Chart of Accounts

Introduction

The Chart of Accounts (CoA) is a list of accounts in the general ledger, systematically classified by title and number. The account number is referred to as the GL code. The appropriate financial transactions are posted against these GL codes. Mifos provides a default CoA.  From Mifos 1.1 onwards, the CoA configuration is in XML.  This section in Configuring Mifos describes how to customize your own CoA.

See also: Microfinance Accounting Issues

All offices under the HO use the same CoA. The list of accounts is organized into the following general ledger categories:

  • Assets
  • Liabilities
  • Income
  • Expenditure

The Mifos CoA supports up to four levels of categories.

  • The first level is called a category, and consists of ASSETS, LIABILITIES, INCOME and EXPENDITURE. These categories cannot be removed or modified and new categories cannot be added.
  • Categories are followed by up to three levels of sub-categories. MFIs can rename the description of default subcategories.
  • Sub-categories can be added to the CoA within the approved structure, as defined in this specification. The updates, if any, will be reflected in the respective acceptable GL Codes list for the different entities.  For example, if a GL code for interest has been added in CoA, then when creating a loan product, the drop down box for the Interest GL code is populated with options from the CoA.

Default Chart of Accounts

Mifos supports and ships with the following CoA in the configuration file.

Please review the following information very carefully:

  • Required general ledger accounts are in BOLD. Required means Mifos depends on their existence: GL code, name, and location must be exactly as shown below.
  • Names and GL codes cannot be changed for required GL accounts.
  • Subcategories may be added underneath any GL account. Follow this procedure to do so. Once a GL account is added and Mifos is started, only the name may be changed.
  • GL codes and names may be alphanumeric. Only numeric GL codes have been tested, however, so experiment at your own risk.
  • You may remove any subcategory, but financial action mappings must exist as specified here.
  • You may change the name of any general ledger subcategory, but we recommend following standard accounting practices.

 

10000 -- ASSETS
    11000 -- Cash and bank balances
        11100 -- Petty Cash Accounts
            11101 -- Cash 1
            11102 -- Cash 2
        11200 -- Bank Balances
            11201 -- Bank Account 1
            11202 -- Bank Account 2
    13000 -- Loan Portfolio
        13100 -- Loans and Advances

            13101 -- Loans to clients
            13102 -- Emergency Loans
            13103 -- Special Loans
        13200 -- Loan Loss Provisions
            13201 -- Write-offs
20000 -- LIABILITIES
    22000 -- Interest Payable
        22100 -- Interest payable on clients savings
            22101 -- Interest on mandatory savings
    23000 -- Clients Deposits
        23100 -- Clients Deposits
            23101 -- Savings product 1
            23102 -- Savings product 2
    24000 -- Mandatory Savings
        24100 -- Mandatory Savings
            24101 -- Mandatory Savings Accounts
30000 -- INCOME
    31000 -- Direct Income
        31100 -- Interest income from loans
            31101 -- Interest on loans
            31102 -- Penalty
        31300 -- Income from micro credit & lending activities
            31301 -- Fees
            31302 -- Processing Fees
            31303  -- Annual Subscription Fee
    31401 -- Income from 999 Account
40000 -- EXPENDITURE
    41000 -- Direct Expenditure
        41100 -- Cost of Funds
            41101 -- Interest on clients voluntary savings
            41102 -- Interest on clients mandatory savings

GL Code Changes

Users should not edit a GL code post-installation. The CoA is set once in Mifos, at implementation time. Thereafter, the existing GL Codes should not be edited/deleted. However, new GL Codes can be added under defined sub-categories.

Debit/Credit Financial Transactions

Mifos is required to make debit/credit entries, in a transactions table, when a transaction is made. The entries should be made against the lowest level GL Code under a category. For example, a fee transaction is:

  • Dr 31303 (loan fees)
  • Cr 11201 (bank account)

An example of complete financial transaction: If a loan payment of Rs. 1000 is received (by cash) for installment 3 on Jan 1st, 2006 and a user with username mariea records it in the system on Jan 3rd, 2006, Mifos will make the following entries in the transaction table:

 

Column Name Description
Date Date of transaction- 01/01/2006
Payment ID System generated payment ID
Payment Type Cash
Receipt/check number and date As specified by the user
Transaction ID System generated transaction ID
Related transaction ID - (relevant only for an adjustment)
Installment number 3 since the payment is made for installment 3
Type Payment recd
GL Code  
Debit -
Credit 1000
Balance Remaining loan balance (remaining principal + interest + fees ) to be paid
Date posted 01/03/2006
Posted by Mariea
Notes -

Posting Rules

The CoA is divided into four categories: ASSETS, LIABILITIES, INCOME and EXPENDITURE. The sign of the entry depends on whether it’s a Dr or a Cr AND under which category it is being recorded. The category is included in parenthesis for each accounting entry. While making the accounting/financial entries, the following rules should be used for the signs based on which category the entry falls under.

