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How do I set up my General Ledger Chart of Accounts?

How do I set up my General Ledger Chart of Accounts?

The RedTail Accounting module contains a utility to create your GL Chart of Accounts.  From the Main Menu:

  • Click on the Accounting page tab
  • Click the GL Chart of Accounts button
  • Click on the Default GL Chart of Accounts Page tab to familiarize yourself with the numbering scheme
  • The General Ledger Chart of Accounts is a listing of all accounts in the general ledger. A GL cannot have duplicate account numbers. RedTail Accounting uses a four digit numbering system ranging from 1000 to 5999.  
    • RedTail uses a 4 digit numbering system
    • 1000 accounts = Assets
    • 2000 accounts = Liabilities
    • 3000 accounts = Equity
    • 4000 accounts = Revenue
    • 5000 accounts = Expenses

Specific numbers in this range have been reserved by the system to form the financial reporting structure pertaining to the Trial Balance, Balance Sheet, and Income Statement. Click on the Reserved Accounts tab for a complete list of reserved account numbers.

It is recommended to consult an accounting professional when creating your GL chart of accounts. RedTail Accounting includes a default template that is preloaded to serve as a starting point. The GL Chart of Accounts tab shows the current assignment of account numbers. Once you have configured your chart of accounts the next step is to configure the system’s integration accounts.

Integration accounts are GL accounts that are configured for automated GL posting procedures throughout the application. Automated GL posting procedures eliminate the need for users to possess in-depth accounting knowledge when working with the various application modules. For example, when a sale is made from the RedTail POS module, a GL entry is automatically created recording the sales revenue, inventory adjustments, cash drawer activity and tax collections. All applicable GL accounts are configured (integrated) at the time of creating RedTail stations.

RedTail Accounting’s integrated GL accounts can be station specific. Station specific accounts are as the name implies – accounts that can be configured on a station by station basis. For example, if you run two point of sale stations called Station 1 and Station 2 respectively – Station 1 may post to Cash Drawer Account 1010 while Station 2 posts to Cash Drawer Account 1011. It is up to the business as to whether or not it is necessary to use different integration accounts for each station. If you decide not to, you can use the duplication tool in Configure Stations under System Configuration to save time on creating each station. To access the GL integrated accounts, click the following link below.

Collective Group:
RedTail Accounting can also function as a departmentalized accounting system for all inventory that is managed by RedTail POS. Each inventory item is assigned an Inventory Department. You can create as many departments as necessary via System Configuration, Modify Drop Down Lists (Department tab). Each department can be linked to 4 GL ledger accounts. The first account is for posting inventory supplier purchases while the second account is for posting inventory cost adjustments (e.g. theft and damage). The third account is for posting the inventory sales revenue, while the fourth is for cost of goods sold. If you want to implement a departmentalized accounting system, link your GL account to your inventory departments. If not, leave them empty and the system will instead use the station integration accounts. Note that you can link Inventory Purchases and Inventory Adjustments to the same GL account within your Departments. Some businesses may want to show cost adjustments as an Expense account while others post all purchases and adjustments to an Inventory asset account.

Tax Account:
The RedTail Accounting module can generate a tax remittance report based on your designated sales revenue accounts and tax accounts. The RedTail POS and RedTail PO modules contain procedures to compute cost of inventory and sales of inventory. All of these tasks need to reference all of the GL accounts that are associated with sales and inventory. If you are running RedTail Accounting as a departmentalized accounting system you will need to identify all of the GL accounts to include in computing cost of inventory and total sales. To do this, use the Collective Group field to link all of your inventory accounts and sales revenue accounts. The options are to link accounts to Inventory, Inventory Adjustments or Sales Revenue.

Control Account:
A control account can be used as an integrated account but will not be available for selection by users.   

 

Departmentalized Accounting:

RedTail POS is a perpetual inventory management system. This means that inventory is managed in real time and constantly changing with the buying and selling of product. Such changes pertain to On Hand quantities as well as overall monetary value. Stock levels are managed by RedTail POS while its monetary value needs to be reflected in the asset section of your company Balance Sheet.

RedTail Accounting is an optional integrated accounting module that seamlessly interfaces with RedTail POS to manage that monetary value of inventory. If you are using RedTail Accounting, it can be configured to function as a departmentalized accounting system.

This means that each inventory item being managed by RedTail POS is assigned four GL accounts (from RedTail Accounting) based on the Department from which the inventory belongs. That is, each inventory department you create can be assigned four GL accounts to manage purchases, cost adjustments (adjustments to On Hand quantities) and sales and cost of goods sold. This allows you to maintain multiple inventory accounts in your General Ledger to comprise your total cost of inventory.

Consider the following example:
Your business is comprised of three departments and adopts a departmentalized accounting system. The Department names are as follows:
Food      Beverage      Other

The Food department is linked to GL Account number 1200 – Food Inventory
The Beverage department is linked to GL Account number 1210 – Beverage Inventory
The Other department is linked to GL Account number 1220 – Other Inventory
The GL also contains account number 1250 – Total Cost of Inventory (Subtotal Account)

The Food department is linked to GL Account number 5750 – Food Inventory Adjustments
The Beverage department is linked to GL Account number 5751 – Beverage Inventory Adjustments
The Other department is linked to GL Account number 5752 – Other Inventory Adjustments
The GL also contains account number 5755 – Total Inventory Adjustments (Subtotal Account)

The Food department is linked to GL Account number 4100 – Food Inventory Sales
The Beverage department is linked to GL Account number 4110 – Beverage Inventory Sales
The Other department is linked to GL Account number 4120 – Other Inventory Sales
The GL also contains account number 4150 – Total Inventory Sales Revenue (Subtotal Account)

The Food department is linked to GL Account number 4100 – Food: COGS
The Beverage department is linked to GL Account number 4110 – Beverage: COGS
The Other department is linked to GL Account number 4120 – Other: COGS
The GL also contains account number 4150 – Total Inventory COGS (Subtotal Account)

The Balance Sheet is able to report your total cost of inventory, broken down by each Department within your organization. This particular example configures your ledger to show inventory adjustment accounts (5750, 5751, and 5752) to show cost adjustments (i.e. theft or damage). If you do not require this level of detail, you can record the same GL account for both Inventory Purchases and Adjustments.

Non Departmentalized Accounting:
If you simply want show your entire inventory as a single item on your Balance Sheet, leave the four Department Ledger Account columns blank. When inventory related GL postings are necessary, RedTail will use each Station’s integrated ledger accounts instead for inventory postings. (System Configuration, Configure Stations, Accounting tab)

It is extremely important to properly configure a departmentalized accounting system in order for the cost of inventory to remain accurate in both the POS module (Total combined cost of all inventory profiles) and the Accounting (GL) module. Consult an accounting professional for further information pertaining to departmentalized accounting.