In this chapter we illustrate the basic financial reports of accounting and describe the relationship between reports and accounts. We show how to add reports to the NV2 database and accounts to reports, and how to use report arithmetic to control totals on reports.
See report Analysis for the built-in report views.
To organize your financial activities, transactions and other information are grouped together in accounts. Which accounts you should have and how they should be related to each other are the most important questions you must address when organizing a set of books. Before you select your accounts, you should decide what information you need from the system. Fortunately, the requirements of almost any individual or business share so many characteristics that the accounting profession has developed a consistent approach to answer these questions. When accountants, governments, bankers or investors examine the financial position of an individual or business, they can usually find the information they need on two fundamental reports, the Balance Sheet and the Income Statement.
In NewViews, items on a report represent accounts. Accounts on the Balance Sheet and Income Statement provide the core of any set of books. However, if accounts become very numerous, groups of related accounts are often moved to subsidiary reports often called subsidiary ledgers or supporting schedules.
For additional information on subsidiary ledgers, see Adding Accounts. Pay particular attention to the section titled Organizing Accounts.
Subsidiary ledger totals are then summarized on the Trial Balance report in single accounts called controlling accounts. Amounts from a Trial Balance are then used to prepare an Income Statement and Balance Sheet, which form the financial cap of a business.
Subsidiary reports are managed in NewViews using features described in this chapter and there is no limit to the number of reports you can add. However, since subsidiary reports only enhance the basic financial reports without changing the fundamental structure of a set of books, we concentrate on a simple Trial Balance, Income Statement and Balance Sheet.
The Trial Balance report in NewViews should contain your balance sheet accounts (asset and liability accounts), your income statement accounts (revenue and expense accounts) and an opening retained earnings account. Some of these accounts will be posting accounts that have been added directly to the Trial Balance report; others will be total accounts that have been totaled from other reports to the Trial Balance report.
The Trial Balance (or General Ledger) Report that is imported by NV1 Import will bring any preset Trial Balance from NewViews from DOS (when available). There is now a new option within NV2 to get a "traditional" trail balance report. With the traditional trial balance the view of the accounts list will have two columns (one credit and one debit) and the amounts displayed will respect the date range properly. (I.e. the Balance Sheet accounts will display closing perpetual balances, Revenue and Expense accounts will display the periodic change and Opening Retained Earnings (opening fund balance) will display the opening perpetual balance at the begin date of the Trial Balance reporting period).
For additional information, see The Trial Balance.
NOTE: It is not necessary to "close" Revenue and Expense accounts every period. Do not post amounts to periodic accounts to zero them (with a summary balancing entry posted to Retained Earnings (or fund balance)). Doing so will zero your account histories. NewViews is designed to display the Trial Balance and Balance Sheet as if you had done this, without throwing away prior period activity.
There are three basic types of accounts on any balance sheet. Assets are things of value that you own. Liabilities are debts that you owe. Equity, also called Capital or Net Worth, is the excess of assets over liabilities. For NPO or non-profit organizations Net Assets or Fund Balance, is the excess of assets over liabilities. The balance sheet lists all of these accounts in one-place and groups similar types of accounts together to provide useful totals. For the non-profit sector Net Assets or Fund Balance will be referred to as Equity.
Equity has special significance to a financial position. Equity equals all assets minus all liabilities. In other words, equity equals what is owned minus what is owed. It is for this reason that for individuals equity is often referred to as net worth. The following two equations say exactly the same thing.
(1) Equity = Assets - Liabilities
(2) Assets = Liabilities + Equity
Equation (1) tends to be more intuitive but the balance sheet is usually organized more like equation (2). Equation (2) is called the Fundamental Accounting Equation.
A balance sheet has two major totals that must balance, that is, they must be equal. This gives the balance sheet its name. All assets sum to the first total. Liabilities are added to equity for the second. If you study a balance sheet carefully with this in mind, it should become apparent that the balance sheet is really just equation (2).
