Account Hierarchy

Account Hierarchy

Account Hierarchy in EquiBillBook allows you to organize accounts in a structured, multi-level format. This hierarchical structure helps you maintain a logical organization of accounts, generate summary reports at different levels, and manage complex account structures efficiently. This guide explains how to understand and work with account hierarchy.

What is Account Hierarchy?

Account Hierarchy is a parent-child relationship structure that organizes accounts in levels:

• Account Types: Top level (Assets, Liabilities, Income, Expenses, Equity)
• Account Sub-types: Second level (Current Assets, Fixed Assets, etc.)
• Account Groups: Third level (optional grouping within sub-types)
• Individual Accounts: Final level (actual accounts for transactions)

Why is Account Hierarchy Important?

Account hierarchy provides several benefits:

• Organization: Groups related accounts together logically
• Reporting: Generates summary reports at different hierarchy levels
• Navigation: Makes it easier to find and manage accounts
• Structure: Maintains consistent financial structure
• Analysis: Enables analysis at group, sub-type, or type level
• Scalability: Supports complex account structures for large businesses

Understanding Hierarchy Levels

Level 1: Account Types

The top level of hierarchy consists of five main account types:

• Assets: What your business owns
• Liabilities: What your business owes
• Income: Revenue and income sources
• Expenses: Costs and expenses
• Equity: Owner's investment and retained earnings

Level 2: Account Sub-types

Each account type is divided into sub-types:

• Assets: Current Assets, Fixed Assets, Other Assets
• Liabilities: Current Liabilities, Long-term Liabilities
• Income: Sales Revenue, Other Income
• Expenses: Cost of Goods Sold, Operating Expenses, Other Expenses
• Equity: Capital, Retained Earnings

Level 3: Account Groups (Optional)

Sub-types can be further organized into groups:

• Group related accounts together
• Create custom groupings based on your business needs
• Examples: Cash Accounts, Bank Accounts, Receivables, Payables

Level 4: Individual Accounts

The final level contains actual accounts:

• Accounts used for recording transactions
• Each account belongs to a specific sub-type
• Can be linked to parent groups if using groups

Viewing Account Hierarchy

To view account hierarchy:

1. Navigate to Accounts → Chart of Accounts
2. Select hierarchy view or tree view
3. Expand levels to see sub-types and accounts
4. Use hierarchy navigation to browse accounts

Creating Account Hierarchy

1. Start with Account Types

Account types are typically predefined, but you can customize:

• Account types are created first
• These form the foundation of your hierarchy
• Ensure all five main types are set up

2. Create Account Sub-types

Under each account type, create relevant sub-types:

• Go to Chart of Accounts → Account Sub-types
• Select the parent account type
• Create sub-types relevant to your business
• Examples: Under Assets, create "Current Assets" and "Fixed Assets"

3. Create Individual Accounts

Create accounts under appropriate sub-types:

• When creating an account, select the sub-type
• Account automatically inherits hierarchy from sub-type
• Maintains proper organization

Hierarchy Navigation

Navigate the hierarchy using:

• Tree View: Expand/collapse hierarchy levels
• Breadcrumbs: See current location in hierarchy
• Filters: Filter by account type or sub-type
• Search: Search accounts within hierarchy

Using Hierarchy in Reports

Reports can utilize hierarchy:

• Summary Reports: Show totals at each hierarchy level
• Roll-up Totals: Aggregate accounts by sub-type or type
• Group Reports: Generate reports for specific hierarchy groups
• Hierarchical Display: Show accounts in hierarchy format

Best Practices for Account Hierarchy

1. Plan Your Structure

• Plan hierarchy before creating accounts
• Consider your business structure and needs
• Keep hierarchy logical and intuitive

2. Maintain Consistency

• Use consistent naming conventions
• Follow standard accounting practices
• Keep similar accounts at same hierarchy level

3. Keep It Manageable

• Avoid too many hierarchy levels (3-4 levels recommended)
• Don't create unnecessary sub-types
• Balance detail with simplicity

4. Review Regularly

• Periodically review hierarchy structure
• Adjust as business needs change
• Ensure hierarchy supports reporting needs

Modifying Hierarchy

You can modify hierarchy by:

• Moving Accounts: Change account's sub-type assignment
• Reorganizing: Restructure sub-types as needed
• Adding Levels: Create new sub-types when needed
• Consolidating: Merge similar sub-types if appropriate

Hierarchy and Account Codes

Account codes can reflect hierarchy:

• Use code ranges for different hierarchy levels
• Example: Assets (1000-1999), Liabilities (2000-2999)
• Sub-types can have code ranges within type ranges
• Makes hierarchy visible in account codes

Related Features

Account hierarchy integrates with:

• Account Codes - Codes can reflect hierarchy
• Financial Reports - Reports use hierarchy for grouping
• Account Types - Types define top level
• Account Sub-types - Sub-types define second level

Need Help?

If you need assistance with account hierarchy:

• Review the Chart of Accounts guide
• Check Account Types and Sub-types guides
• Consult accounting best practices
• Contact support for help with complex structures

Account hierarchy is essential for maintaining an organized and scalable Chart of Accounts. A well-planned hierarchy supports efficient account management and comprehensive financial reporting!