Chart of Accounts

The chart of accounts is a listing of all the general ledger accounts defined in your system, along with their account numbers. The accounts are generally listed in the following order:

• Assets
• • Asset accounts represent things of value that belong to an organization, or amounts that an organization is owed.
  • Types of assets include:
  • • Current Assets- Accounts you can reasonably expect to convert to cash, sell, or consume in the near future through the normal business operations. These include cash, currency or coins, accounts receivable, and notes receivable.
    • Fixed Assets- Tangible, long-lived (more than one year), fixed (in size, shape, or form), or permanent assets used in the operations of the business. These include buildings.
    • Other Assets- This category includes all assets not classified in other categories. It can include investments (stocks, bonds, funds, etc.) and intangibles (patents, copyrights, trademarks, goodwill, etc.).
  • Common Asset accounts include:
  • • Account Current- Agency-billed items due to the insurance company in a particular accounting month.
    • Accounts Receivable- Amount owed to the agency for policy-related and non-policy-related services.
    • Cash on Account- Cash that is currently available for use by the organization.
    • Any savings or checking accounts held by the organization.
  • Asset accounts are at the agency level only.
• Liabilities
• • Liability accounts represent amounts owed by an organization.
  • Types of liabilities include:
  • • Current liabilities- Liabilities owed to others that you must pay within the current fiscal period (the same period used for current assets), e.g., payable payroll taxes.
    • Long-Term Liabilities- Includes all liabilities not due in the current period, e.g., long-term debt.
  • Common liability accounts include:
  • • Company Payables- All agency-billed items currently due to an insurance company.
    • Broker Commission Payables and Producer Payables- All commissions due to brokers/producers (a subaccount may also be generated for each commissionable broker/producer entered in the system).
    • Taxes collected by the organization that must be paid to the government.
  • Liability accounts are at the agency level only.
• Equity
• • Equity accounts represent the residual value of an organization after total liabilities are deducted from total assets. Equity is also referred to as Owner's Equity, because it represents the owner's share of an organization's assets.
  • Equity accounts are at the agency level only.
• Income
• • Income accounts represent the money coming into an organization.
  • Common Income accounts include Agency Bill Income and Direct Bill Income. Income subaccounts may be generated based on your income posting breakdown selection.
• Expenses
• • Expense accounts represent the money paid by an organization.
  • Common Expense accounts include:
  • • Producer Expense- Money paid to producers for earned commission. Subaccounts may be generated for all commissionable producers entered in the system.
    • Broker Commission Expense- Money paid to brokers for earned commission. Subaccounts may be generated for all commissionable brokers entered in the system.
    • Other non-policy-related expenses such as Rent, Utilities, Advertising, Education, and Employee Salaries.

Asset, Liability, and Equity accounts are Balance Sheet Accounts and are included, grouped together and subtotaled, on the Balance Sheet. The total assets minus the total liabilities yield the total equity, i.e., the total worth of the organization at the time the report is run.

Income and Expense accounts are Income Statement Accounts and are included, grouped together and subtotaled, on the Income Statement.

For a list of required accounts in the Epic Chart of Accounts, along with their types and purposes, see the Required Accounts Configuration topic in the Epic help file.

Double-Entry Accounting

For every entry made in the general ledger, there must be an offsetting/balancing entry. To be more specific, every debit entry made must be balanced by credits, and vice versa.

In general, debits represent positive amounts and credits represent negative amounts. But whether a debit or credit increases or decreases an account’s balance depends on the type of account:

• Asset and Expense accounts normally have Debit balances. This means that debiting these accounts would increase their balances (and, therefore, crediting would decrease them).
• Liability, Equity, and Income accounts normally have Credit balances. This means that crediting these accounts would increase their balances (and, therefore, debiting would decrease them).

If it helps you remember, think of the Chart of Accounts as a "credit sandwich on debit bread." The Assets and Expense accounts, which carry debit balances, are the "bread," while the other accounts "sandwiched" between them carry credit balances.