The income statement is a fundamental report used to describe how equity has changed from one date to another. There are three basic types of accounts on the income statement. Revenues are amounts that you charge other people or businesses for your goods and services. Expenses are amounts that you pay other people or businesses for their goods and services. Finally, income equals revenues minus expenses. The following equation shows the relationship between the three types of accounts on the income statement.
(3) Revenues - Expenses = Income
An income statement lists all of your revenue and expense accounts in one-place and groups similar accounts together to provide useful totals. If you study the income statement carefully with this in mind, it should become apparent that the income statement is really just equation (3).
We have also included a brief statement of changes to retained earnings on the income statement. The balance sheet and income statement are related because income increases (decreases) equity. The section of the income statement used to calculate changes to retained earnings (a component of equity) serves to provide more details of this relationship. Later in this chapter we show how this relationship is automatically managed by integration in NewViews. For convenience we refer to accounts that appear on or total to the balance sheet as balance accounts and those that appear on or total to the income statement as income accounts.
The first document displayed when you run NewViews is the NV2 Database Explorer. Items on the NV2 Database Explorer are accounts, journals, payroll and reports. Any number of reports can be added to the /NewViews/Report branch. To add a report:
After you add a report, you can click on the report on the NV2 Database Explorer to expand it on the right side. The first time you open the report, the default window setup will run. You can then start adding accounts to the Account Setup. Items on reports are accounts and every account appears on one report and in the /NewViews/Accounts listing. To add an account:
The position of accounts on a report can be changed at any time using /Block Move and you can also move accounts from one report to another. Therefore, although you should have a good idea of how to organize your accounts and reports before adding them, you do not have to anticipate all requirements since you can rearrange your reports at any time.
The Window Define command is used to set the reports date range, amount type, tag, etc. Periods and amount types are explained in detail later in the manual and you need not be concerned with them when adding accounts to your reports.
Account names should be selected carefully since meaningful names help during transaction entry. An account name can have any number of characters of any type: letters, digits, hyphens ( - ) and underscores ( _ ). Therefore you are not forced to use numbers to refer to accounts. The names of accounts have nothing to do with the way an account is used, its position on a report, or any other factor. You are free to choose account names in any way convenient for your requirements with the single restriction that no two accounts of the same type can have the same name.
You have any number of characters to describe each account and the description can be changed at any time. You can indent descriptions by entering blanks on the left side to improve the appearance of your reports.
Journals can be added in the same way as adding reports and accounts. Click on a journal on the NV2 Database Explorer to expand it on the right side. The first time you open the journal, the default window setup will run. Select "Sub-Journals" from the Window List button in the right hand pane. To add an journal:
The method used to add a journal is described in detail here.
Journal names should be selected carefully since meaningful names help during transaction entry. A journal name can have any number of characters of any type: letters, digits, hyphens ( - ) and underscores ( _ ). Therefore you are not forced to use names to refer to journals. The names of journals have nothing to do with the way a journal is used. You are free to choose journal names in any way convenient for your requirements with the single restriction that no two journals of the same type can have the same name.
You have any number of characters to describe each journal and the description can be changed at any time. You can indent descriptions by entering blanks on the left side to improve the appearance of your reports.
The C (column) and U (underline) fields on the single period report view are used to format a report and these fields can be changed at any time. To underline the amount for an account you simply enter the letter S in the underline field. To position the amount in any of the five available columns, enter the column number in the column field. If a zero is entered in the column field then the amount for the account is not displayed.
You can add text lines to space out a report or to add titles or underlines. To add a text line, simply do not fill in the account type, name, normal balance, representation, etc of the account. The description can be left blank or can be filled in to provide titles for groups of accounts. If the line is to be used as a blank line or title, no other fields need to be filled in. If you want to use the text line to provide an underline then fill in the column field with the column number (1 to 5) to position the underline, and set the U field to S for a single, or D for a double underline. The Totalto fields should not be filled in on a text line. Their values are cleared if you attempt to record an account that has no name.
You can convert a text line to an account at any time by filling in the Name and Normal Balance fields. This is very convenient when adding accounts to a report since it allows you to add many lines of text, look it over, think about account names, and then fill in the names and normal balances all at once.
