How do I Setup and Maintain General Ledger Accounts?

Creating New General Ledger Accounts and amending Existing ones.

Written By Gerry Mckeown ()

Updated at June 16th, 2018

1.     Introduction:

When you initially engage with the System you will find that you have been supplied with a pre-defined standard package of General Ledger Accounts and Codes.  These include General Ledger Categories, General Ledger Sub-Categories and General Ledger Groups along with a set of other Codes (Currencies, Taxes, etc.) important to the proper functioning of the System. You should review these in order to determine if they reflect your requirements in this area and then re-define them, add to them as necessary, or delete any un-wanted General Ledger Accounts.  (Or indeed, discard them in favour of your own existing Coding System).    These pre-defined Codes will help you to get started very quickly – but as you progress, you may well find that it becomes necessary to add to these Codes, especially as you require more in-depth Analysis and Reporting.  It’s also important that you fully understand the role of the General Ledger Categories and Sub-Categories in driving the design and layout of the Profit & Loss and Balance Sheet Reports – so we highly recommend that you review the “How do I Modify or Re-Design the Layout of the P & L Reports Article in conjunction with this Article.  To summarise, the hierarchical relational- ship of the General Ledger Coding system can be presented as follows, wherein General Ledger Codes belong to General Ledger Sub-Categories who in turn belong to General Ledger Categories;

2.     Adding further GL Categories and Sub-Categories:

Before you add more General Ledger Codes, you may want to review, amend or create additional General Ledger Categories and/or Sub-Categories as these will be required when adding new General Ledger Codes;

2.1         General Ledger Categories:  You are supplied with 11 pre-existing GL Categories, numbered 1 to 11 as Alphabetic Codes, which you cannot change or delete.   You can, however, edit them and change their meaning.    And you can add to them if you wish.  To access the General Ledger Categories and Sub-Categories;

To amend an existing GL Category, click on “Edit” beside the appropriate Code.  To add a new General Ledger Category, click on “Add New Category” at the bottom of the screen.

When adding a new General Ledger Category you must also add a Category Type.  This Category Type will subsequently be inherited by any General Ledger Codes which quote this General Ledger Category as its ultimate parent (i,e. attached to a General Ledger Sub-Category which, in turn is attached to the General Ledger Category).  The Category Type determines what reports, or section of a report, the General Ledger Codes with this Category Type will appear in.  

You can also determine its position in these Reports by allocating a “Sort Order Code”.  The General Ledger Categories will appear in ascending numerical order of Sort Order Code in the Chart of Accounts starting with the number 1.   If you decide to change a GL Category’s position by changing its Sort Order Code or you add a new GL Category with a new Sort Order Code then, on “Save”, by ticking the box “Re-Sort sort order”, the sequence will be re-ordered.   In the example below, “Operating Income” will be the first line on your Profit & Loss (Income & Expenditure) Reports followed by “Cost of Sales” and “Direct Costs”.

2.2         General Ledger Sub-Categories:   As with General Ledger Categories the system comes equipped with a standard set of General Ledger Sub-Categories which you can Add to or Modify as you wish.  Each also has a Profit & Loss (Income & Expenditure) Sort Order Code – but in this instance – these Codes determine the sequence of their appearance within a General Ledger Category.    Maintenance is similar to that of GL Categories with the ability to re-sequence the Report or Chart of Accounts using the Sort Order Codes.   The “Non-Cash Item”, if ticked, will cause all General Ledger Codes with that particular General Ledger Sub-Category as a parent to be excluded from Cash Forecasting. 

There is a more detailed explanation of the role of GL Categories, GL Sub-Categories and GL Codes in the preparation of Financial Reports in the Article entitled; How do I Modify or Re-Design the Layout of the P & L Reports

3.     Adding Further General Ledger Codes:

You can access the list of current of General Ledger Codes from this Window.  Select “New General Ledger Account” to add a new GL Code or Click on an existing General Ledger Code if you want to Amend it;

There are several ways you can extend the pre-defined set of General Ledger Codes;

(i)    You can add New Codes in the Gaps between the existing ones;

In this instance we have extended the number of Sales Accounts by adding new Codes 1012 to 1018.

(ii)    You can use suffixes to expand an existing Code as in this example;

(iii)    You can set up completely New Codes, as in this example;

When you Click on “New General Ledger Account” as illustrated the following window will appear;

Finally, click on “Process” to add the new GL Account Code to the table of General Ledger  Codes.

You should note that it’s also possible to add new General Ledger  Categories and General Ledger  Sub-Categories during the process of adding new General Ledger  Codes;

4.     Using General Ledger Groups:

General Ledger  Groups do not feature in the hierarchy of the General Ledger Coding Structure. They are optional, but serve as a way of viewing and reporting of General Ledger Codes which fall into various collections of Revenue, Cost Accounts or Balance Sheet Accounts. For example you can group all Insurance Codes, or Employee Costs, and so on.  You can use these to refine Enquiries and other Reports;

5.     Deleting General Ledger Codes:

The pre-supplied Standard General Ledger Code Package is fully comprehensive and extensive in the expectation of catering to the needs of many different types of businesses - and therefore necessarily extensive and lengthy.  In many cases – overly so.

It is therefore recommended that you should “prune” or tailor this pre-supplied pack to reflect the actual needs of your business.  Just as it is important to add or extend some Coding areas, it is equally important to get rid of unwanted Codes in order to reduce clutter.  One example where this will prove useful is in the area of budgeting.  If there are many un-used General Ledger  Codes in the system then the Budget preparation documents and spreadsheets will be unnecessarily complicated with the inclusion of these un-used Codes.   Another example is the case of unwieldy General Ledger  Code Lookups or Drop-Downs.  And, don’t forget that, if you are overly zealous in your “trimming”, you have always the option of adding back GL Codes later on.  

N.B.  You can only delete un-wanted GL Codes if there are no transactions in the system with this particular GL Code recorded against them.  If this is the case, when you Go To > General > Add/EditGL Codes, the Delete button will be highlighted.  In all other cases this Delete Button will not appear.

So, it is particularly important that you carry out the “pruning” process before you commence the introduction of transactions as part of the system go-live.

6.     Re-Defining GL Codes:

Finally, you can also use the Edit facility to change the meaning of your existing GL Codes by changing the GL Code Description and the GL Category and Sub-Category it/they belong to;

7.     Create General Ledger Control Type C Accounts:

Required or Control Accounts are GL Accounts that the system will use during automatic system transaction posting. The difference between a Control Account and a Default Account is that you cannot create a manual posting to a Control Account.

A Control Account is only updated through automatic system transactions - e.g. Debtors Control, Creditors Control, Sales/Purchase Tax Control, Retained Reserves. A Default Account is one that is updated by either automatic system transactions, or manual transactions - e.g. Discounts, Accruals, Prepayments, Currency Gain/Loss Account, etc...).  

To setup a new General Ledger Control account follow all the steps as per point 3 above with one exception.

Ensure that the Account Type is set as 'C' - Control.

Click Process to Save the new General Ledger code.

The new type C Control account then needs to be added as a system Control Account.

To do this go to Setup > Codes Maintenance > System Accounts

Choose your new type C Control account from the drop down list and choose the relevant Account type;

Click Save and your new Type C Account is setup.