Assets and Expenditure

  • Dr- Increase
  • Cr- Decrease

Liabilities and Income

  • Dr- Decrease
  • Cr- Increase

Transaction Entries

Events that require a debit/credit entry are listed below.

Clients/Groups/Centers Transaction Entries

Fee is received from client/group/center:

  • DR Cash (Assets) 11201
  • CR Fees (Income) 31301 (exact GL Code to be picked from fee definition)

Misc fee is received from client/group/center:

  • DR Cash (Assets) 11201
  • CR Fees (Income) 31301

Misc penalty is received from client/group/center:

  • DR Cash (Assets) 11201
  • CR Penalty (Income) 31102

Adjustment in client/group/center accounts when the last received amount is nullified.The last payment has to be broken down in the components and separate DR/CR entries must be made for each one of them.

Fee /Misc fee nullified:

  • DR Fees (Income) 31301 (exact GL Code to be picked from fee definition)
  • CR Cash (Assets) 11201

Misc Penalty nullified:

  • DR Penalty (Income) 31102
  • CR Cash (Assets) 11201

Loan Account Transaction Entries

Loan is disbursed:

  • DR client’s loan (Assets) 13101 (exact GL Code to be picked from product definition)
  • CR Cash (Assets) 11201

Principal installment received:

  • DR Cash (Assets) 11201
  • CR client’s loan (Assets) 13101 (exact GL Code to be picked from product definition)

Interest installment received:

  • DR Cash (Assets) 11201
  • CR Interest on Loan (Income) 31101 (exact GL Code to be picked from product definition)

Fee charged is received:

  • DR Cash (Assets) 11201
  • CR Fees (Income) 31301 (exact GL Code to be picked from fee definition)

Penalty charged is received:

  • DR Cash (Assets) 11201
  • CR Penalty (Income) 31102

Misc fee charged is received:

  • DR Cash (Assets) 11201
  • CR Penalty (Income) 31102

Misc penalty charged is received:

  • DR Cash (Assets) 11201
  • CR Penalty (Income) 31102

Adjustment, where last payment is nullified. The last payment has to be broken down in the components and separate DR/CR entries must be made for each one of them.

Principal nullified:

  • DR client’s loan (Assets) 13101 (exact GL Code to be picked from product definition)
  • CR Cash (Assets) 11201

Interest nullified:

  • DR Interest on Loan (Income) 31101 (exact GL Code to be picked from product definition)
  • CR Cash (Assets) 11201

Fee nullified:

  • DR Fees (Income) 31301 (exact GL Code to be picked from fee definition)
  • CR Cash (Assets) 11201

Penalty nullified:

  • DR Penalty (Income) 31102
  • CR Cash (Assets) 11201

Loan account is moved to Closed- Written off state

  • DR Loan loss provision (13201) X Amount
  • CR Client’s Loan (13101 or 13102, etc) X Amount

Savings Account Transaction Entries

Deposit is made in voluntary/mandatory savings account:

  • DR Cash (Assets) 11201
  • CR Savings Accounts (Liabilities) 23101 (exact GL Code to be picked from product definition)

Withdrawal is made in voluntary/mandatory savings account:

  • DR Savings Accounts (Liabilities) 23101
  • CR Cash (Assets) 11201

Interest is posted to the account:

  • DR Interest Payable – Mandatory/Voluntary Savings (Expenditure) 41101/41102 (exact GL Code to be picked from product definition)
  • CR Mandatory Savings Accounts (Liabilities) 24101 (exact GL Code to be picked from product definition)

Adjustment- Voluntary/Mandatory: last deposit is nullified/decreased/increased. A reverse entry of the original transaction should be made. Also, a fresh entry with the new deposit amount should be made.

Adjustment- Voluntary/Mandatory: last withdrawal is nullified/decreased/increased. A reverse entry of the original transaction should be made. Also, a fresh entry with the new withdrawal amount should be made.

Adjustment: Account balance is reduced:

  • DR Mandatory Savings Accounts (Liabilities) 24101 (exact GL Code to be picked from product definition)
  • CR Cash (Assets) 11201

Adjustment: Account balance is increased:

  • DR Cash (Assets) 11201
  • CR Mandatory Savings Accounts (Liabilities) 24101 (exact GL Code to be picked from product definition)

Adjustment: Interest earned is reduced:

  • DR Mandatory Savings Accounts (Liabilities) 24101 (exact GL Code to be picked from product definition)
  • CR Interest Payable – Mandatory/Voluntary Savings (Expenditure) 41101/41102 (exact GL Code to be picked from product definition)

Adjustment: Interest earned is increased:

  • DR Interest Payable – Mandatory/Voluntary Savings (Expenditure) 41101/41102 (exact GL Code to be picked from product definition)
  • CR Mandatory Savings Accounts (Liabilities) 24101 (exact GL Code to be picked from product definition)

Rounding: 999 account

Amounts entered in the system should be stored as per the decimal precision specified by MFI. Amounts should be rounded only in the specific circumstances described below. Loan disbursal amounts should not be rounded.

