You’ve probably heard of the accounting hierarchy – you’ve seen the chart with parent and child accounts, but what is it, exactly? The accounting hierarchy is the set of accounts arranged by position. Each group of bill units is headed by a parent bill unit. The child bill unit is a subordinate to the parent, while a non-paying bill unit is the child of a parent account. In an accounting hierarchy, a bill unit is either a paying entity or non-paying.
Accountants are the next-to-last level in the accounting hierarchy. Their duties are directly related to their area of expertise. They perform many tasks, including analysis, reporting, and payroll. They also handle accounts payable and receivable. In some smaller companies, an accountant may be responsible for all of these duties. Regardless, accountants process daily numbers and figures and report to their accounting manager. In some organizations, accountants also have other jobs.
The accounting hierarchy is important for small business owners. While small businesses have a common set of positions, large organizations typically have several levels of accounting hierarchy. In addition, they may employ a single accounting manager, which is the last level in the hierarchy. In the US, an accounting manager usually appoints staff accountants. In small businesses, an accountant may be a supervisor of a staff accountant. The accounting hierarchy reflects the overall structure of the organization, but not every company has a top accounting position.
If you have three revenue streams for a technology company, you can set up a parent-child arrangement. The parent level account would be 30000 Sales. No transactions would post to this account. The child accounts would be 31000 Sales-Web Design, 32000 Sales-Server Management, and 33000 Sales-Hardware. A parent-child accounting hierarchy is beneficial for companies that have several revenue streams. This setup will ensure that all business units get the necessary information.
The child account will point to the parent’s bill, if one exists. The parent account will have the same billing date as the child. If the parent account has multiple bill units, you can move the bills to the non-paying bill unit. However, you must make sure that all bill units are in the same currency. You must also make sure that the currency of the parent and child accounts match. When changing the currency of the parent and child accounts, check the currency of your non-paying bill units.
In larger companies, there are many levels of accounting hierarchy. For example, the chief financial officer (CFO) is the overall head of the finance department. They coordinate the activities of all sub-departments and approve financial reports and transactions. As the chief financial officer, you’ll need to know and understand the various aspects of accounting so you can make the best decisions for the company’s future. In an accounting hierarchy, it’s important to understand that each level has a different level of responsibility.
Accounts are specific bins for accounting transactions. You can see this in a chart of accounts. For example, when a company sells laptops, they will put the sale amount in the Sales-Laptops-Dell Laptops account. Similarly, a month-end financial statement summarizes the balances of the various accounts at the end of the month. It’s impossible to make a financial statement that is more informative than a chart of accounts.