What are ledger accounts, and what is their classification?
Kevin Pérez [Vauxoo]
18 August 2021
Administrative management must be accompanied by good accounting management, which must offer accurate data to carry out future strategies. To achieve a good accounting management it is necessary that the order of the data is correct, that is where the ledger accounts come in, since without them financial analysis could not be carried out.
What are ledger accounts?
Ledger accounts are a set of records that detail the movements or transactions that the company has made in a given time.
In other words, they are not more than simple accumulators of similar concepts, but they have great importance in generating other processes (balance sheet and income statement), therefore their correct registration is vital for the company.
Classifications of ledger accounts
These include assets, liabilities and equity. They are also known as "real accounts" or "permanent balance accounts " because they remain open for more than one fiscal period.
Those accounts that represent the income, costs and expenses that the company has as a result of economic activity in a certain fiscal period. They are also known as "cyclical accounts", since they do not chain your balance from one fiscal period to another.
Those accounts that record those transactions that do not affect the equity equation (Assets, Liabilities and Equity) or the operations of the company, but which are a responsibility and in the future can be presented as a contingency for the company.
Purpose of ledger accounts
The purpose of the ledger accounts are not an end, but a means to reach the financial or accounting statements of the company, hence the importance that the accounting record is correct and that there are no errors.
Having a correct record allows us to have control over the company's accounting information and how resources and assets will be distributed.
It can be seen as a map, since you will be able to better visualize the resources that you have available to use or those debts that you must solve to avoid any problem, it also helps you to analyze investment decisions if there is a possibility of making them.
Ledger accounts in Odoo
Odoo is one of the few ERPs whose accounting-financial part makes it almost impossible for an accountant to generate unbalanced records.
Your company will be able to compare one year against another to see if it was better than the previous one, Odoo allows you to enter the equity account code (where all income statements are summarized) and takes care of all the work of closing the cycle with just ask you for an income statement (A statement of income, expenses and costs).
With few parameters, Odoo can compare the same period prior to the current date, for example: If your company is closing March, you can request an accumulated income statement as of March of this period, you can also compare with 1, 2 or the previous fiscal periods that you require, Odoo will generate it automatically.
Another of the great virtues of Odoo is that it allows you to make a dashboard to your liking, and according to the needs of each user, where you can see the bank accounts, ledger accounts and the financial situation. Everything tailored to your company.
Reconciliations in Odoo can be configured to arrive as automated as the client requires, they are the least effort and human error possible in all ERPs.
With Odoo it is not necessary to load the chart of accounts to be able to carry all the departmentalization of expenses or costs.
The chart of accounts is kept as simple as possible and Odoo takes care of all departments, revenue centers or cost centers through an additional dimension to the chart of ledgers, which are the analytical accounts. Odoo, natively, issues income statements for one or more analytical accounts, or for the entire company.
Keeping the correct order of your accounts will allow you to understand the why of your company's finances and generate analyzes that contribute to decision-making. By using accounting software like Odoo you completely reduce errors in the area and guarantee reliability in your accounting management.
Use accounting software that allows you to streamline your processes and reduce errors, use Odoo Accounting.