Loan repayments:

  • The repayment amount for each installment is calculated based on the product definition.
  • If the total of principal, interest, fee and penalty is not rounded, the system rounds the total as per the rounding rules. Then the principal amount is adjusted so that total = sum of principal, interest, fee and penalty.
  • The extra/less principal paid in all the installments is then adjusted in the principal amount of the last installment.
  • The total of the last installment is rounded during actual payment and the excess/deficit is logged as the 999 account entry given below:
  • For example, if each installment total is 50.5, which after rounding becomes 50, the 0.5 from each installment is increased in the last installment. The last installment is adjusted for each installment’s rounding.

When the rounding of loan repayment increases 999 account balance:

  • DR client’s loan (Assets) 13101 (exact GL Code to be picked from product definition)
  • CR 999 Account (Income) 31401

When the rounding of payment decreases 999 account balance:

  • DR 999 Account (Income) 31401
  • CR client’s loan (Assets) 13101 (exact GL Code to be picked from product definition)

The following rounding rules apply to savings accounts:

  • Rounding is not required for deposits and withdrawals, because these are user entered values and the assumption is that the user will enter only a physically exchangeable amount.
  • Rounding is not required when interest is posted to savings accounts.
  • Rounding is required when a savings account is being closed and the total balance is not a rounded amount. In this case, a withdrawal entry for the rounded amount is made. In addition, the following 999 account entry is made to adjust the excess/deficit balance:

When the withdrawal in savings increases the 999 account balance:

·         DR Mandatory Savings account (Liabilities) 24101

·         CR 999 Account (Income) 31401

When the withdrawal in savings decreases the 999 account balance:

·         DR 999 Account (Income) 31401

·         CR  Mandatory Savings account (Liabilities) 24101

Example:

Payment of $100 for loan repayment is received by the MFI. This payment includes payment for the principal ($60), interest ($25), fee ($10) and penalty ($5). The following transaction entries are made:

  • DR Cash (Assets) 11201; amount 60
  • CR client’s loan (Assets) 13101; amount 60

 

  • DR Cash (Assets) 11201; amount 25
  • CR Interest on Loan (Income) 31101; amount 25

 

  • DR Cash (Assets) 11201; amount 10
  • CR Fees (Income) 31301; amount 10

 

  • DR Cash (Assets) 11201; amount 5
  • CR Penalty (Income) 31102; amount 5

Out of Scope

Merging of Sub-Categories

System handling of merging of subcategories as long as the functionality ID of the category is not modified. Guidelines on merging will be included in the installation document. For example, for the above CoA, following merging will be supported:

22000

Interest Payable

 

22100

Interest payable on clients' savings

22101

Interest on mandatory savings

22102

Interest on mandatory savings

23000

 

Clients' Deposits

 

23100

Clients' Deposits

23101

Savings accounts

24101

Mandatory Savings accounts

Miscellaneous

  • Front end for CoA
  • Status field for GL Codes
  • Importing/Exporting of CoA
  • Deleting of a GL Code
  • Adjustments- GL Codes
  • Insurance
  • Programs
  • Following entries in Chart of Accounts
    • Deposits for short term investments
    • Interest receivable- other interest receivable
    • Inter entity/project donor/HO/branch balances
    • Other assets
    • Investments- long term
    • Fixed assets
    • Liabilities- accrued expenses and payables; loans payable- short term; loans payable- long term; grants from donors; reserves; unearned interest on loans
    • Direct income- interest income from investments; other income
    • Other income
    • Expenditure- personnel; Board expenditure; Occupancy expenditure; Cleaning expenditure; Licenses and insurances expenditure; Postages and telephones; Advertising expenses; Printing and stationary expenses; Travel and entertainment expenses; Repairs and maintenance expenses; Rental expenses- equipments
    • Charges- Finance charges; Professional charges; Training charges
    • Depreciation
    • Other expenses
    • Sub codes- entity; department;

User interface for Chart of Accounts creation

 

New version of Mifos brings functionality which allows to add new, modify and remove accounts directly from the Mifos User Interface. It is possible to modify/remove only those GL Codes which were not previously used in the system. Four main categories ASSETS, LIABILITIES, INCOME and EXPENDITURE cannot be removed or modified.
Note: Initial version of Chart of Accounts xml file still needs to be added to Mifos before first start of Mifos.

There is a new page 'Manage Chart of Accounts' in Mifos Admin section:

The following operations are possible on 'Manage Chart of Accounts' page:

  • Add – after clicking on this link, it is possible to add a new account under selected parent account

  • Modify – this link allows to modify name, code and parent of account which has not been previously used in the system

  • Delete – by clicking on this link it is possible to remove account which has not been previously used in the system

Managing Chart of Accounts functionality has also its own permission, so it is possible to control which users can add/modify/delete accounts:

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