What are Chart of Accounts?
-> Chart of accounts are nothing but a list of General Ledger accounts. We can say, Chart of accounts provide the framework for defining GL accounts.
-> Chart of accounts consists of several Account Groups based on the nature of GL accounts.
-> This account group within chart of accounts provide the number range for GL accounts creation.
->Also account group controls the fields of GL master data.
-> Chart of accounts are defined at the client level, and assigned to company code.
-> Few parameters that Chart of accounts consists of -
- Maintenance language
- Length of GL account number
- Manual or automatic creation of cost elements
- Group chart of accounts.
There are 3 types of Chart of Accounts:
1.Operational Chart of Accounts:
-> All the day to day transactions of business are posted and recorded in this COA.
-> The operating chart of account must be assigned to each and every company codes of the organization.
-> If every company code has different operating chart of accounts, then respective controlling area is required for each company code.
2.Country or alternative Chart of Accounts:
-> It is an optional Chart of account, which is used to meet and report country’s legal requirements.
-> Country chart of accounts is used when submitting financial statements to country’s authorities.
-> The GL accounts of this Chart of accounts are assigned to GL accounts of Operating Chart of accounts.
3.Group Chart of Accounts:
-> It is an optional chart of accounts which contains the accounts at group level, where many operational accounts can be assigned to single group account.
-> If group chart of accounts is used, each operational account must be assigned to group account.
-> Note that Group chart of accounts are assigned to operational chart of accounts, not the company code.
-> This is mainly used for reporting purpose at the organization level, as the entire general ledger accounts come under Group Chart of accounts.
Thanks for reading.
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