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Level 3

Any "best practices" for the use of header vs detail accounts?

I'd be interested in how folk handle the question as to whether one should allow posting of transactions to so-called "header" accounts. Just in case it's not as common a term as I think: by "header" account I mean simply an account that has sub-accounts. It is in contrast with a "detail" account, which is simply an account that does *not* have sub-accounts. (I sometimes refer to detail accounts as "leaf" accounts, in that in the overall account "tree" they are at the very tip of all the branches.)

 

So for example, in the following:

 

60000 TRAVEL

---- 60100 Conference Travel

---- 60200 Sales Travel

61000 FACILITIES

---- 61100 Maintenance

---- 61200 Rent

-------- 61210 Full Offices

-------- 61220 Temporary Offices

------------ 61221 City Center

------------ 61222 Outside City

 

60000, 61000, 61200, 61220 are Header accounts, and the rest are Detail accounts. So again, my question is:

 

Should one permit posting of transactions to Header accounts? (That is in contrast to restricting them to be used only as "grouping" or "rollup" accounts, not permitted to have any transactions of their own?)

 

thanks for any advice.

 

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Best answer 02-23-2019

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Level 7

Re: Any "best practices" for the use of header vs detail accounts?

I actually think we're in agreement and we both DISagree with the policy that says you're 1.9 Other Travel is not valid...

 

I (personally, no accounting precedent here...) believe that if you're going to have Subs for those categories that that make sense, then ALL entries go in a Sub, NOTHING should be put in the Primary/Header Acct.  But again, some CPA class may tell you different.

 

But I just think it makes Logical sense to stick with a format.  Travel, multiple Loans, Income from Credit Card, Income from Delivery Service, etc., etc. all make sense to isolate them in one under one Primary/Header Acct.  This way the numbers all fall in the right place, but you can easily look at each track individually. 

 

So I disagree that you should not have an Other Travel when you look at the report and the stuff you put in the Header is called Other anyway.  But transaction that maybe should be in 1.1-8 might get lost in the "Other" if they're accidentally put in the Header.

 

So again, my Best Practice is that if you need or decide to have Subs for any reason, ALL transaction in that Acct should be in a Sub.

 

If your management believes otherwise...   Well there is no hard fast rule, so don't buck the boss!  If you think they really don't care then move it all into a Sub.  The reports all show it in an Other section anyway.  So just make things easier for you to catch errors.  If there's a $ amount in the Header, you know there was an entry error.

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6 Comments
Level 7

Re: Any "best practices" for the use of header vs detail accounts?

Well...   There was a reason you came up with the Sub Accounts in the first place to keep things straight.  So why are your going against your own standards?

 

You can just post to the header and it will come up as "Other" on the reports.  But whenever I see this I assume something did not end up in the correct Sub Account.  So maybe you could create a "General" or some other named Sub Account so that there is no doubt by anyone else looking at the reports to wonder why a transaction is not in a Sub.

Level 3

Re: Any "best practices" for the use of header vs detail accounts?


Thanks @Pete_Mc 

 


@Pete_Mc wrote:

Well...   There was a reason you came up with the Sub Accounts in the first place to keep things straight.  So why are your going against your own standards?

Not sure I follow. I'm not adhering to any standard I know of, mine or otherwise. And the reason I came up with Sub Accounts is the usual one -- to group transactions into different levels of hierarchy so that at reporting time I can choose whether to have a coarse-grained view of things, fine-grained, or whatever.

 

But the question as to whether or not to post transactions to headers cuts across all that. Thing is, I have seen it done both ways, and I've seen different accounting software handle it differently. Some packages simply don't permit posting to Headers; some, like QuickBooks not only permits it, but even provides a consistent mechanism for reporting where Headers contain transactions. (e.g. QB knows when to roll up and when not to, depending not only on the account hierarchy but also what your current view is in a report.

 

So it can work both ways, but I just wondered if anyone had any opinions as to one way being superior to the other. For example:

 

Pro allowing Header posting:

Allowing Headers to have transactions means there is no need for any "Other" accounts in the various groups.  The Header account itself effectively becomes "Other" and QuickBooks knows to report on it as such. So in a P&L report you might see:

 

-------- 61220 Temporary Offices

------------ 61221 City Center

------------ 61222 Outside City

------------ 61220 Temporary Offices - Other

 

If displayed non-collapsed like that, then the topmost mention of 61220 would have zero against it and the bottommost one -- the one with "Other" appended (automatically by QB) to the end of the name, would show the value of the transactions posted directly to the Header.

 

BUT

 

Anti-allowing Header posting:

Sometimes we may want to relocate one of a Header's sub-accounts (either a detail, or another sub-tree) to a different Header. That can be slightly easier if we know for sure that Headers never contain transactions.

 

Level 7

Re: Any "best practices" for the use of header vs detail accounts?

Okay, I thought you organized the Chart of Accounts.  So that's why I thought it was your "standard" for breaking things into Sub Accounts.  I always do it for things like Loans.  So even though one may have been paid off and closed, if you do a new construction project or anything else that requires a loan, all transactions for that loan are in one account, not mixed with others. 

 

Similar to what you've appear to have done.

