How Account Types Affect Your Reports ?
Very fundamental concepts one must understand in order to use Odoo accounting to it's true capacity is - Chart of accounts and Account types.
We will jump straight into these two topics.
All the financial activities basically fall under some basic nature. In fact, the nature of the financial activities represents different aspects of the company's financial situation.
We can categorise accounts based on the nature of the activity it represents. Such categorisation is done as account types in Odoo Chart of Accounts.
In Odoo Chart of Accounts , default account types are given based on these basic categories of financial activity.Also account types are categorised in 4 basic types :
1) Liquidity - these type of account types represent bank or cash accounts
2) Receivables - these are customer accounts.
3) Payable - these are vendor account.
4) Regular - these are regular account ,used for miscellaneous purposes. Most of the account type fall into this category.
Following are the Account types, by default given in the odoo:
• Current Assets
• Fixed Assets
• Non-Current Assets
• Bank & Cash - Liquidity type
• Current Liabilities
• Non-Current Liabilities
• Credit Card Account - Liquidity type
• Current Year Earnings
• Other Income(Indirect Income
• Cost Of revenue
• Off-Balance Sheet
These are the 18 different account types which are by default given in Odoo Chart of Accounts.
We have just listed the account types here. Of course, you guys will be even more interested to know why/how/what of all these account types. For this reason In the upcoming post in Accounting Series, we will discuss all of this account types in details.
In simple words - an account is a record which holds information on different types of financial activities together.
Sales Income – this account holds information of income generated due to sales activity.
Another Examples :
Cash account - this account holds information of all in/out Cash transactions.
Salary expense – this account holds information of salary given to all employees.
By default the community version comes with very minimal view for accounting, to avail full features, we need to enable full accounting features from the user access right panel. Once we have it done, we can navigate to Invoicing -> Configuration -> Chart of Accounts.As the name suggests, this menu is a list (Chart) of all accounts, a company might need to record all its financial activities.
Following are the Must Have information we need, to create an account in Odoo Chart of Accounts:
• Account Code: This is the unique identifier of the account. In the image below ,we can see that Odoo have given a nice way to look at the chart of account using the account codes. There is no mandatory pattern for setting account codes. It depends on company accounting adviser, how he wants to follow the patterns. However, one generalised pattern is:
Assets – Codes from 1000 to 1999
Liability – Codes from 2000 to 2999
Equity – Codes from 3000 to 3999
Income – Codes from 4000 to 4999
Expense – Codes from 5000 to 5999
But again as I mentioned earlier, there is no mandatory pattern, it could vary based on company's financial adviser, numbers of subsidiaries, the number for business units and many other factors. The general pattern can be used for a small company.
• Account Name: This is the account name (yes, as simple as that). It has to be given in such a way that it represent exactly the nature of the activities that we are going to record with this account. Naming matters because these names will be displayed in the financial statement such as Profit & Loss and Balance Sheet.
• Account Type: This is the most important detail we need to provide while creating the accounts in Odoo Chart of Accounts. Because, this will decide that how this account will impact company's financial statements. Mainly being Profit&Loss and Balance Sheet.It is also necessary to generate country-specific legal reports and to set the rules for closing the fiscal year and to generate the opening entries.We have discussed about this in details above.