What is account assignment?

Account assignment is a central concept in accounting, referring to the process of assigning business transactions to specific accounts in the chart of accounts. This step is crucial for the correct recording and evaluation of a company’s financial transactions. The aim of account assignment is to ensure that each posting record is posted correctly in both the debit and the credit in order to ensure proper accounting.

The importance of account assignment:

1. Assigning business transactions:
   During account assignment, the various types of business transactions, such as income, expenses, investments or liabilities, are assigned to the corresponding accounts. These accounts are usually structured in a chart of accounts such as SKR 03 or SKR 04.
2. Secure posting:
   Assigning accounts ensures that each business transaction is recorded properly and transparently in the accounting records. It prevents errors that could lead to inaccuracies in financial reports.
3. Consistency and transparency:
   Consistent account assignment makes it possible to standardise the accounting process. This helps to ensure that financial data is transparent and traceable for both internal and external stakeholders.

Steps in posting:

1. Identifying the business transaction:
   The first step is to identify the specific business transaction. This could be an invoice, a receipt, a bank statement or some other document.
2. Determining the relevant accounts:
   The next step is to identify the accounts that are relevant for posting the respective transaction. This requires knowledge of the chart of accounts and the type of business transaction.
3. Debit and credit postings:
   The accounting transaction is then recorded in the form of a posting record. This specifies the account to be debited and the account to be credited. Example: when goods are sold, the account ‘Sales revenue’ is posted to in credit and the account ‘Trade receivables’ is posted to in debit.
4. Creating a posting record:
   The accounts determined are summarised in a posting record that indicates the amount of the posting and the corresponding accounts in debit and in credit.

Example of account allocation:

Let us assume that a company sells goods worth 1,000 euros on account. The posting record would look like this:

• Debit: Trade receivables (account 1200) 1,000 euros
• Credit: Sales revenue (account 8000) 1,000 euros

In this case, the ‘Accounts receivable’ account (asset account) is debited because the company is entitled to payment. At the same time, the ‘Sales revenue’ account (income account) is credited because it is a revenue.

The benefits of posting:

• Avoiding errors: Posting errors are minimised by clearly assigning business transactions to specific accounts.
• Improved analysis: Accurate account assignment enables better analysis of financial data and facilitates the creation of reports.
• Complying with regulations: Correct account assignment helps to comply with legal accounting requirements.

Conclusion:

Account assignment is a fundamental accounting process that is central to the accurate recording and analysis of business transactions. Assigning business transactions to specific accounts enables clear, traceable and error-free accounting, which is crucial for a company’s financial health. Knowledge and skills in account assignment are therefore essential for every accountant and finance professional.