In this brief article we will examine the Multidimensional Chart of Accounts. Don’t forget to download the Free Top 10 Tips for Organizing your Chart of Accounts Document at the end of this article.
Over the years we have seen a lot of Chart-Of-Accounts (COA), and some are set up much better than others. There can be various reasons for this such as change in organizational focus, the length of time the system has been used, staff turnover, and a poor design.
The intent of this article and the accompanying “Top 10 Guide” is to provide some tips based on our observations over the years related to the design that can hopefully save you time and help you get the most out of your financial reports and analysis.
COA Definition & Meaning
A multidimensional Chart-Of-Accounts (COA) is an account numbering system that has multiple segments (aka dimensions) and is typically used by a larger organization. These organizations are more complex (for example they have multiple physical locations or product lines) and need to track their Assets, Liabilities, Equity, Revenue, and Expense transactions from more than one perspective or identifier within the General Ledger. They are also, of course, running an ERP that supports this enhanced structure such as Microsoft Dynamics, Epicor, or SAGE.
A typical example is an organization, such as a restaurant chain, that has many locations. They cannot track revenue and expenses at just the account level but need to identify each transaction on a location by location basis so they can produce and analyze financial reports per location. This will enable management to know which location is the most profitable, the most expensive, has the best margins, where physical assets are located, and so on.
This basic example would require each transaction to be coded so that it identified two things: the main account (aka core, primary, object) segment and also the location number. In figure #1 below there are three segments because this organization also wants to track things on a departmental basis. This figure shows the “Full Account” (segment combinations that are used), the individual segment values and descriptions, and lastly the definition.
For additional Information Download the Free 10 Tips for creating and organizing your Chart of Accounts (COA) .