Chart of Account
Chart of Accounts is actually an Accounting Key Flexfield within General Ledger Application. As chart of accounts Structure is the most important part of accounting setups it is very important to finalize the correct accounting structure (Chart of accounts) before we start accounting setups. It is important to note that once the chart of accounts structure is defined it is not recommended to change it.
Defining of Chart of accounts consists of following main steps.
- Finalize the chart of account Structure
- Creating value sets which can be assigned to various segments of Chart of accounts Structure.
- Defining Accounting Key Flexfield and its Segments.
- Specifying appropriate qualifiers.
- Compiling the Key flex field Definition.
- Defining Values for the value sets.
Finalize the chart of account Structure
it is very important to finalize the correct accounting structure (Chart of accounts) before we start accounting setups. Because once the chart of accounts structure is defined it is not recommended to change it. Analyze the organizational structure and the dimensions of the business before designing the Chart of accounts by carefully evaluating the business needs, design the chart of accounts to take advantage of General Ledger’s flexible tools for recording and reporting the accounting information in the best possible way.
Sample Structure for a three segment Chart of Accounts.
- Balancing segment
- Natural Account
- Cost center
Defining Value sets
Define the value sets for different Segments of the chart of account structure. Value sets determine the attributes of your account segments such as the segment length, value alignment, and value security. Do note that same value sets can be used for multiple segments of COA Structure.
Define the Value sets for the Accounting Flexfield as independent, table, or dependent-type value sets. Refrain from using value sets with a validation type of None, Pair, or Special for the Accounting Flexfield.
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Defining Accounting Key Flexfield and its Segments.
Define the chart of Accounts structure in oracle applications by defining Accounting Flex fields. There can be up to 30 segments for an Accounting Flex Field Structure. We should assign one of the Chart of account segments as Balancing Segment and one of the segment as Natural Account segment as these two are required Segments.
Application: General Ledger
Flexfield Title: Accounting Flexfield.
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- Check the Allow Dynamic Insert check Box if it is desired to create the accounting ode combinations dynamically.
- Check the Cross Validate segments checkbox if it is desired to use Cross Validation rules to prevent/ allow creation of some account code combinations.
Define Chart of Account Segments:
Define the chart of account segments as per the structure decided and attaché the corresponding value sets to the segments. It is very important to decide and setup the column as it specifies which Segment it will correspond to in the accounting code combinations. It Determine the appearance of your key Flexfield window, the number and order of the segments, and the segment descriptions.
Specify Accounting Flexfield qualifiers:
Accounting Flex Filed qualifiers specify how different accounting flex filed segments will be used. By default there are three accounting Flexfield qualifiers.
- Balancing Segment
- Natural Account
A natural account segment contains values representing account types, such as expense, liability, Revenue Etc. This Account type finally specifies the type of the account code Combination.
- Cost Center
- Intercompany
- Management
- Secondary Tracking
We should designate one of the Chart of account segments as Balancing Segment and Natural Account segment each. We can optionally designate other segment as Cost Center, intercompany, management, Secondary tracking. It is mandatory to define a Cost center segment if Oracle Assets or Oracle Projects is supposed to be installed and used.
Compiling the Key flex field Definition.
Once the Chart of Accounts Structure is defined and the respective qualifiers and Value sets are attached to the segments appropriately. Freeze the Flexfield definition by checking the “Freeze Flexfield Definition” check box. Once the Accounting Flexfield account structure is Freezed in the Key Flexfield Segments window and we start using account numbers in data entry, we should not modify the Flexfield definition. Changing the existing Flexfield structure after Flexfield data has been created can cause serious data inconsistencies.
- Check the Allow Dynamic Insert check Box if it is desired to create the accounting ode combinations dynamically.
Defining Values for the value sets.
Define the Values in the value sets attached to different segments of Chart of accounts Structure so that the corresponding values can be used for the creation of the accounting Code Combination.
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Select Allow Budgeting and Allow Posting as per business requirement.
Allow Posting flag confirms that the segment value can be used by the Posting program.
Oracle Receivables does not use the Allow Budgeting option
Natural account segment contains values representing account types, such as expense, liability, Revenue Etc. This Account type finally specifies the type of the account code Combination.
