Chart of Accounts

Overview

The chart of accounts is the core concept where all modules create transactions that are recorded in the general ledger and other accounting reports.

Mezan provides a default chart of accounts that you can use as a starting point for your organization. You can modify the default chart of accounts to better suit your organization's needs, or create your own chart of accounts from scratch.

Account Types

In mezan, there are 5 main account types. The account type number is also required to be the first number of the account code in Mezan. An assets account code must always start with 1, liability accounts with 2, equity accounts with 3, revenue accounts with 4, and expense accounts with 5.

The main account types are:

  1. Asset: An asset account is a balance sheet account that represents an economic resource owned by the organization. Examples include cash, accounts receivable, and inventory.
  2. Liability: A liability account is a balance sheet account that represents an obligation owed by the organization to external parties. Examples include accounts payable, taxes payable, longterm and shortterm loans.
  3. Equity: An equity account is a balance sheet account that represents the residual interest in the assets of the organization after deducting its liabilities. Examples include common stock, retained earnings, opening balances interim accounts.
  4. Revenue: A revenue account is an income statement account that represents the income earned by the organization from its core business activities. Examples include sales revenue, interest revenue, and rental revenue.
  5. Expense: An expense account is an income statement account that represents the costs incurred by the organization in the course of its business operations. Examples include cost of goods sold, salaries and wages, and rent expense.

Fields of the Account Form Explained

Accounts can be created in the chart of accounts by clicking the "New Account" button in the specific account type section in the chart of accounts page. Each type section has it's own create button, and that determines the type of account that will be created.

  1. Accepts Transactions: To control if the account can be used to record transactions. Accounts that accept transactions are always considered a "subaccount" in the chart of accounts. If this is disabled, the account will be considered a "parent account" and will not be able to record transactions. This is not modifiable after the account is created, but there's a short-cut to convert and existing account to a parent account via duplicating a parent account in it's place with the same name and code, and adding the existing subaccount below it.
  2. Account Name: The name of the account. This is a required field. It will show the account name in the general ledger and account statements, and all other places that reference the account.
  3. Account Description: A free-text field to add any notes or description about the account. This is optional and purely for reference purposes. It does not show up on the general ledger or account statements.
  4. Account Code: The code of the account. This is a required field. It is used to identify the account in the general ledger and account statements, and all other places that reference the account. The code must be unique within the organization. The account code has a total maximum of 20 digits, including the account type number it starts with. Mezan will automatically generate the next available account code for the current type or parent account selected when the account form is opened. Account codes can be modified later, but will not affect subaccounts that have already been created if you are editing a parent account.
  5. Parent Account: The parent account of the account, this is automatically populated based on the account code. Account codes are how we determine the structure of the chart of accounts and linking parent accounts to subaccounts. If this empty it means no parent account was detected in the account code, and this is a top-level account for it's type category.

Accounts Other Properties

  1. Account Type: The type of account. This is deteremined at the time of creating the account and cannot be modified later.
  2. Parent Account: This is inferred from the account code, if a parent account is detected in the account code it will be automatically be considered a parent. If current parent is removed or modified and no longer matches the account code, the account will be fallback to the next available parent account in the account code, or if no parent account is available it will be considered a top-level account.

Actions available in the Chart of Accounts

Each account has a few actions that can be performed on it when editing the chart of accounts.

  1. Edit: To edit the account properties like name, description, and account code.
  2. Convert to Parent: This is a shortcut to perform the following steps to convert an existing subaccount to a parent account:
    • Create a new parent account with the same name and code as the current account.
    • Add the existing subaccount below the new parent account. For example: if the current Account Code is 1110, the new parent account will be 1110 and the existing subaccount will be 111001.
  3. Add Subaccount: To add a new subaccount to an existing parent account. This will initiate the account creation form with the next available account code that matches the current parent account code and account type.
  4. Delete: To delete the account. The account can only be deleted if it has no records or settings associated with it in other modules of Mezan.

The chart of accounts is used in every module in Mezan. And is a core concept that many settings and features use to reference accounts.