Setting up accounting

Before TrakIT can keep a company’s books, the company needs a base currency, a chart of accounts, default accounts for automatic postings, payment methods linked to bank and cash accounts, and a financial year. This page lists the steps in the order that works best. Do them for each company that will keep its books in TrakIT.

Some steps are for system administrators only; the others need the permissions listed on the Accounting page.

1. Set the base currency

The books are kept in the company’s Default Currency. A system administrator sets it:

Select Admin > Masters > Companies, then the company.
Select the pencil icon (Modify Company).
Under Finance Settings, choose the Default Currency. It must be one of the company’s Available Currencies, if those are set.
Select Update.

Choose carefully: the default currency cannot be changed once the company has an open financial year, or once anything is posted in its books.

2. Initialize the chart of accounts

Select System > Chart of Accounts.
If you have access to more than one company, choose the company.
Select Initialize.

Initialize appears only while the company has no chart of accounts and once its default currency is set. TrakIT loads a standard chart for the company’s country if it has one, or a general one. It creates the account groups and a first level of accounts, coded 1xxx for assets, 2xxx for liabilities, 3xxx for equity, 4xxx for revenue and 5xxx for expenses. The accounts are shown in five tabs: Assets, Equity, Liabilities, Revenue and Expense.

The groups come only from this template: you cannot add groups later.

3. Add the accounts you post to

The accounts the template creates are parent accounts (shown with a folder icon): they organize the chart and show the total of the accounts under them, but nothing can be posted to them. Entries go to child accounts, which you add under them.

To add an account under a parent account:

On the Chart of Accounts page, select the parent account.
On the Sub-Accounts tab, select Add….
Choose the Account Type: Child for an account that takes postings, Parent for another level of grouping.
Enter the Account Code and Account Name.
For a child account, choose the Currency. Leave [Company Currency] unless the account is held in a foreign currency, for example a bank account in US dollars.
Select Add.

You can also select Add New on the Chart of Accounts page, and choose the Group and Parent there. A child account always needs a parent account.

Codes may contain letters, digits and . - / _. TrakIT removes spaces and stores them in capitals. A code can be used only once in the company for the same currency.

After you create an account, its type, group, parent and currency cannot be changed, so check them before you save. An account with a balance cannot be made inactive, and an account that has been posted to cannot be deleted.

At a minimum, add these child accounts:

Account	Typically under	Needed for
Bank and cash accounts	Assets: bank accounts, petty cash	Receipts and payments.
Accounts receivable	Assets: accounts receivable	Invoices and receipts.
Accounts payable	Liabilities: accounts payable	Bills and payments.
Revenue	Revenue	Invoices.
Expenses	Expense	Bills.
Retained earnings	Equity: retained earnings	Closing a financial year. See step 4.
Sales tax	Liabilities	Invoices with tax.
Purchase tax	Assets	Bills with tax, if you recover the tax.
Withheld tax	Assets	Invoices on which the customer withholds tax.
Withholding tax payable	Liabilities	Bills on which you withhold tax from the supplier.
Discounts and allowances	Revenue	Invoices with adjustments.
Exchange gains and losses	Expense	Receipts and payments in other currencies, and FX revaluation.

4. Mark the retained earnings account

Closing a financial year moves its profit or loss to the account whose Special Code is RE.

On the Chart of Accounts page, select the retained earnings account.
Select the pencil icon (Modify).
In Special Code, enter RE.
Select Update.

The account must be an active child account in an Equity group, in the company currency. Only one account of the company can have the code. RE is the only special code.

5. Choose the default accounts

The default accounts tell TrakIT where automatic postings go. They are in the Auto-Posting Default Accounts panel at the top of the Chart of Accounts page, shown to users who can update the chart once it is initialized.

Choose an account in each box you need.
Select Save Defaults.

