GL: Chart of Account Concepts

Chart of Account (COA) is one of the building block of Ledger. It is an important as well as a
mandatory step to setup a ledger. It is important because the structure of COA determines
thelevel or depth of financial reporting. The more detailed the structure is the more reporting
detail it has, but than more account codes and long data entry by the end user.
A simple example of a COA structure is
Company-Branch-Department-Product-Account
A mandatory structure of COA in GL is
Company-Department-Account
COA determines the particulars of any accounting transaction. If you take the first example
(simple COA) of structure, it tells which company, from which location did the transaction took
place, which department was involved in the transaction, against which product did the
transaction took place, what was the nature of the transaction (Purchase, Sales or Expenditure
etc.). COA structure is made up of different Segments.
Segment is the building block of a COA. There can be 30 segments in a single COA structure but
all in all Oracle supports a total length of 240 Characters.
In terms of Oracle Apps, COA is a key flexfield namely Accounting Flexfield. There is more on
Flexfield here
Lets take an example of a hardware vendor having branches in major cities of Pakistan. The sales
department of this vendor sells some p4 Desktops which in Karachi to a bank. How will it note
this transaction in Oracle GL?
XYZ Karachi Sales P4 Desktop Accounts Receivables
The above combination of different segment is called a Account Code Combination. At the
back-end or at database level each code combination has an ID referred as CCID.
There can be multiple COA structure defined in an instance. But only One structure can be
attached to a Ledger. Each COA structure has to be Enabled, Freezed and Compiled. Other
options like Cross Validate Segment, Allow Dynamic Inserts and Freeze Rollup Group are
not mandatory but useful in some scenarios.
I have explained some of these option in the following blog entry.
GL:Allow Dynamic Inserts
GL:Cross Validate Segment
Thats All :)