 

There is no absolute.  But if you're looking for "Best Practice" then my recommendation would be that if there was a reason to create Sub accounts, then stick to it under that primary heading.  Cononsistency is always a key factor in Best Practice for me. 

 

Also, I think it just makes things clearer when someone else looks over the books or someday takes over for you. 

Level 3

Re: Any "best practices" for the use of header vs detail accounts?

Hey Pete,

 

Again, thanks for taking the time to reply. However, I think we're still at crossed purposes. My question isn't whether or not to have sub-accounts. In all of my companies, we alway have had, still do, and will continue to have an account hierarchy. The one I'm working on has three levels. That's all fine.

 

The question is, given that some accounts have subs, but some do not, should we make a rule that says, in effect, "No posting to accounts with subs"

 

Couple of practical examples.

 

In one of the companies I've run, I got involved well after the CofA had been established, and the accountants who'd set things up for them told them never to post to headers -- i.e. if an account had a sub, you weren't allowed to post to it. And in fact all header accounts had "(H)" at the end of their name, so as to remind people not to post there.

 

By contrast, in another firm, their approach was not only to allow header posting, but in fact they had a rule that said you should not have any catchall "Other" accounts. So in the following:

 

1 TRAVEL

1.1 Airfare

1.2 Accommodation

1.3 Ground Transport

1.4 Meals and Incidentals

1.5-8 (others, I forget)

1.9 Other travel

 

That 1.9 account was not allowed. But what that meant was that if you did have to book a travel expense that didn't fit into any of 1.1 to 1.8, you were supposed to post it directly to the header account, "1 Travel". 

 

So one setup forbade posting to headers, while one effectively required it. 

 

I mean, what do you yourself do? Do you allow posting to accounts that themselves have sub accounts? Or do you only ever post transactions to accounts with no subs?

 

thx.

 

Level 7

Re: Any "best practices" for the use of header vs detail accounts?

I actually think we're in agreement and we both DISagree with the policy that says you're 1.9 Other Travel is not valid...

 

I (personally, no accounting precedent here...) believe that if you're going to have Subs for those categories that that make sense, then ALL entries go in a Sub, NOTHING should be put in the Primary/Header Acct.  But again, some CPA class may tell you different.

 

But I just think it makes Logical sense to stick with a format.  Travel, multiple Loans, Income from Credit Card, Income from Delivery Service, etc., etc. all make sense to isolate them in one under one Primary/Header Acct.  This way the numbers all fall in the right place, but you can easily look at each track individually. 

 

So I disagree that you should not have an Other Travel when you look at the report and the stuff you put in the Header is called Other anyway.  But transaction that maybe should be in 1.1-8 might get lost in the "Other" if they're accidentally put in the Header.

 

So again, my Best Practice is that if you need or decide to have Subs for any reason, ALL transaction in that Acct should be in a Sub.

 

If your management believes otherwise...   Well there is no hard fast rule, so don't buck the boss!  If you think they really don't care then move it all into a Sub.  The reports all show it in an Other section anyway.  So just make things easier for you to catch errors.  If there's a $ amount in the Header, you know there was an entry error.

View solution in original post

Level 3

Re: Any "best practices" for the use of header vs detail accounts?

Hey @Pete_Mc ,

 

> I (personally, no accounting precedent here...) believe that if you're going

> to have Subs for those categories that that make sense, then ALL entries

> go in a Sub, NOTHING should be put in the Primary/Header Acct.  But

> again, some CPA class may tell you different.

>...

> I disagree that you should not have an Other Travel when you look at the

> report and the stuff you put in the Header is called Other anyway.  But

> transaction that maybe should be in 1.1-8 might get lost in the "Other"

> if they're accidentally put in the Header.

 

I think you're right, and I've just found a good reason to break what was for me the tie between the two methods. And your comment about something getting lost in "Other" pretty much nails it.

 

And that reason is that Intuit appear to have changed the way this whole thing is handled when comparing QB Desktop vs QB Online. As a result, if you have any transactions in a Header account, then when you migrate -- or even just try to compare -- there is a lot of scope for confusion. I've just found that QB Online does not report transactions directly to the Header account as being in that virtual "Other account. That's just a QB Desktop thing. Instead, QB Online simply reports any direct-to-the-Header right on the Header line itself. So while in QB Desktop a (non-collapsed) P&L report might have:

 

-------- 61220 Temporary Offices                       

------------ 61221 City Center                                $2,000.00

------------ 61222 Outside City                              $1,000.00

------------ 61220 Temporary Offices - Other     $1,000.00

 

In QBO that same report would instead have:

-------- 61220 Temporary Offices                        $1,000.00

------------ 61221 City Center                                $2,000.00

------------ 61222 Outside City                              $1,000.00

 

That in itself is annoying, but there is a situation where it could be even worse than that. 

But anyway, the problem just doesn't exist if the approach you advocate is taken -- i.e. as you said:

 

> So again, my Best Practice is that if you need or decide to have Subs

> for any reason, ALL transaction in that Acct should be in a Sub.

 

Yup.

 

Well done my friend. If we don't hear from any of the CPAs or GAAP experts telling us why we're wrong, I think we can conclude that what we've converged on IS the best practice! :-)

 

thanks for your help.

 

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