Each box offers only active child accounts of the company, in the company currency, from one category:

Default	Offers	Used for	Needed
Default AR Account	Assets	Debited when an invoice posts, credited when a receipt posts.	Always, for invoices and receipts.
Default Income Account	Revenue	Credited for invoice lines whose account master has no ledger account of its own.	When such lines exist.
Default AP Account	Liabilities	Credited when a bill posts, debited when a payment posts.	Always, for bills and payments.
Default Expense Account	Expense	Debited for bill lines whose account master has no ledger account of its own; credited by bill adjustments.	Always, for bills.
Sales Tax Account	Liabilities	Credited with the tax on invoices.	For invoices with tax.
Purchase Tax Account	Assets	Debited with the tax on bills.	Optional. Without it, the tax on each bill line goes to that line’s expense account.
Withheld Tax Account	Assets	Debited with tax that customers withhold from an invoice.	For invoices with a tax deduction.
Withholding Tax Payable	Liabilities	Credited with tax you withhold from a supplier on a bill.	For bills with a tax deduction.
Discounts & Allowances	Revenue	Debited with the adjustments on invoices.	For invoices with adjustments.
FX Gain/Loss Account	Expense	Takes realized and unrealized exchange differences.	For receipts and payments in other currencies, and for FX revaluation.

When a document needs a default that is not set, it cannot be finalized: the message names the missing account. See Automatic posting.

6. Link account masters to ledger accounts (optional)

Each line of an invoice, bill or internal posting uses an account master, such as a freight or handling charge. You can send each account master to its own ledger account, for example to keep freight revenue and storage revenue apart. Lines whose account master has none go to the Default Income Account or Default Expense Account.

Select Admin > Masters > Finance Masters, then the Account Masters tab.
Choose the company, then select the account master.
In Select Action, choose Modify Account.
In COA Account, choose the ledger account, or – Not Mapped (use default) –.
Select Save.

This needs the Update permission on Finance Masters.

7. Link payment methods to bank and cash accounts

A receipt or payment posts to the bank or cash account of its payment method. A system administrator links them:

Select Admin > Masters > Finance Masters, then the Payment Methods tab.
Select Add, or the pencil icon of an existing method.
Enter the Payment Mode Name and choose the Company.
In COA Account, choose the bank or cash account. The list shows the company’s asset accounts, including accounts in a foreign currency.
Select Save.

A method for [Global] cannot have an account, so receipts and payments of a company that keeps its books in TrakIT need methods set up for that company. A method whose account is in a foreign currency can only be used for receipts and payments in that currency.

8. Create the first financial year

On the Financial Years tab of Finance Masters, create the company’s first financial year. Its start date matters: the opening balances are posted on that date, and nothing dated before it can reach the books. A year cannot be changed or deleted once created. See Financial years.

9. Load exchange rates

If the company works in more than one currency, make sure the exchange rates between its base currency and each other currency are there, and keep them up to date. Receipts, payments, internal postings and revaluations in another currency do not post without a rate. See Multi-currency accounting.

10. Enter the opening balances

If the company is moving from another accounting system, enter the balances its accounts had at the start of the first financial year on the Opening balances page: select Opening Balances at the top of the Chart of Accounts page.

11. Switch the finance system to TrakIT

A system administrator does this last:

Select Admin > Masters > Companies, then the company.
Select the Finance System tab.
Under Select finance system to use, select the TrakIT logo.

From then on, as long as the company has a chart of accounts, finalizing an invoice, bill, receipt or payment and approving an internal posting post to the books. If something the posting needs is missing, such as a default account or an open financial year, the document cannot be finalized or approved until it is fixed. That is why this step comes last.

Documents finalized or approved before the switch are not posted by the switch. Under Synchronisation Settings on the same tab, a system administrator can turn on Invoices and Bills. TrakIT then looks every 5 minutes for finalized invoices, credit notes and bills that it has not synchronized yet, older ones included, and posts them. A document it cannot post, for example because no open financial year covers its date, gets the error message as its sync reference instead. Receipts, payments and internal postings are posted only when they are finalized or approved.

12. Check the books

Open the Trial Balance as of the first day of the financial year. It should show the opening balances and no difference between debits and credits: it should match the closing trial balance of your old system.