Account format

Account format
See also
Subsidiary ledger Common-size financial statement Normal account balance Balance an account Subsidiary account Interim Statement Accounting reports Closing balance Cash and cash equivalents

Account format is the framework of each account in the company that is: the number of segments of each account number, its length and the length of each segment. The company may assign specific characters for a selected segment of the account number, for example: the last segment may be a characteristic of a specific department within the company. It is also possible to segregate the account segment to indicate the selected information (Renato Bellu 2008, s.44).

There are default settings that are imposed by Dynamics GP if the company is created using a standard chart of accounts. So that the account format is tolerated the length of the account number must consist of 3 segments with a total of 9 charakters: the first segment has 3 characters, the second - 4 and the third - 2. The selected acoount structure cannot be changed, but it is possible to make small changes to it, for example extend or shorten one or more segments in the account format (Renato Bellu 2008, s.44).

General ledger formats

A balance sheet is a document which informs about the company's assets and financial standing. It is at the same time the basic financial statement. Is a synthetic statement, in terms of value, of all the assets and liabilities of an enterprise in a specific form as at the balance sheet date. There are two main formats that can be used in this statement:

• T account format - this format shows a table consisting of two basic columns. On the left is the Debit (Dr) side, where you can present your assets and right side is the Credit (Cr) where are liabilities and owner's equity. Above the table there is the name of the account (Edward A. Clarke 2012, s.98).
• "Columnar format - this format is also known as the narrative format and lists the assets, liabilities and owners' equity vertically clown the page. Total liabilities are deducted from total assets to arrive at net assets which is then balanced, or agreed, with the owners' equity." (Valarie Wilson, Suellen Freeman, John Freeman 2015, s.65)

The balance sheet can be presented in account format or net asset format Account format generally shows assets and liabilities on separate pages each with their own total, while the net asset format shows them on the same page with a total of assets less current liabilities (Dr Peter S. Morrell 2013, s.35).

Examples of Account format

• A common account format consists of a two-segment account number. The first segment is typically a three-digit number that indicates the type of account, such as a current account, savings account, or loan account. The second segment is typically a six-digit number that is unique to the customer account. For example, a current account may have an account number of 123-123456.
• Another example of an account format is a four-segment account number. The first segment is typically a two-digit number that indicates the type of account. The second segment is a three-digit number that indicates the type of customer, such as an individual, business, or organization. The third segment is typically a six-digit number that is unique to the customer account. The fourth segment is typically a two-digit number that indicates the currency in which the account is held. For example, a business account in US dollars may have an account number of 10-001-123456-USD.
• A third example of an account format is a three-segment account number. The first segment is typically a three-digit number that indicates the type of account. The second segment is typically a six-digit number that is unique to the customer account. The third segment is typically a two-digit number that indicates the type of customer, such as an individual, business, or organization. For example, an individual account may have an account number of 123-123456-01.

Advantages of Account format

One of the main advantages of using an account format is its ability to provide consistent structure and organization to financial accounts. This allows for easier navigation, more efficient reporting and more accurate analysis of financial data. Here are some other advantages of using an account format:

• It provides a standardized way to organize and present financial data, making it easier to read and interpret.
• It can help to reduce errors in the recording and reporting of financial information.
• It can be used to group similar accounts together, making it easier to compare and analyze.
• It can be used to identify trends or patterns in financial data over time.
• It can help to ensure that financial data is presented in a consistent manner across an organization.
• It can be used to make sure that all financial information is accurately represented in financial statements.

Limitations of Account format

Account format is a crucial tool for business accounting, however it has a number of limitations. These include:

• Inflexibility: Account formats are inherently rigid, meaning that businesses must work within the predetermined framework given to them. This can limit the scope of the business’s accounting capabilities and restrict the possibilities of tracking more complex and varied financial information.
• Limitations on Data: Account formats can limit the types of data which can be incorporated into the company’s accounting system. This can be a problem if the business is attempting to track more complex or specific data points.
• Lack of Automation: Account formats can also limit the ability to automate processes, as they can be difficult to integrate with other systems. This can make manual data entry more labour intensive and time consuming.
• Difficulty in Updating: Changing an account format can also be difficult, as it requires more in-depth analysis and understanding of the company’s current accounting systems. This can be time consuming and costly.

Other approaches related to Account format

Introduction: Apart from the Account format, other approaches to financial data management exist.

• Activity-Based Accounting (ABC) is a way of accounting in which financial data is tracked on a per-activity basis. It is designed to provide an in-depth view of the cost of activities and the financial performance of various departments.
• Cost Accounting is a branch of accounting that focuses on tracking, accumulating and analyzing the costs associated with producing a product, delivering a service or running a business. It is a valuable tool for management decision-making.
• Performance Management is a system for assessing and tracking the performance of an organization or a specific project or task. It involves setting objectives, tracking progress and using the information to improve performance over time.
• Budgeting is a process of creating and managing budgets to ensure that costs are controlled and resources are used efficiently. It is a key tool for financial planning and management.

Summary: In addition to Account format, other approaches to financial data management exist, such as Activity-Based Accounting (ABC), Cost Accounting, Performance Management and Budgeting. These approaches provide valuable information for management decision-making and financial planning.

References

• Bellu R. (2008), Microsoft Dynamics GP For Dummies, John Wiley & Sons, Chichester,
• Clarke E. A. (2012), Accounting: An Introduction to Principles + Practice, Cengage Learning, South Melbourne,
• Kutz D. W. (2003), Policies and Procedures Manual for Accounting and Financial Control, Aspen Publishers, New York,
• Morrell P. S. (2013), Airline Finance, Ashgate Publishing, Surrey,
• Pendlebury M. Groves R. E. V. Groves R. (2004), Company Accounts: Analysis, Interpretation and Understanding, Cengage Learning EMEA, Andover,
• Wilson V. Freeman S. Freeman J. (2015), Accounting: A Practical Approach, Pearson Higher Education, London.

Author: Anita Byś