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Chart of Accounts

Chart of Accounts

Publicado el
Published on
September 6, 2023
Actualizado en
Updated on
December 20, 2023

A chart of accounts is essentially a directory that organizes your business's financial transactions. Think of it as a library of accounts, where each 'book' represents a specific type of income, expense, asset, liability, or equity. For instance, there can be accounts for sales, rent, salaries, equipment, and much more.

When you start using Cashflow, the system already comes equipped with a predefined chart of accounts designed to cover the common financial and tax needs of most businesses. This chart of accounts includes accounts for recording your tax obligations, among other things.

You can customize it to suit your business, which means you have the freedom to add, modify, or delete accounts as needed. This makes the chart of accounts a versatile and adaptable tool for managing your business' finances.

1. Adding Ledger Accounts

To add new accounts to the chart of accounts, follow these steps:

  1. In the main menu, go to Accounting and then click on Chart of Accounts.
  2. In the list of Accounts, click on the (+) button.
  3. In the window that appears, select the Control Account, define the Title, and Description.
  4. In Control Account, set whether this account will be a control account. Defining an account as a control account allows you to create sub-accounts.
  5. In Transactions, determine if the account is available to receive transactions and if it is Active.
  6. Click the Save button to save the changes.
Chart of Accounts
Cashflow's chart of accounts is structured into five levels. In the last level, the fifth, you will find accounts that directly record transactions (Subsidiary Accounts). The previous levels group these accounts and are known as control accounts, so they do not directly record transactions.

This structure helps prevent errors and confusion since transactions are recorded in specific accounts in the final level (Subsidiary Accounts) rather than being scattered across more general control accounts. This way, detailed tracking of transactions is facilitated, supported by the details provided in each fifth-level account (Subsidiary Accounts).

2. Editing a Ledger Account

To edit a ledger account, follow these steps:

  1. In the main menu, go to Accounting and then click on Chart of Accounts.
  2. On the Chart of Accounts screen, find the account you want to edit.
  3. Click on the action menu (three horizontal dots) associated with this account.
  4. Click on Edit.
  5. Update the necessary fields.
  6. Click Save.

3. Deleting a Ledger Account

You may need to hide or delete ledger accounts that you no longer use in your company. To delete an account from the chart of accounts, follow these steps:

  1. In the main menu, go to Accounting, and then click on Chart of Accounts.
  2. Click on the action menu (three horizontal dots) next to the account.
  3. Click Delete.
  4. You will be asked to confirm the deletion.
Deleting Accounts
You should be aware that you can only delete accounts that have no associated transactions. If an account has already been used in a transaction, you won't be able to delete it.

Tips & Best Practices

Effectively managing a chart of accounts can be challenging, but with the right practices, you can ensure you have a robust and useful tool for your financial management in Cashflow. Here are some tips to help you get the most out of your chart of accounts:

  1. Structure of Your Catalog
    Remember to maintain a clear and organized structure in your chart of accounts. The top-level (control accounts) should have a clear relationship with the accounts they group at the lowest level (subsidiary).
  2. Consistent Naming
    Use clear and consistent names and descriptions for your accounts. This will facilitate understanding and searching for accounts in the future.
  3. Regular Review
    Regularly review your chart of accounts to ensure that all accounts remain relevant and useful. Consider deactivating accounts you no longer use instead of deleting them, especially if they have been used in past transactions.
  4. Proper Use of Accounts
    Avoid using control accounts to record transactions. These accounts are designed to group and summarize information from subsidiary accounts.

By following these tips and best practices, you can effectively manage your chart of accounts in Cashflow, making it a valuable tool for your financial management.

Common Issues

Even with the best practices, problems can sometimes arise while managing your chart of accounts. Here are some of the most common problems that may occur and how you can avoid or resolve them:

  1. Accounts Not Found in the Chart of Accounts
    Ensure that the account you are looking for has not been deactivated or deleted. If you can't find an account, check the entire catalog and the change history.
  2. Unable to Delete Accounts
    Remember that you cannot delete an account that has been used in a transaction. If you're trying to delete an account and can't, check if the account has associated transactions.
  3. Unable to Record Transactions in Some Accounts
    A common mistake is trying to record transactions in control accounts. Remember that transactions should be recorded in the subsidiary accounts at the lowest level.
  4. Deactivated Accounts
    If an account has been deactivated, you won't be able to use it for new transactions. Make sure the accounts you need are active before attempting to record transactions.