Overview

One key consideration you will make is to ensure your current chart of accounts (COA) will work well within NorthScope. Some companies use this time to restructure their COA so they can start fresh and other companies try hard to keep the existing structure. To best capitalize on many of the features in NorthScope, including those you may not implement until a future date, a dedicated effort should be placed on reviewing your COA. This document contains information to help you create a COA that works for your business and will allow you to best utilize the features of NorthScope. It also contains tips and best practices to help you maximize the benefits of the software.

Defining your Chart of Account Structure

How you define your Chart of Account (COA) structure is an important decision that goes beyond simply differentiating between balance sheet and income statement accounts.

Account Segments

An Account segment is nothing more than a pre-defined pattern. For example, a U.S. social security number contains 3 segments (123-45-6789) where each segment has significance. In a simple COA structure, account 4000 may represent “Sales Revenue” whereas in a more complex COA structure it may be 4000-10 to represent “Sales Revenue – Strawberries”. In this example, the GL Account has 2 segments where segment 1 represents the Natural Account (Sales Revenue) and segment 2 represents the Commodity (Strawberries). There is nothing that requires you to use multiple segments so you could setup GL Account 400010 and do the same thing, however segments offer several advantages:

Financial Reporting and Analysis can be easily run for specific segments. If segment 2 in your COA represents “Commodity” then you could easily run a financial statement by commodity. You could also group your sales reports at this level. Without segments, this is more difficult to do and typically requires custom reports that can be costly to maintain.
Segments provide structure that can be enforced. If you want the last 2 digits of your GL Account to represent the Commodity and you are using segments, you would enter ‘4000’ for segment one and ‘10’ for segment two. When you saved the account, the system would validate that you are using existing segment values and create your account description based on the segments. Without this, someone could accidentally add account 400020 and name it “Sales Revenue – Strawberries” when ‘20’ is the commodity code for Blueberries. If this happened, you would not know which part was incorrect.
If you strive to keep your Natural Account segment as simple as possible and put the rest of your detail in your other segments it becomes easy to clone segments for new business entities. For example, if your segments were Natural Account, Department, and Division and you added a new Division, you could clone all the accounts with Division 10 to create new ones with Division 11.
Account numbers are easier to read and memorize when you have clearly defined segments.

When determining how many segments you need, you should review the following:

Do you need to separate GL Accounts by Company? If you run more than one legal company and you want consolidated financials you may want to consider adding a segment for the company.
Are there any major areas of your products that would benefit from the ability to easily run financials or operating statements for? Seafood companies often want to separate revenue and expenses by Specie so they will have separate Divisions for Salmon, Crab, Halibut, etc. Fruit companies often want to separate revenues and expenses by Commodity so they will have separate Divisions for Strawberries, Raspberries, Blueberries, etc.
Are there any major areas of your operations that would benefit from the ability to easily run financials or operating statements for? Companies may want to view costs by cost centers such as Plant1, Plant2, Sales, Operations, etc.

Some common segments include:

Natural Account
Division
Department
Company

Length of segments

Once you have determined how many segments you need, the next step is to determine how long each segment should be. Keep in mind that account numbers in a four-segment structure can get quite long and every time you want to look up GL Account number you will deal with that. For example, if all your segments were 4 digits and you had a 4-segement COA your GL Account length, including hyphens, would be 19 digits (e.g., 1000-4000-0050-0020). When determining segment lengths, you should follow these rules:

If the list of values in a segment is <=6 then consider using a single digit. For example, if you have 4 companies then make them 1,2,3,4 rather than 100, 200, 300, and 400.
If the list of values in a segment is <= 80 then consider using 2 digits
Try to avoid making segments (including the natural account) larger than 5 digits.

Using the example from above, if we set the company at 1 digit, the natural account at 4, the division at 2, and the department at three we have a much shorter GL Account (1-4000-50-020)

Assigning segment values

When determining segment values, it is a good idea to leave room for adding new values. For example, if you have 9 Commodities of fruit that you identify with “Divisions” it may be a good idea to make the Division Segment 2 characters and set them at 10, 20, 30, etc. This way if you add a new division later you can decide where to add them in the COA.

With the Natural Account, it is a good idea to start at 1000 or 10000 and increment them by 5 or 10 (e.g., 1000, 1005, 1010). This provides room so that as you need to add new accounts you can add them within the group of similar accounts.

