COA - ERP Systems

ERP manages to achieve accounting requirements by having different segments and combining them into a COA Structure. The Chart of Accounts (COA) is an account structure composed of various dimensions capturing relevant information related to underlying transaction. This structure helps in capturing appropriate level of details while recording transactions which helps in deriving the financial account balances at the desired segment level.
A typical structure in ERP will have segments like below:

• Legal Entity – Capturing the Company Information
• Cost Center – Capturing Department or Cost Center Information
• Natural Account – Synonym with the tradition account and captures Asset, Liability, Income or Expense
• Sub – Account – Captures granular details of the Natural Account

ERP is the importance of the account type - while defining the Natural Account; the Natural Account value must have only one Account Type. The valid account types are primarily four – Asset, Liabilities, Income and Expense and some packages may include Share Holder Equity as another classification. Defining an account type as Income or Expense tells to the system that this is a revenue account and the opening balance of this account must be zero at the beginning of the financial year