why do we need to create a multiple accounts that represents one account at the end?!"chart of accounts"

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Omar2723
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Joined: 16 Apr 2022, 02:09

why do we need to create a multiple accounts that represents one account at the end?!"chart of accounts"

Post by Omar2723 »

hello ,,
I know it may seem a naïve question but I want to know why do we need to create a different accounts that represents on type of account in the Charts of accounts
for example if we have a bank account should we sub divide it into Bank account 1, bank account 2 ,,etc.
so basically we are doing this so we can track every single account on it's own right ?
can we just make one account and make the GL Have more information about the JV itself
for example we get paid I'm gonna dr. bank account and in some field I'm gonna declare it's for the bank account 1

SO basically in the GL it's gonna appear with the needed information and we can track every single account but using one account
of course I'm talking here from an accounting system that can generate reports and filtering every single account easily

my question is that acceptable ? or there is other reasons we divide the accounts into smaller accounts in the COA
thanks in advance
JRSB
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Re: why do we need to create a multiple accounts that represents one account at the end?!"chart of accounts"

Post by JRSB »

it could be pretty tricky to check bank reconciliations if all banks are combined into one account, and you might upset the auditor over controls... but there could be small companies with 2 accounts, 1 not very active, where they code everything to one bank account. I think in some countries like France the ledgers are specific on requirements so that might be different. in the UK you can do whatever you want so I think the question is just risk management in various regards. some clever accounting software automatically allocates banking transactions and reconciles, if that's an issue
Leo
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Re: why do we need to create a multiple accounts that represents one account at the end?!"chart of accounts"

Post by Leo »

Even in France, where the chart of accounts is regulated and pre-defined by the regulation, you can still create numerous sub-accounts under the main one.

I've never seen one company that put everything of the same nature in a single account.
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Marek Muc
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Re: why do we need to create a multiple accounts that represents one account at the end?!"chart of accounts"

Post by Marek Muc »

You can have one GL account representing all bank accounts provided that your accounting software enables to break it down into specific bank accounts.

I worked with a software that had this logic. There was only one GL account for bank accounts, only a few GL accounts for trade receivables etc. But there were additional 'modules' within the software that held all the details per bank account, per customer etc
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