It is also recommended that you use numeric values rather than alpha characters, if possible. This is not a requirement but rather a suggestion since it is easier to type 1000-20-400 than 1000-AB-STA.

Sequence of segments

The last decision will be how you structure your chart of account segments to create GL Accounts. Unless there is a reason to do otherwise, we recommend sequencing the Natural Account first. One exception would be that if you have more than one "Company" configured, you might want to start with Company and then Natural Account. The idea is that your COA sorts as naturally as possible and using this approach will ensure your Balance Sheet accounts sort before your Income Statement Accounts.

Understanding NorthScope GL Account Properties

Property	Definition
Posting Type	Identifies whether the Account is a Balance Sheet or Income Statement Account. Balance Sheet Accounts live on the Balance Sheet. Year-end balances for Balance Sheet accounts rollover during the year-end close process to become Beginning Balances for the next year. Balance Sheet Accounts are classified as either Asset, Liability, or Equity Accounts. Income Statement Accounts live on the Income Statement (Profit & Loss Statement, P&L). Year-end balances for Income Statement accounts are automatically closed to the 'Retained Earnings Account' during the year-end close process, ensuring they start the new year with a 0.00 balance. Income Statement Accounts are classified as either Revenue or Expense Accounts.
Category	The General Ledger Account Category identifies which major section the GL Account belongs to on the Financial Statements. Account Categories can be assigned as follows: Balance Sheet Accounts: Asset Liability Equity Income Statement Accounts: Income Statement
Account Class	GL Account Classes are used to classify one or more GL Accounts into a group with other similar behaving accounts and for organizing financial reports. For example, you may have several revenue accounts that are all classified as "Sales" Accounts.
Account	A General Ledger Account (synonymous with Account and GL Account) is a unique identifier used to store specific accounting data in the General Ledger. A General Ledger is made up of multiple General Ledger Accounts.
Account Description	A GL Account Description is the name given to a GL Account ID.
Control Account Type	A Control Account is a general ledger account containing only summary amounts. The details for control accounts are stored in a separate but related subsidiary ledger. The subsidiary ledger allows for tracking transactions within the control account in more detail. Individual transactions are posted both to the control account and the corresponding subsidiary ledger, and the totals for both are compared when preparing a trial balance to ensure accuracy. Control Accounts keep the general ledger free of details, while still maintaining correct balance for preparing the company's financial statements. The most common examples of Control Accounts include Accounts Receivable and Accounts Payable. The List of Control Account Types include: Brokerage: The accrued brokerage payable. The details are stored in Program Balances. Checkbooks: The balance of a bank account. The details are stored in the Checkbook Transactions inquiry. Customers: Current Accounts Receivable. The details are stored in the custom aging. Fishermen: Current fishermen payable/receivable. The details are stored in the Fisherman Balances inquiry. Fishermen Loans: Current Fishermen Loans Receivable. The details are stored in the Fisherman Balances inquiry. Freight: Current Accrued Freight (from Freight POs). The details are stored in the Purchase Order Lines List View. Growers: Current Grower Payable. The details are stored in the vendor aging. Inventory: Current inventory valuation. The details are stored in the Inventory valuation. Rebates: The accrued rebates payable. The details are stored in Program Balances. Retained Earnings: This is posted to during a year-end close. Vendors: Current Accounts Payable. The details are stored in the vendor aging.
Typical Balance	Identifies whether the natural balance of the account is a Debit or Credit. This setting is used on some financial reports but does not server any other purpose.
Inactive	Identifies if the record is "Inactive". If inactive (set to "Yes"), it will not be included in look-ups for transactions or other master files. If set to "No" or blank, the record is active and can be freely used.
Use In	Use in GL – Identifies whether a manual Journal Entry can be made against the account. If the value is ‘No’ then the account will not be visible in the GL Account lookup for a manual Journal Entry. Any GL Account with a Control Account Assigned should be set to ‘No’. Use in IM – Identifies whether the GL Account is available for use in the Inventory module. This setting is not currently used anywhere in NorthScope. Use in AP – Identifies whether this account is visible in lookups on transactions within the AP Module. It is most common that only GL Accounts for purchases are turned on to AP. Use in SP – Identifies whether the GL Account is available for use in the Sales Program module. This setting is not currently used anywhere in NorthScope. Use in SO – Identifies whether the GL Account is available for use in the simple sales transaction.

Creating your Chart of Accounts