The chart of accounts: the standard chart, and when to add an account

What is a chart of accounts?

A chart of accounts is the dictionary of the books. Every account has a number, a name and a type: income statement (income or cost) or balance sheet (asset, equity or liability). When you book a purchase, you choose the account that describes what you bought, and the accounts add up to the statements. The more consistently they are used, the more the reports tell you.

The numbering has a purpose: accounts with the same first digit belong together, so a report can gather them without knowing each one, and you find an account by remembering where it sits. The law does not prescribe your own chart. If you file the annual report with an accounts file in Regnskab Basis, your accounts are translated to the Danish Business Authority's standard chart, and that translation sits on every account as a standard account number.

The standard chart of accounts

Venetis standard chart follows the layout Danish bookkeepers are used to. Account numbers have five digits, and the first says where the account belongs:

Some accounts are system accounts the application books to itself: the bank accounts receive the bank lines, Debtors the customer invoices, Creditors the supplier invoices, and the VAT accounts the VAT the codes calculate. They must exist and keep their roles, which is why they can be neither deleted nor renamed.

VAT codes on accounts

Every account in Venetis standard chart carries the VAT codes that can be right on it, the most likely first, and guidance on when each applies. The account for IT software subscriptions says, for example, that a Danish subscription is K25, one from an EU supplier KY25-EU under reverse charge, and one from the USA KY25-UEU. The account for insurance says "Ingen", because insurance carries no VAT.

That is the guidance Veneti reads when it suggests the VAT code on a bank line or a supplier invoice; choose another account and the suggestion follows that account's guidance. So the right account is also the right VAT, and an account you create yourself in the chart has no guidance, so the VAT suggestion skips it; create it through Luca and it inherits the guidance from the closest comparable account. How VAT is gathered into the return is in The VAT return and under VAT.

When to add an account

Add an account when an amount must be readable on its own in the reports, and not before. Too many accounts give a long report where every figure is small and nobody looks; too few hide what you would have liked to know. Good reasons for a new account:

• A new line of business whose revenue should be followed on its own: another product, another customer group.
• A cost you want to budget and follow up on: a particular supplier, a particular kind of expense.
• A different VAT treatment from the one the account has today: sales to EU customers without VAT on their own account, so box B reconciles line by line.
• A new asset or a new liability that belongs in the balance sheet: a loan, a deposit, a new bank account.

A bad reason is "an amount does not quite fit": use the closest account and explain in the description. And do not use Miscellaneous for everything; it is the account the auditor asks about first.

How Veneti sets it up

When you create the company, it is looked up in the CVR register, and Veneti proposes a chart by legal form and industry: a consulting ApS gets the standard chart, a holding company accounts for shareholdings and dividends, a sole proprietorship the owner's private drawings and contributions instead of share capital, and a software company or a hairdresser accounts that fit their sales. You can choose another, or start with a chart of your own and enter the accounts yourself, one at a time or from a file from your old application.

The chart is ready from the first sign-in, with VAT codes, VAT guidance and standard account numbers on every account. The accounts born with the company are Venetis standard setup: they can be deactivated but not edited or deleted, so what has to work keeps working. Accounts you create are yours to change freely. What an account is in daily use is in Bookkeeping for beginners, and how the standard account numbers are used, in The annual report for an ApS.

Add an account

1. 1

   Find the free number

   Open the chart of accounts and find the account's group. Choose a free number within it, so the account sorts in where it belongs.

2. 2

   Give it a name and a type

   The name should say what is booked on the account, not whom you bought from. Type and category decide where it stands in the income statement or balance sheet.

3. 3

   Set the standard account number

   Choose the account in the Danish Business Authority's standard chart that yours corresponds to. Without it, the account's amount is left out of the annual report's file.

4. 4

   The VAT guidance

   The VAT guidance cannot be written in the chart of accounts: an account you create there has none, and the VAT suggestion skips it. If you create the account through Luca, it inherits the guidance from the closest comparable account.

5. 5

   Book to it

   The account can be used at once in the journal. Book the first voucher and see the account appear in the income statement or balance sheet. If you do not have a company set up yet, Get started.

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