In my experience; I find it very common amongst bookkeepers that they do not use the general ledger accounting system’s numbering method to great extent. This, I think, is because in the olden days before computerisation the “books” were written up manually and the lesser quantity of GL accounts were preferred. This practice has been inherited and comtinued by modern day bookkeepers who probably don’t even know where the outdated terms books, bookkeeping and bookkeepers come from! So the new bookkeepers carry on the old way and the computerised accounting system is not providing management with important basic information which would help them greatly in daily decision-making. Glancing at the Income Statement and Balance Sheet which is automatically produced by the accounting system can provide this additional basic information if GL accounts are expanded to include more accounts and sub-accounts. Typically an accounting system (like Pastel Xpress) has 9999 accounts and 999 sub-accounts. The scope for adding basic information by using as many accounts and sub-accounts as is practically informative is enormous. The need to analyse a GL account would not arise unless it is something not usually required. I still sometimes see a General Expenses or Sundry Income account in a client’s accounting system which is simply absurd as you would have to manually analyse the account to know what the balance comprises of.
An example of further expense account analysis is motor vehicle expenses – instead of one account being kept for all vehicles and types of motor vehicle expense, an account is kept for each vehicle and sub-accounts are kept for each type of expense eg. Fuel, repairs and maintenance, insurance, licence, finance costs etc.
An example of further income account analysis is obviously sales – instead of one account for sales, additional accounts could be used for geographical area and sub-accounts for type of sale eg. Products, spares, servicing etc. or visa versa depending on which prime analysis is best needed.
Asset and liability accounts (excluding trade debtors and creditors ledgers which are part of the accounting system by default) should also be further analysed by using sub-accounts for sundry debtors and sundry creditors for instance.
Computerised accounting systems allow certain basic manipulations like viewing reports with or without sub-accounts, so if full detail is required then viewing with sub-accounts is selected and visa versa for the summarised view.
Planning and using your general ledger account numbering in an extensive way will greatly increase basic information available at a glance and would be using the accounting system at your disposal more fully.