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Wednesday, March 3, 2010

Basics of Chart Of Accounts (COA)

The Chart of Accounts (COA) is the account structure the organization uses to record transactions and maintain financial account balances. Defining a chart of accounts is getting the structure of the accounting flex field and setting up the related parameters

Most important point is to analyze the organizational structure as your accounting structure will mirror that for all accounting and reporting needs. The structure is comprised of multiple uniquely defined segments. Each segment contains a list of values, such as the list of Cost Centers or Natural Accounts.

When defining the Accounting Flex field (COA) segments, Oracle requires one segment be designated as the balancing segment and one segment be designated the account segment. Further Oracle allows cost center segment used for identifying funcitonal areas like finance,Marketing etc.
Balancing Segment: - Identifies an entity requiring a self-balancing trial balance, such as Company 
Account segment: - Identifies the segment used to produce the Financial Statements such as Cash, Accounts Payable, or Revenue 

There are several constraints that should be adhered to when defining the organization’s COA in Oracle 
• COA structure must contain at least 2 segments (Balancing and Natural Account) and no more than 30 segments 
• Total length of segment combinations cannot exceed 240 characters 
• Each Natural Account value must have only one Account Type (e.g. Expense, Asset, etc…)

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