Account Category

ERPNext Accounting
1

@Aadhil_P_M first of all, thank you so much for adding this missing feature in COA.

Currently Account Category is not linked to Root Type thus its difficult to identify the root type of Account Category for financial data analysis.

I have below suggestions to make this feature more robust:

  1. Add Root Type in Account Category doctype
  2. Do not allow user to create/update Account Category by enabling User Cannot Create option in doctype properties.
  3. In Account doctype:
    • toggle this field based on is_group (no need to show this field if its a group account)
    • for ledger account, filter Account Category based on root_type for selection

See below mapping:

Root Type Account Category
Asset Cash and Cash Equivalents
Expense Cost of Goods Sold
Liability Current Tax Liabilities
Expense Finance Costs
Asset Intangible Assets
Income Investment Income
Liability Long-term Borrowings
Asset Long-term Investments
Liability Long-term Provisions
Expense Operating Expenses
Asset Other Current Assets
Liability Other Current Liabilities
Expense Other Direct Costs
Asset Other Non-current Assets
Liability Other Non-current Liabilities
Income Other Operating Income
Liability Other Payables
Asset Other Receivables
Equity Reserves and Surplus
Income Revenue from Operations
Equity Share Capital
Liability Short-term Borrowings
Asset Short-term Investments
Liability Short-term Provisions
Asset Stock Assets
Asset Tangible Assets
Expense Tax Expense
Liability Trade Payables
Asset Trade Receivables
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Proposal: Sub Root Type in Accounts for Improved Financial Data Classification and Grouping
2

Thanks for the suggestion. It’s implemented here:

credits: @Abdeali

3 Likes
3

@Abdeali thank you so much for this.
Highly appreciated.

I have one more suggesion to add a new doctype named as Sub Root Type (in read_only mode) and link it to both in COA and Account Category.
Introducing a Sub Root Type in the Chart of Accounts (COA) and Account Category will enhance the efficiency and accuracy of Financial Analysis..

I can develop and add this feature if everyone agrees.

Root Type Sub Root Type
Expense Indirect Expense
Expense Direct Expense
Income Indirect Income
Income Direct Income
Liability Other Liability
Liability Current Liability
Liability Long Term Liability
Asset Loan and Advance
Asset Other Asset
Asset Investment
Asset Current Asset
Asset Fixed Asset
Equity Shareholder Current Account
Equity Reserve and Surplus
Equity Share Capital
4

Account Category after adding Root Type and Sub Root Type

Root Type Sub Root Type Account Category
Asset Current Asset Cash and Cash Equivalents
Asset Current Asset Other Current Assets
Asset Current Asset Other Receivables
Asset Current Asset Short-term Investments
Asset Current Asset Stock Assets
Asset Current Asset Trade Receivables
Asset Loan and Advance Loan and Advance
Asset Fixed Asset Fixed Asset
Asset Investment Long-term Investments
Asset Other Asset Intangible Assets
Asset Other Asset Other Non-current Assets
Asset Other Asset Tangible Assets
Equity Reserve and Surplus Reserves and Surplus
Equity Share Capital Share Capital
Equity Shareholder Current Account Shareholder Current Account
Expense Direct Expense Cost of Goods Sold
Expense Direct Expense Operating Expenses
Expense Direct Expense Other Direct Costs
Expense Indirect Expense Finance Costs
Expense Indirect Expense Tax Expense
Income Direct Income Other Operating Income
Income Direct Income Revenue from Sales of Services
Income Direct Income Revenue from Sales of Goods
Income Direct Income Revenue from Operations
Income Indirect Income Investment Income
Liability Current Liability Current Tax Liabilities
Liability Current Liability Other Current Liabilities
Liability Current Liability Other Payables
Liability Current Liability Short-term Borrowings
Liability Current Liability Short-term Provisions
Liability Current Liability Trade Payables
Liability Other Asset Other Non-current Liabilities
Liability Other Liability Long-term Borrowings
Liability Other Liability Long-term Provisions

After this, one can easily do Ratio and Other Financial Analysis.

5

Currently subgroup type if added will just act as a additional data field, which is not used.
This can be easily achieved by adding a custom field (if required).

In addition, the existing patent account feels more like a root subtype as you suggest. Idea is to keep the account configuration simple to begin with. And so we are not prioritizing this right now.

6

Given the current COA configuration, how can current ratio or working capital be calculated, considering that neither Account Type nor Account Category includes classifications that support these calculations?

7

You can select more than one account category and use formulas.
eg: following is the screenshot from the template you can configure.

image
image900×866 62.4 KB

8

Thank you @Smit_Vora for the information.

Let me check if this helps me to achieve my objective of doing Financial Analysis using AI in simplest possible way by extracting data from ERPNext database and without much hard coding of ledger mapping.

9

This is what I am currently working upon.
output

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10

Hello @Smit_Vora,

I reviewed both Account Category and Financial Report Template, and observed that:

  • Since both are user-configurable, we cannot depend on user defined names or structures for consistent account classification and grouping.
  • There also appears to be no default Financial Report Template that can be reliably used as a standard input for processing data through the Financial Report Engine.

Given this, I would like your guidance on the following:

If we extract raw financial data from GL Entries (mapped with Accounts) and intend to leverage AI / BI tools for financial analysis, what should be the recommended or standardized approach to classify and group accounts into meaningful analytical buckets such as:

  • Direct Income
  • Direct Expense
  • Indirect Income
  • Indirect Expense
  • Current Assets
  • Current Liabilities
  • Long-term Loans
  • Equity
  • Reserves & Surplus

Is there an expected classification model we should follow to ensure consistent financial analytics ?

11

This model changes with country and regulations in country.
Hence it’s based on user inputs.

—

You could take following approaches for using AI for analysis:

  • Use AI to classify accounts - could be incorrect and may need customization
  • Allow user to change this classification - saved in settings from 1 above
  • Use existing financial reporting templates to get clues on 1 and improve accuracy there
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