System and GL Setup tells every module which ledger account to post to. Nothing here is visible day to day, yet every invoice, receipt, delivery and payslip depends on it. A wrong account does not raise an error — it posts quietly to the wrong place until year end.
Where to find it
Go to Setup > Company > System and GL Setup. The accounts you choose come from your Chart of Accounts, so set that up first.
System
The account code type decides the shape of your GL codes — numeric such as 1060, or alphanumeric such as AB11. Choose it before creating accounts, since it governs everything that follows.
System Accounts
| # | Account | What posts here |
|---|
| 1 | Retained Earnings | Accumulated profit carried forward when a financial year closes. Mandatory. |
| 2 | Profit and Loss Year Transaction | The current year result before it is closed out. Mandatory. |
| 3 | Exchange Variance | Gains and losses when exchange rates move between a transaction and its settlement. |
| 4 | Bank Charges | Default account for bank fees and commissions. |
Sales and Customer Accounts
| # | Account | What posts here |
|---|
| 5 | Receivables Account | What customers owe you. Debited by every sales invoice. |
| 6 | Sales Account | Revenue earned. Credited by every sales invoice. |
| 7 | Sales Discount Account | Discounts given away on sales. |
| 8 | Payment Discount Account | Prompt payment discounts, given when a customer settles early. |
| 9 | Shipping Income Account | Freight recovered from customers. |
| 10 | Deferred Income Account | Money received before the sale is earned. See below. |
How Deferred Income works
Deferred income holds value you have been paid for but not yet earned, so revenue lands in the period it belongs to.
| Stage | Effect |
|---|
| Payment received, before invoice | Cash increases; the value sits in Deferred Income rather than revenue. |
| Invoice issued | Deferred Income is released into the Sales account, recognising the revenue. |
Purchases and Suppliers Accounts
| # | Account | What posts here |
|---|
| 11 | Payables Account | What you owe suppliers. Credited by every purchase invoice. |
| 12 | Purchase Discount Account | Discounts received from suppliers. |
| 13 | GRN Clearing Account | The provisional liability for goods received but not yet invoiced. |
The GRN Clearing Account is the one people set carelessly and regret. It carries the value of stock you hold but have not been billed for, and it should trend toward zero. A growing balance means goods received with no supplier invoice booked — see Goods Receipt Note.
Inventory and Services Accounts
| # | Account | What posts here |
|---|
| 14 | Inventory Account | The value of stock you hold. |
| 15 | Cost of Goods Sold (COGS) | The cost of stock as it leaves on a delivery or invoice. |
| 16 | Inventory Adjustment Account | Write-offs, shrinkage and stock corrections. |
| 17 | Work in Progress (WIP) | Value held in production before manufacture completes. |
| 18 | Inventory Disposal/Write-Off Account | Where the loss goes when stock is written off. Leaving it as No Disposal removes the ability to create disposals at all — see below. |
| 19 | Inventory Costing Method | How stock is valued as it moves. |
The Inventory Disposal/Write-Off Account is the one field here that switches a feature on and off. Until an account is chosen, the New Disposal button does not appear anywhere in Items and Services, because there would be nowhere to post the loss. See New Disposal.
Getting it right
- Set these before posting transactions. Changing an account later affects future postings only — history stays where it was posted.
- Every mandatory account must be filled before the system will let you transact.
- If you are unsure of an account, ask your accountant. A wrong default is silent and surfaces at year end.
Related pages