Report/Total Arithmetic refers to the way amounts are totaled on reports. You can completely control your report arithmetic with the Totalto and Normal Balance fields of accounts on the account setup window. For simplicity in the introductory examples, only one of the four Totalto's is used.
You can pick a total account in a Totalto field of an account, changes to the account will then total automatically to the selected account. If that account in turn totals to another account then the change ripples onward until an account with blank Totalto fields is updated. In this way reports always reflect changes to amounts due to the addition, editing or deletion of transactions, or due to the editing of budget amounts. You can easily understand the entire reporting structure of any set of books by examining the Totalto fields on reports.
An account can total to any other account on the same report or on any other report. The ability to total an account on one report to an account on another report is the foundation of integration in NewViews. Do not underestimate the importance of this simple feature. For instance, you can total income to the change to retained earnings on the income statement and then total the change to retained earnings to retained earnings on the balance sheet to reflect this important relationship automatically. Integration also provides the ability to automatically total amounts from all subsidiary ledgers and schedules directly to controlling accounts on financial statements or other subsidiary reports. As a result, a set of books is potentially unlimited in size and structure, all fully integrated, with relationships automatically reflected.
Rippling stops at an account whose Totalto fields are blank. For example, on a simple set of books two accounts on the balance sheet have blank Totalto fields. These are the accounts used for total assets and total liabilities & equity, and they contain the amounts that make the balance sheet balance. Therefore, in this case, rippling stops only when one side or the other of the Fundamental Accounting Equation has been reached.
Each account must have either a Debit or Credit normal balance. When you add an account, the Normal Balance field is filled in with either the debit or credit or press <F3> to select the value. This field can be changed after an account is added. Changing the normal balance of an account only affects how numbers are displayed. The normal balance for each class of accounts is well defined in standard double entry accounting as suggested below:
| Assets | Debits |
| Liabilities | Credit |
| Equity | Credit |
| Revenue | Credit |
| Expenses | Debit |
| Income | Credit |
The sign of all changes caused by totaling is controlled in NewViews by using the normal balances of accounts to comply with standard accounting practice. When an account totals to another account that has the same normal balance, the amount is added. When the normal balances differ, the amount is subtracted. This is the only effect of the normal balance on report arithmetic. Once an account is added, it is unlikely that its normal balance would need to be changed, but it is allowed.
When you add accounts to reports you do not have to fill in the Totalto fields. You can add accounts first and then later fill in the Totalto fields to set up your report arithmetic. In fact, report arithmetic can be changed at any time by pressing <F3>, picking another total account name in Totalto fields. All effects on accounts due to rippling are undone and redone automatically by NewViews to ensure that changes are reflected by all reports and accounts. The column number, underlining, and the position of an account on a report has no effect on report arithmetic.
When an account is totaled to from other accounts it is called a total account, otherwise a posting account. The Total field on the account setup window is set by NewViews to the number of accounts that total to it, and it is blank for posting accounts. Total and posting accounts are identical with one exception. You cannot add transactions to total accounts or edit their budget amounts. Suppose these operations were allowed. Then amounts on a total account would be due both to transactions added directly to the account and from the totaling of amounts from other accounts. This would not affect the integrity of your books but columns of numbers on reports would not appear to total correctly. Normally, there is no reason to add transactions to a total account or edit its budget amounts and these operations could lead to confusion. Therefore editing is prohibited. However in NV2 you can see all transactions posted to a total account. The new Account column, (by default column 2) shows the cross-account of the transaction.
You can use Block Move to move accounts around on a report when it is sorted by Line number. Furthermore, you can move accounts from one report to another. The Report field on each account item contains the name of the current report. When you add a new account to a report, the Report field is automatically set to the name of the report. You can move accounts from one report to another by pressing <F3> and selecting the name of the report in the Report field. When the change is recorded, the account disappears from the current report and reappears at the end of the report selected. You can reposition the account anywhere on the new report using /Block Move. Report arithmetic is not affected when you move accounts between reports.
This ability to reorganize your entire report structure means that you do not have to anticipate all possible future requirements when setting up your books. You can add new accounts and reports, move accounts around on any report or between reports, and change your totaling structure at any time.