All financial transactions are accumulated and organized into General Ledger accounts, each of which represents a distinct and defined segment of business operations. These accounts are collectively referred to as a Chart of Accounts. While every organization has the ability to define its own Chart of Accounts, there are certain conventions to follow.
Inform requires the creation of a P&L Break Account to define the separation between accounts used on the Balance Sheet and Income Statement.
To learn how to create, edit, and print financial reports, see Create, edit, and print financial reports.
Types of general ledger accounts
Following are the major types of general ledger accounts. Account numbers must be prefixed in a logical order for a logical and professional appearance on financial reports. Please note that this list is for demonstration purposes and your Chart of Accounts may follow the format as recommended by your CPA or management.
|
Classification & Numbering |
Definition |
Typical Balance |
Sample Accounts |
|---|---|---|---|
|
Assets (1000-) |
Owned by or owed to the business from outside sources |
Debit |
Cash in Bank Accounts Receivable Inventory |
|
Liabilities (2000-) |
Owed from the business to outside sources |
Credit |
Accounts Payable Sales Tax Payable Bank Loans |
|
Owner’s Equity (3000-) |
Owner and Shareholder investment in the business |
Credit |
Contributed Capital Owner’s Draw Retained Earnings |
|
Revenue (4000-) |
Income derived from sales of goods and services |
Credit |
Merchandise Sales Service Sales Freight - Out |
|
Cost of Goods Sold (5000-) |
Direct costs to make goods and services available for sale, including the value of the goods |
Debit |
Merchandise Costs Direct Labor Freight - In |
|
Expenses (6000-, 7000-) |
Indirect costs incurred from normal operations. This includes fixed and variable costs. |
Debit |
Salaries Software Entertainment |
|
Other Income (8000-) |
Sources of income not attributable to the sale of goods and services. |
Credit |
Gain on Sale of Assets Bad Debt Recoveries |
|
Other Expense & Tax (9000-) |
Sources of expense not attributed to normal operations |
Debit |
Penalties & Fines Income Tax |
Available financial reports
- Trial Balance: list of all G/L accounts and balances at a point in time; usually the last day of the requested accounting period. The Trial Balance will always serve as the basis for all other reports. Producing the Trial Balance requires that a single accounting period is selected for all accounts and source codes.
- General Ledger Reports: various inquiries may be made from the G/L Inquiry Screen:
- Activity may be selected for an entire fiscal year or the current year to date.
- Activity may be filtered by Source Code.
- Activity may be restricted to an individual branch or division. For more information on branches and divisions, please refer to Understand and use divisions.
- Activity may be displayed in summary, detail or expanded mode.
- Activity may be viewed, printed, converted to a .pdf or exported to .csv format.
- Balance Sheet: indicates the ownership position at a point in time, usually the last day of the requested accounting period. This report is preloaded with Asset, Liability and Equity groups.
- Income Statement: shows the performance of the business for a period of time, usually a single accounting period. Comparisons are often made from the current year to the prior year. This report is preloaded with Revenue, Cost of Sales, Expense and Other Income groups.
Considerations before creating a financial report
- The G/L Chart of Accounts must contain account numbers in a logical order.
- Each G/L account is required to be placed into a G/L group for inclusion on the report.
- Balance Sheet accounts require a category group to define report position.
- Income Statement accounts require a category group to define report placement, plus a special “IS” summary group to calculate the income or loss for the period and update the Balance Sheet.
Group G/L accounts
There are two approaches to grouping accounts:
- From the account level: Accounting > General Ledger > G/L Account. This method works best when a new account is added or the grouping of a single account needs to be edited.
- From the group level: Accounting > General Ledger > G/L Group. This method is optimal when a new group is created, or when a large number of accounts must be added to a group.
- For more information, see Group your general ledger accounts.
Add a G/L group of accounts to a financial report
In this example, a net zero balance G/L group will be added to the Income Statement to consolidate the revenue and cost of inter-store transfers.
For more information on creating and editing financial reports, see Create, edit, and print financial reports.
- Create the G/L Group in Accounting > General Ledger > G/L Group > New. Accounts may be added to the new group from the same window.
- To avoid duplicating the account balances, edit the any groups containing the accounts to be placed in the new group.
- Edit the structure of the financial report in Accounting > General Ledger > Financial Reporting to include the new group.
- Choose the report and click on the Setup tab to the left.
- Choose Report Settings to update the report structure.
- Click Edit.
- To insert a line, choose the line directly below, right click and choose Insert Row (image #1).
- The report structure works as follows (image #2).
- Add displays and sums all accounts in the selected group
- Subtotal creates a separate line for the subtotal
- Totals 1, 2, 3, etc. adds up all subtotals above
- Grand Total adds up all totals above
- Zero/Reset Total 1, 2, 3, etc. begins adding balances below its placement.
- Click Save.
- Run the report to validate for accuracy.
