Chart of Accounts Setup

You can define all your charts of accounts ledgers using the general ledger (GL) tab in LawAccounting.

1. Navigate to Accounting Home and click the General Ledger under the Accounting setup Menu. 
2. This should bring you to the list view of all the General Ledgers defined in the system, Picture 1 
3. Click New to create a new General Ledger, Picture 2

Picture 1 ( List view of all the defined general ledgers in the system)

Picture 2 (Defining a new General ledger)

Ledger Name: This is the name of your General Ledger (Chart of Accounts name). Law Accounting recommends using a number and text for the name as it helps searching the GL on accounting screens very easily.

Example: The Amex Account. “1000.c1 – AMEX For Filing Fees” You can use 1000 to search this GL in every accounting screen where GL is getting used. When naming GL accounts it is typical to follow the number ordering below.

• 1— Assets will typically begin with “1” and are ordered by liquidity. The less liquid the asset the higher the GL account number. Below is a typical order of liquidity for assets with some example GL accounts:
  • Cash (Example: 1000-Amex Bank)
  • Accounts Receivable (Example: 1200-Accounts Receivable)
  • Prepayments (Example: 1400-Prepaid Expenses)
  • Deposits (Example: 1450-Deposits)
  • Inventory (Example: 1500-Inventory)
  • Fixed Assets (Example: 1600-Fixed Assets)
  • Intangible Assets (Example: 1800-Goodwill)

• 2— Liability accounts begin with “2” and are also ordered by liquidity. The less liquid the liability the higher the GL account number. Most customers set up credit cards and lines of credit as “Bank” GL accounts. Below is a typical order of liquidity for liabilities with some example GL accounts.
  • Accounts Payable (Example: 2000-Accounts Payable)
  • Credit Cards (Example: 2010-Chase Credit Card 9176)
  • Lines of Credit (Example: 2020-BOA Line of Credit)
  • Accrued Expenses (Example: 2100-Accrued Expenses)
  • Notes Payable (Example: 2600-Bank Note Payable)
  • Long Term Debt (Example: 2700-Long Term Debt)

3— Equity accounts typically begin with “3”. It is common to just have a few equity accounts as detailed below:

• Contributed Capital (Example: 3020-Owners Contributions), Owner contributions/distributions.
• Current Year Earnings (Example: 3050-Current Year Earnings)
• Retained Earnings (Example: 3060-Retained Earnings) 

4— Revenue accounts typically begin with “4”. (Example: 4000-Product Revenue)
5— Cost of Goods Sold typically begin with “5”. (Example: 5000-Direct Labor)
6, 7, 8— Labor, Sales, Facilities and Marketing often begin with these numbers. This does vary quite a bit by industry. It is best to group all of one category of accounts together.
9— Other income and expenses often begin with “9.”

• Ledger Type: Type has three values and LawAccounting does not recommend you customize these entries.
  • Balance Sheet
  • Revenue
  • Expense

• Sub Type 1: is the next sequential grouping layer. Sub Type 1 for Balance Sheet Type GL Accounts is fixed. The values are Assets, Liabilities, and Owners Equity. Sub Type 1 for Revenue and Expense GL Accounts are completely customizable with your own values.
• Sub Type 2: is the next sequential grouping layer and is completely customizable for all GL Accounts regardless of Type
• Bank/ Credit Card Account: Check this option if the General Ledger you are defining is for the Bank account of Credit Card account. Any GL marked as Bank or Credit card can be used in the Cash Receipts, Cash Disbursements, Journal entries, Bank Reconciliations, Bank Deposits.
• Trust Bank Account: Check this option for any Bank account which is used as Trust Bank, LawAccounting use this checkbox to treat any transactions made against this bank as Trust transactions.
• Parent General Ledger: Use this field to create a Parent of any General Ledger. This is General Ledger lookup, that means the Parent General Ledger should be defined in the system before you create a child General Leger. All the financial reports are going to automatically group on the Parent General Ledger. If you are doing any transactions against Parent General Ledger, it is going to add up with the group total of the child ledgers under this. Example of Parent Ledger can be
  • 6000-Office expense (Parent General Ledger)
    • 6001- electricity 
    • 6002- Rent
    • 6003- coffe

Having transactions against any of child transactions will be grouped on the
6000-office expense if that is defined as a Parent General Ledger

Taxable: Check this field to mark any General Ledger as Taxable. If this checkbox is checked, System calculates the defined tax against that line item, leaving it blank will skip calculating tax against this line item.

Cash Flow Type: This is a system field used to group the cash flow categories by GLs.

Active: By default, this checkbox is checked. Uncheck this checkbox if you do not want this GL to be used in the transactions. Please keep in mind, unchecking this checkbox in the middle of the year when you have that year transactions against that GL is not allowed and the system throws the error.