Types of Accounts on a Profile

Overview

Accounts are records for sorting and storing transactions. They can either be "Connected", which originate with observations from Integrations, or "Notional", which originate from either counterparty detection or nesting.

Basis maintains a full Ledger and Chart of Accounts for the purposes of unifying Accounts, irrespective of the origin of the data. A transaction may be observed in a bank account and recorded as a Posting under that Account ledger, but a new Posting will automatically be recorded under the counter-account.

Let's consider the example of an observation of a transaction in a bank account. The transaction will be recorded as a Posting in the following account:

assets
- cash and cash equivalents
-  - connected
-  -  - chase for business *1234

Account Notation

This same account can be represented in a single line using dot notation, as is used with postgres ltrees, using a period to separate nested layers:
assets.cash and cash equivalents.connected.chase for business *1234

Upon observing this transaction, the counter-account will be identified. For the sake of this example, let's use the law firm "Goodwin Proctor". At the same time that the Posting is recorded in the chase for business *1234 account, a Posting will be recorded in the goodwin proctor account.

expenses
- professional fees
-  - legal fees
-  -  - goodwin proctor

Note that Goodwin Proctor is not observed directly from an Integration. It is a Notional Account created by Basis for recording transactions with this counterparty.

The power of this structure lies in reporting and analysis. Understanding how much this business paid for legal fees in a given timeframe is a simple Balance Report on the legal fees Account. If multiple law firms are used, say "Fenwick and West" as well, the Account structure will be modified:

expenses
- professional fees
-  - legal fees
-  -  - goodwin proctor
-  -  - fenwick and west

Yet, the Balance Report for legal fees remains the same - the new counterparty is automatically aggregated into the appropriate Account.

The Chart of Accounts

The five primary Accounts are:

Assets
Liabilities
Equity
Revenue
Expenses

Directionality is important to note for these different Accounts. Postings have directionality of "Debit" or "Credit", and Accounts are either "Debit-normal" or "Credit-normal".

Directionality	Balance impact
Debit-normal	Account balance increases with Debit postings
Credit-normal	Account balance increases with Credit postings

One way to think about whether an Account is debit-normal or credit-normal is whether it is typically a "source" or a "use" of cash. For example, Revenue is most often a source of cash and Expenses are most often a use of cash, so Revenue is credit-normal and expenses are debit-normal. Similarly, Liabilities are a source of cash and purchasing Assets is a use of cash, so Liabilities are credit-normal and Assets are debit normal. Many simply memorize the below table. It is also important to note that all Accounts nested under the primary Account types inherit the directionality of the primary Account.

Account	Directionality
Assets	Debit-normal
Liabilities	Credit-normal
Equity	Credit-normal
Revenue	Credit-normal
Expenses	Debit-normal

Beyond the primary Accounts, Basis maintains an extensive Chart of Accounts for each Profile. This can be retrieved for a profile with the Accounts endpoint.

Account Labels

The Account detail includes a label which represents the location of the Account in the Chart of Accounts. The label uses dot notation, as is used with postgres ltrees. In this representation, dots are used to represent Account nesting.

Returning to our prior examples, the Chase Account would be represented as:

assets.cash and cash equivalents.connected.chase for business *1234

and the Goodwin Proctor Account would be represented as:

expenses.professional fees.legal fees.goodwin proctor

Use Cases

Analytics

The Notional Accounts on a Profile can be used for convenience in performing analytics on a Profile. For example, to understand all of the legal fees paid by a business over a given period of time, a Postings Report can be generated using the below label and a start_date and end_date corresponding to the period of interest:

expenses.professional fees.legal fees

Counterparty Identification

Notional Accounts can also be used to identify notable counterparties of the business. For example, if venture debt from Triple Point is detected, that account may appear as follows:

liabilities.triple point venture line