COA Desing - Considertions & Factors

Design of COAstructure is a critical process for two reasons. First, it affects all the departments within the organization & second, it's configuration which cannot be revisited on a later date. Following are some important factors which should be considered  :-

Legal Entities - When a business group is operating though more than one legal entity, it requires having at-least one trial balance per legal entity.

· Budgeting - The level of budgeting done in an organization provides a guideline to prepare the company, cost centre & natural account segments.

· Company Locations - In cases where the organizations operate from more than one location say through sales offices, factories, subsidiaries etc, it may be helpful to record the location where a particular financial transaction occurred.

· Supplier/Customer Locations - Organizations which need to analyze the financial information based on the supplier’s or customer’s location may require a location segment dedicated to this.

· SBU - Sub Business Unit or Operating Unit or Line of Business has been introduced more & more in modern chart of accounts consequent to diversification of services & globalization of operations.

· Departments / Cost Centre - Almost all charts of accounts have a segment for cost centre.

· Products - Some organizations deal in products which are low in volume but high in value. Mostly these organizations would like to analyze their costs & revenue for individual products.

· Projects - Certain organizations have their business models build around project activities.

· Modules - Number of modules to cater to individual needs of various organizations & functions within.

· Reports - The reports required by an organization can broadly be divided into two parts. Firstly, the reports that are mandated by law & secondly, the reports required by management for analysis & decision making. .

· Intercompany - In cases where the organization operates through more than one company/division, there are intercompany transactions generated in the course of business.