Personalize or Modify Your Account Charter

The chart of accounts is essentially the list of accounting accounts used to record transactions.

When you review your financial reports such as the balance sheet, income statement, and trial balance, you want to see the status of your income, expenses, etc.

The chart of accounts is the skeleton or foundation of your business. It is usually set up at the beginning and is rarely changed afterward. Your accountant is the best person to help you define your chart of accounts. Have it validated by the accountant who will close the year.

A number of accounts are included in your software. You may rename the code if it does not match your accounting system, or change the name to fit your situation, if the system allows it.

When a new GEM-CAR is created, we include a sample chart of accounts. You can modify it based on the list of accounts provided by your accountant. For example: you may want to clearly identify the bank with which your transactions are made — National Bank, Desjardins, etc.

To do so, go to the section Accounting > Chart of Accounts. As long as you have not made any transactions, you can export your chart of accounts in Excel, modify it or have your accountant modify it, and reimport it into GEM-CAR.

Let’s imagine your expenses: you want to know your expenses for phone, office, salaries, etc. Each of these expenses corresponds to an account in your chart of accounts. Here’s a practical example: to know how much your office supplies cost, you have the choice of accounts such as: purchase of pencils, purchase of erasers, purchase of paper clips, etc., or simply the account Office Supplies.

Brief definition of terms

ASSET
This is a property that has value at a given time. For example, your car, your bank account, your accounts receivable, your accounting software.
Standard: This account code should start with 1 and is normally DEBIT.

LIABILITY
This is what you owe. For example, a line of credit, a debt, etc.
Standard: This account code should start with 2 and is normally CREDIT.

EQUITY
Capital is what you are worth. For example, a profit, share capital, etc. If we sell all our assets and pay all our liabilities, capital is what remains.
You will therefore find the following equation: ASSET = LIABILITY + EQUITY
Standard: This account code should start with 3 and is normally CREDIT.

INCOME
Includes all various sales items.
Standard: This account code should start with 4 and is normally CREDIT.

EXPENSES
Expenses hardly need explanation; they are the most frequent aspect of a business.
Standard: This account code should start with 5 and is normally DEBIT.
Every account in your chart is either credit or debit. It is simply an accounting convention. You should not try to find a logical explanation if you’re not familiar with this convention.

COST OF GOODS SOLD (COGS)
If the expense account you create is directly related to the cost of your goods sold, select cost of goods sold as the account type.
This way, below the revenue line, you will see your cost of goods sold and the gross profit.

DEBIT
Asset and expense accounts are normally debits.

CREDIT
Liability, revenue, and capital accounts are normally credits.

SHORT TERM
Normally realizable within the following year (e.g., Bank Account)

LONG TERM
Normally realizable in more than one year (e.g., Furniture).
Always by convention, list short-term accounts before long-term ones.

BANK ACCOUNT
In the case where your account is a bank account from which you write cheques

TAXABLE
Check this if the account normally affects TVQ and TPS. (An additional field will appear. If the taxable percentage of this account is not 100%, please enter the percentage here. Taxes will then be applied according to the entered percentage.)

In summary:

• Check the “Taxable?” option so taxes are automatically applied on transactions made with this account,

• Use percentages to apply the correct allocation; e.g., entertainment expenses at 50%,

• Excluded from box 101 of the tax report.

For account types, here are your options.

Modify the account types via the left-hand menu under Accounting > Chart of Accounts.

To view the layout and utility of the account types, go to the menu Accounting > Reports > Balance Sheet > Send to view.

For each GL code, you can associate an Account type, which will be presented and detailed in the window below.

In the example, account 1201 is a Subgroup accounts, it is written with an indent. Account 1225 is a Subgroup total account, showing the sum of the subgroup accounts above it.

This type of account cannot be used in a transaction.

Subgroup Account
Account 1201 is a “Subgroup account”; it is written with an indented blue line.

It can be used in an accounting transaction.

Subgroup Total
Account 1225 is a “Subgroup total account”; it shows the sum of the subgroup accounts above it and displays the total.

This type of account cannot be used in a transaction.

Header Account
It serves as a title to group accounts and is displayed in bold. This type of account cannot be used in an accounting transaction.

The word Taxes to be paid, in bold, is a Group Header type account. This type of account cannot be used in a transaction. Accounts 2430 and 2470 are Group Accounts, meaning regular accounts, but since they follow a Group Header type account, they are shown indented. Finally, account 2499 is a Group Total account, displaying the group’s total. This type of account cannot be used in a transaction.

In your chart there is an account numbered 999999, which is an adjustment or temporary account. It is your choice to have such an account, but I suggest having one with an undefined purpose. When faced with a transaction and you don’t know which account to use, temporarily use this account while you consult your accountant to find out what should have been done. An adjustment account also serves as a temporary account during the initial import. We suggest using the “Ajustements” account.

Small note about profit accounts

• Retained Earnings
• Current Earnings
• Net Income

The one configured in GEM-CAR is the account that will be used to accumulate your operating profits — in short, the one that will accumulate your earnings.

We suggest using the Current Earnings account.

IMPORTANT: As soon as your chart of accounts is finalized (to your liking and your accountant’s), immediately define the main accounting accounts in the menu Accounting > Configurations > Configurations.
Same applies if you have activated modules like employee payroll or CCQ payroll.