categories, like 'Marketing Expenses' and 'Operational Expenses.' You can create these subgroups and categorize your existing accounts accordingly.
The beauty of this flexibility is that you're not limited. You can maintain the original group as the parent while further detailing subcategories and accounts.
Gain Financial Insights through Account Grouping
In your chart of accounts, you can represent different financial categories, like Expenses, Costs Revenues, Assets, Liabilities but you can also represent Incomes and Equities by grouping different account types. By properly grouping different account types, you naturally represent key accounting equations.
For example, Incoming (green) and outgoing (red) type accounts together in one group give an income as a result.
Similarly, on the Balance Sheet, you can represent Equity by grouping Asset (blue) and Liability (yellow) type accounts, giving you the Equity position.
Flexibility you need in bookkeeping
Start Simple
Begin with a basic chart of accounts that covers your essentials – if you want you can start with four accounts (Assets, Liabilities, Revenue, and Expenses) and two groups (Equity and Income). Minimalistic, still it provides the solid foundation to get to your financial position and performance.
Add Details
As your operations expand, questions arise. How much are we spending? Who owes us money? Who do we need to pay quickly? To answer these questions efficiently, you'll naturally enhance your chart of accounts with more specific categories.
Expense Categories: Add general categories under Expenses to gain more control over spending.
Balance Sheet: Include receivables under Assets and payables under Liabilities on the Balance Sheet which will provide you with more insights into your overall financial performance and position.
Meet External Requirements:
As your business grows, so do external requirements like provisioning, taxes, reporting and compliance. Your chart of accounts can adapt to reflect these obligations seamlessly.
But you don't stop there. A robust chart of accounts doesn't just meet external demands; it empowers you to analyze your business deeply. For instance, you can implement cost accounting for multiple product lines serving different market segments, enabling you to make data-driven decisions with more precision.
In summary, your chart of accounts is not static; it's a flexible tool that evolves with your activities, ensuring you have the insights needed for the various phases your organization goes through.
How to create a hierarchy into your chart of accounts.
Adding Accounts to a Group:
Navigate to Your Book: Log in to your Bkper account and select the book where you want to work with the chart of accounts.
Select the Group: In the left menu, click on the sandwich button to the right of the group to which you want to add an account.
Add New Account: Click Add New Account on the pop-up that opens .
Fill Account Details: Enter the account name.
Save Account: Click "Save" to add the account to the selected group.
Repeat as Needed: Repeat these steps for each account you want to add to the group.
For example, let's say you're adding an account to the "Marketing Expenses" group
Adding a Parent Group to a Group:
Navigate to Your Book: Log in to your Bkper account and select the book where you want to work with the chart of accounts.
Select the child Group: In the left menu,Click on the group to which you want to add a parent group.
Edit Group: Click Edit on the pop-up that opens.
Add Parent Group: In the group's settings, select the Parent from the drop down list.
Save Changes: Save the changes, and the group hierarchy will be updated.
For instance, you can choose "Expenses" as the parent group for "Marketing Expenses."
Hierarchy Conditions
The use of group hierarchies in Bkper's chart of accounts, has some conditions to keep in mind:
Unique Group Placement: A group can be part of only one hierarchical structure. Once you place a group within a hierarchy, it cannot simultaneously belong to another.
Non-Grouping Parent: A parent group cannot contain accounts directly. It serves as a higher-level category for subgroups, ensuring that the balance values of the parent group always sum the correct total value of sub group in its hierarchy.
Single Account Use per Hierarchy: Each account can only be used once within a hierarchical structure. For instance, an asset can only account once on the Balance Sheet. Still, you can use that same asset on a separate hierarchy. For example to track your portfolio assets.
Balance Sheet Grouping: Groups under the Balance Sheet section can only hold accounts Asset and Liability type accounts.
Income Statement Grouping: Groups under the Income Statement section can only include Incoming and Outgoing type accounts.