Step 1: Chart of Accounts
MEETS THE FOLLOWING DCAA REQUIREMENTS:
- Proper segregation of direct costs from indirect costs
- Accounting system is in accordance with GAAP
- Accumulation of costs under general ledger control
- Exclusion from costs not allowable under FAR 31
The chart of accounts is the foundation on which you will build your DCAA compliant accounting system. Like building a house on a weak foundation, your accounting system will not stand up to a DCAA audit without a strong chart of accounts.
The chart of accounts is simply a list of general ledger accounts, grouped by their function within the accounting system. Each general ledger account will hold individual transactions based on the type of account. Govcon Accountants has developed a standard chart of accounts that will pass DCAA audits and is designed for use with Quickbooks. Our chart of accounts will allow for easy computation of your indirect rates with a simple excel template.
The chart of accounts is a listing of general ledger accounts organized by account type. In a typical chart of accounts, you will find a balance sheet section with assets and liabilities, an equity section, and an expense section. The chart of accounts utilized in government contracting has some similarities to the typical chart of accounts utilized by commercial enterprises, and the balance sheet and equity sections are nearly the same, but the similarity ends there.
The expense section is very different in government contracting when compared to the expense section of a commercial enterprise. In the expense section of a government contractor’s chart of accounts, you will find that the expense accounts are further divided into standard subsets such as direct costs, fringe benefits, overhead, facilities, general and administrative (G&A), and unallowable expenses. These subsets are utilized to represent cost of sales, intermediate and final indirect expense pools, allocation bases, and expenses segregated from the government contracting business. These subsets are standard to the industry of government contracting and are universally recognized by industry accountants and DCAA auditors alike.
Variations and customization is permitted, as long as the chart of accounts meets DCAA requirements. Before implementing a significant variation from our standard chart of accounts, you may want to consult with an expert before your DCAA system audit.
How to import the Govcon Chart of Accounts
Step 1: Download the Quickbooks version of the Govcon Chart of Accounts.
- Compatible with the 2014 or later version of Quickbooks (either Pro, Premier or Enterprise).
- Upgrade to 2014 or later, if necessary. We only support the two most recent versions of Quickbooks.
- Not compatible with Quickbooks Online.
- Review the excel version first, before importing the Quickbooks version (download here).
- After reviewing the excel version, download the Quickbooks version (download here).
- Potential import errors: If your existing account numbers match any of the same account numbers being imported, you'll need to remove those account number in your existing file first. Otherwise, the import may crash. Check both active and inactive accounts.
Step 2: Make a backup copy of your Quickbooks file
- Before importing the chart of accounts, back up your Quickbooks file.
- Navigate on the top drop-down menu to File/Backup Company.
Step 3: Import the Govcon Chart of Accounts
- Navigate on the top drop-down menu to File/Utilities/Import/IIF Files.
- Select the Govcon Chart of Accounts by navigating within the Import box to the location of your downloaded file named "govconcoa.iff".
- Click "Open" to import.
Step 4: Organize your new Govcon Chart of Accounts
- Your old chart of accounts will not disappear automatically. Take the following steps to organize your new Govcon Chart of Accounts.
- Delete any old accounts that have never been used.
- Remove duplicate accounts by merging old accounts into the new Govcon accounts to move existing transactions from the old accounts to the new accounts.
- Make an old account a sub-account a new Govcon account, and then make the old account inactive. The existing transactions will roll up on reports to the appear listed under the new Govcon account.
- Reclassify transactions by recoding to the new Govcon accounts, if necessary.
Step 5: Create the Chart of Accounts report
- Open the chart of accounts by navigating on the top-menu to List/Chart of Accounts.
- Click on the "Reports" button found at the bottom of the chart of accounts list, and click on "Account Listing".
- Click on "Customize Report".
- In the "Display" box, select the following columns to display and uncheck any others that are checked; Account and Type.
- Change the "Report Title" in the "Header/Footer" tab to "Chart of Accounts".
- Click "OK".
- Drag the column to the right to fully display the account column.
- Memorize the report to a folder for later display.
- The chart of accounts is only one requirement needed to pass the DCAA audit. You will not pass the audit unless you accurately complete all 10 Easy Steps in our program.
- Due to occasional version or software conflicts, you may need to hand-key the new chart from the excel version (download here).
- Account numbers are required by DCAA.
- Accounts must be sorted by account number and appear grouped together based on type.
- The account numbers need to embed logic in the account numbers so that the type of account can be recognized from the account number alone.
- Do not create additional accounts to track separate contracts or projects. This is accomplished in the Customer module in Quickbooks.
- All COGS accounts must be sub-accounts of the top-level account, Direct Costs.
- All expense accounts must be sub-accounts of a top-level pool account, either Fringe Benefits, Facilities, Overhead, G&A or Unallowable.
- Keep your chart as small as possible. Too many accounts quickly become disorganized and lead to miscoding of transactions.