A company’s chart of accounts is just a short list of its financial accounts that serves as a financial architectural blueprint or roadmap. If the architecture is well-considered and in line with the business’s finances, a chart of accounts will be a crucial reference tool that simplifies financial analyses. A chart of accounts is vital for any small business looking to expand, regardless of whether its executives understand basic finance concepts.
What is the NetSuite Chart of Accounts?
NetSuite’s vital accounting functions form its foundation. Similarly, the NetSuite Chart of Accounts, or COA, is the primary component of NetSuite’s accounting functionality. A chart of accounts is a structured list of accounts in a company’s general ledger that depicts its financial structure. It serves as the basis for their financial accounting system. If configured in accordance with that design, the chart of accounts will serve as a valuable reference tool, making financial reporting, analysis, and general financial management more accessible.
Traditionally, Chart of Account numbers determined which segment an account belonged to. Now that NetSuite permits these classes to be assigned to the transaction header and line (with defaults), the NetSuite chart of accounts numbering is utilized to generate various financial statement formats. Typical examples include statistical and management income statements.
What is Included in the NetSuite Chart of Accounts?
Account Types:
Assets
This shows your company’s resources, including cash on hand, cash in the bank, and accounts receivable.
Liabilities
This shows your company’s commitments, including accounts payable, loans payable, and accumulated liabilities.
Equity
This shows the company’s ownership interests, which include stocks, distributions, capital contributions, dividends, and retained earnings.
Revenue
These accounts keep track of the revenue your company earns from the selling of goods or services.
Expenses
These accounts keep track of the expenses your company incurs while running its activities.
Account Details:
Account Number
This is a necessary field. Each account is granted a unique number for identification and organization purposes. The account number may be numeric, alphanumeric, or a combination.
Account Name
This is a necessary field. It is assigned to provide each account with a clear, descriptive name. This allows people to clearly understand the purpose of the account.
Description
You can include a descriptive description to provide more context and information for each account.
Balance
The sum of all transactions posted to the account throughout time.
Account Type
This is a necessary field. The chart of accounts has typically various categories that categorize transactions and provide a clear picture of your company’s financial activities.
Currency
This is a necessary field for bank account types. It lets you specify certain currencies for transactions in different currencies if your company operates globally.
Subsidiary
This is a necessary field. It allows you to assign specific or multiple subsidiaries to accounts in NetSuite. NetSuite also facilitates inter-company transactions and consolidations.
Additional Points:
The precise accounts you include in your NetSuite COA will be determined by your organization’s nature and financial requirements. NetSuite allows you to design unique account structures to meet your company’s needs. It is suggested that you thoroughly review your chart of accounts and avoid making changes unless essential, as it serves as the foundation for your financial reporting.
Setting Up the NetSuite Chart of Accounts
Creating Accounts:
Initially, you could manually create each of your NetSuite chart of accounts. Go to Setup > Accounting > Chart of Accounts > New to achieve this.
On this screen, you can name the account, pick the kind of account, the currency used to record the account’s balance, and the subsidiary to which it belongs. On the Create Account page, you can restrict this account based on department, class, or location. You may choose to attach a number with this account and its name. NetSuite suggests setting up number ranges for different sorts of accounts.
The second option to establish new accounts is to use a CSV import. This strategy is very beneficial when you need to migrate a large number of accounts from a legacy system to NetSuite. To perform the CSV import, go to Setup > Import/Export > Import Tasks > Import CSV Records. On the first page of the Import Assistant, choose Accounting as the import type and Chart of Accounts as the record type.
What information should you include in your CSV import file for the Chart of Accounts? You must include data for the fields required for generating new NetSuite accounts in your CSV file.
Enter Opening Balances:
Once you’ve produced the list of accounts that will appear in your Chart of Accounts, you’ll need to add their opening balances. To do so, navigate as Administrator to Setup > Accounting > Setup Tasks > Enter Opening Balances. This page displays all accounts that do not yet have opening balances assigned to them. To get the initial balance for any of your accounts, choose the appropriate posting period, subsidiary, and date.
NetSuite will automatically populate the Date field with the current date, but you may modify it if you want to record a different day alongside the account’s opening balance. Then, in the list of accounts connected with your selected subsidiary, you can add a debit or credit amount next to each account.
Best Practices and Tips for Chart of Accounts in NetSuite
Plan COA:
Before creating any accounts, carefully consider your NetSuite chart of accounts structure and get it right the first time. Create a graphic of how the hierarchy might look based on your company’s specific demands and reporting requirements.
Clear Names:
Set account names that are clear and descriptive, and offer helpful descriptions to provide additional detail. However, it is preferable if people can deduce the function of an account from its name alone. Avoid names that are general or vague, as these might lead to confusion.
Parent-Child Relationships:
Using parent-child relationships helps to establish a more ordered hierarchical structure in your chart of accounts. In this situation, you can combine multiple expense accounts into a single parent account called “Operating Expenses”. NetSuite also allows you to construct account records only for reporting purposes, known as summary accounts. This is excellent for creating a non-posting, inactive parent account with active kid accounts.
Consistency:
It would be easy to compare various accounts’ performance across time, periods or fiscal years. Constantly adding, merging, and deleting accounts might result in the loss of critical financial data required to create a comparative report or spreadsheet. If your organization has many subsidiaries, make sure the account structure and naming are consistent across them all. This simplifies consolidation and reporting.
Periodic Review:
Review and clean up your chart of accounts in NetSuite on a regular basis to keep it accurate and relevant. Remove any obsolete or unneeded accounts, and make improvements as your firm grows. Many businesses find it helpful to conduct a comprehensive assessment and cleanup at the end of the year to decrease complexity during tax season. Depending on the company conditions, some firms can conduct more frequent reviews, such as in every accounting period, particularly when transaction volumes are high and changes are rapid.
Expert Consultations:
Review and clean up your NetSuite chart of accounts on a regular basis to keep it accurate and relevant. Remove any obsolete or unneeded accounts, and make improvements as your firm grows. Many businesses find it helpful to conduct a comprehensive assessment and cleanup at the end of the year to decrease complexity during tax season. Depending on the company conditions, some firms can conduct more frequent reviews, such as in every accounting period, particularly when transaction volumes are high and changes are rapid.
FAQs for NetSuite Chart of Accounts
Q1. Where can I view and manage the NetSuite Chart of Accounts?
Navigate to Lists > Accounting > Accounts within NetSuite to access your chart of accounts. This page allows you to:
- View a list of all accounts with details like type, balance, and description.
- Edit existing accounts.
- Create new accounts.
- Export the chart of accounts to a file for backup or reference.
Q2. Can I import my NetSuite Chart of Accounts from another system?
Yes, NetSuite provides a CSV Import Assistant that facilitates importing account information from another accounting system. This streamlines the setup process if you’re migrating to NetSuite from another platform.
