R12: Troubleshooting Misclassified Accounts in General Ledger (Doc ID 872162.1)

Last updated on JANUARY 24, 2025

Applies to:

Purpose

The goal of this note is explain the correction of Misclassified Accounts.

An account is misclassified if the account type of the segment value is different from the account type on a code combination that uses that value. It occurs when the account was initially created with the wrong account type and had code combinations generated from it. Then the account type is subsequently changed on the account value screen to a different account type. This change does not change the account type of the code combination it keeps its original type.

The process of changing the account type of a code combination is complicated because you can not do it through the form. This is deliberate as it prevents the account type of a code combination being changed after it is used without users making decisions on how to correct the accounting of journals posted in earlier years. At year end balance sheet balances will be rolled forward and P&L balances will be rolled up into retained earnings. Manual intervention is required to correct the year end balances.

There are 5 basic Account Types available and they form two groups:

• Profit and Loss accounts or Income Statement accounts - the balances are automatically transferred into the Retained Earnings account in the first period of the new year, and therefore the new year's beginning net balance of these accounts is zero:
• Expense
• Revenue
• Balance Sheet accounts - the balances are rolled forward to the same account in the first period of a new year, and therefore the new year's beginning balance is the same as the ending balance of previous year:
• Asset 
• Liability
• Owners equity

There are two types of misclassification:

a) Simple: between account types in the same group.

At year end the behavior of the roll-forward is unchanged. The fix is quite easy as you just need to fix the code combination using sql (this may still impact budgets see Note 308219.1 Effects Of Misclassified Accounts On Budgets And Encumbrance).

Example

1. Account 1000 is setup as Expense
2. Code combination 01.1000.1000 is created (the code combination inherits the Expense type)
3. Account 1000 is changed to account type Revenue (both in the same group). This does not change the account type of 01.1000.1000.
4. A new code combination, for example 01.1000.2000 for this account will be Revenue (inherits the current account type).
5. Any of the combinations follow the same behavior at the year end.

b) Complex: the incorrect account type of the account is in a different group of the desired type.

At year end the behavior of the roll-forward is different between these two account types so some of the code combinations do not behave as expected for its position in the statement of accounts.

Example

1. Account 5000 is setup as Expense (the default)
2. Code combination 01.5000.1000 is created (the code combination inherits the Expense type)
3. Account value 5000 is changed to account type Asset (are in different groups). This does not change the account type of 01.5000.1000.
4.  A new code combination, for example 01.5000.2000 for this account will be Asset (inherits the current account type).
5. The 2 combinations will not follow the same behavior at the year end. One, with Expense type, will transfer the balance to the Retained Earnings account, while the other, with Asset type, will keep the balance in the new year.

The effects of misclassification can be observed in different places:

In Budgets

You are unlikely to see the Simple form causing symptoms in many circumstances but you will find that budget uploads become Debit or Credit depending on whether they are account type Expense, Asset or Owners equity for Debits or Revenue and Liability for Credits.
See Note 357956.1: 'Misclassified Accounts Caused Budget Amounts to be Loaded Incorrectly' to help identify budgets loaded the wrong way round because of misclassifications. You also see this in the complex form if for example the account type started as expense and was changed to liability. The budget would be a Dr instead of a Cr.

In Standard Reports

In standard reports like the Trial balance or Account Analysis in the first period of the new year you find that the Opening balance is zero instead of matching the previous years closing balance. Running the period end diagnostic Note 463519.1 shows that there are no apparent errors.
On further investigation you notice that either the retained earnings is inflated by the amount or that the account has rolled into the new year when you did not expect it. You will not get this in the simple form only the complex form.

In FSG Reports

The Balance Sheet account YTD amount start at zeros in the new year because the balance as at the last period of the year is rolled over to Retained earnings at year end. This only happens for the complex case.

In Create Account Combination Form

In Setup > Account > Combinations you can see the wrong account type defaults in when you enter a code combination in the form GLXACCMB - Create Account Combinations. You can see this in either case.

Troubleshooting Steps

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