Account Charts in OpenERP

A Chart of Accounts (COA) is a way of showing a business´s financial information in such a way that it is possible to make good financial decisions based on the information that it shows. The COA will be made up of all the individual accounts that make up the overall accounts of a business.

 

Structure of Chart of Accounts

The COA provides the necessary structure to the Nominal Accounts to allow the overall picture of a company´s financial health to be easily seen.

In OpenERP, chart of account is represented in the form of a tree and this hierarchical structure is maintained using parent-child relation between accounts. Every Account has an optional field, “Parent”. For an account to appear in the chart it should select a parent account. The root (top level) account of a chart will not have parent.

An example of the chart of account hierarchy is shown in the figure below:

Conventions related to Account codes in Chart

If the code of the main account is ‘1’ and then the code of sub accounts starts with ‘1’. That is, the code of sub accounts should start with the code of its parent account to form a tree structure. The tree structure of the accounts can be altered without recalculating any of the individual entries. So you can easily restructure your account during the year to reflect the reality of the company better.

Advantages of Hierarchical structure

• it displays and calculate only the accounts that interest you,
• it enables you to get a global view of accounts,
• it simplifies searches,
• it allows to search accounts on the basis of their classification,
• it is flexible because it can be easily restructured.

Creating a Chart of Account

Start with the menu : Accounting ‣ Configuration ‣ Financial Accounting ‣ Accounts ‣ Accounts.

First create a root account. Give name and code for root account. The top level account should have Code 0 and Type View. Then create another account. To set the second account as the child of the root account, select the root account in the field ‘Parent’. Code of the child account should start with the code of root account. Similarly we can create a tree structure by adding new accounts one by one.

A screenshot of an account form is shown below. Let’s check the relevance of important fields.

Name: Gives the account a name.
Code: The code length is not limited to a specific number of digits. Use code 0 for all root accounts. Account codes are unique.
Parent : Determines which account is the parent of an account,to create the tree structure of the chart of accounts.
Account Type: Account types determine an account’s use in each journal. We will look into different account types at the end of this section.
Internal Type : Used for internal purpose of OpenERP. We will look into different internal types at the end of this section.
Secondary Currency : Forces all the moves for this account to have this secondary currency.
Reconcile : Activate this field for partner accounts and for chequeing (checking) accounts.
Default Taxes : This is the default tax applied to purchases or sales.
 
Account Types and Internal Types

Account Types:-
OpenERP enables to buy products from a supplier, stock the products in a warehouse and sell these products to a customer.  It is very much an operations manager’s view rather than a financial controller’s view, so it’s reasonable to abbreviate the Balance Sheet down to positive and negative amounts of Cash.

By default, the following types are available: View, Receivable, Payable, Income, Expense, Tax, Cash, Asset, Equity.
 
View — That’s a virtual account. Real accounts are like the leaves on the tree.  Virtual accounts are the trunk, limbs, branches and twigs.  View accounts are just category headings that “contain” derived values summed from the raw (leaf) data items. They don’t “contain” values. Use the View type for accounts that make up the structure of the charts.
Payable and Receivable — Account types are mainly used as informative titles. The only two types that have any particular effect are Receivable and Payable.These two types are used by reports on partner credits and debits. They are calculated from the list of unreconciled entries in the accounts of one of these two types.
Income and Expense — They’re the elements on the two sides to the Profit and Loss Statement.
Cash — OpenERP proposes to use Cash as an abbreviated surrogate for the whole Balance Sheet.
 
To add new types use the menu, Accounting ‣ Configuration ‣ Financial Accounting ‣ Accounts ‣ Account Types.

Internal Types:-
Internal Types has nothing to do with the accounting terminologies. It is used by OpenERP to identify and manage the transactions related to this account. We can define new account types in openerp, but not internal types. For example we can define a new account type which is supposed to act as a Payable Account. But it will do the desired functionalities only if the corresponding internal type is ‘Payable’.

By default, the following types are available: View, Regular, Receivable, Payable, Liquidity, Consolidation, Closed.
 
View — can not have entries.
Regular — these appear to apply to purchases and sales, but as cash transactions.
Payable and Receivable — are for partner accounts (for debit/credit computations). 
Liquidity — these appear to apply to various forms of cash.
Consolidation — are accounts that can have child accounts for multi-company consolidations.
Closed — for deprecated accounts.