Chapter 2

Creating a New Company

Lesson Outcomes

At the end of this Chapter, you should be able to.

LO 1 Describe the need to create a company in the system.

LO 2 Explain the methods of creating a company in the system.
LO 3 Describe the process of using/creating the chart of accounts.
LO 4 Explain how to copy the chart of accounts from an existing Sage 50 company.
LO 5 Explain how to import company data from some other program.
LO 6 Explain the meaning of account segmentation and its usefulness.
LO 7 Explain the process of consolidating companies in the system.
LO 8 Differentiate accrual basis with cash basis of accounting.
LO 9 Differentiate Real Time with Batch posting methods.
LO 10 Explain how to set the fiscal year in the system; and
LO 11 Explain how to backup company data.

2.1 Introduction
Sage 50 walks you through the process of creating a new company. This makes it easier to get
your new company started. You only need to enter a minimum of information to set up the
company. This information includes the Chart of Accounts, Accounting Method, Posting
Method, and Accounting Period Structure. After creating the new company, Sage 50 offers a
Setup Guide so that you can set up default information, data records, and beginning balances.

2.2 Creating a New Company using the Create a New Company Wizard
(LO 1& 2)
Setting up your company is easy with the Create a New Company wizard. This wizard walks you
through creating a new company and prompts you for each piece of information you enter. You
need to enter all information the wizard asks. However, depending on how you complete the
information, you won't see all of the windows mentioned below.
Steps:
You can start creating a New Company from either the Startup Window or the Sage 50 File
Menu:
a) Select Create a new company from the Sage 50 Startup window and click next.

OR

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 b) From the File menu, select New Company. If you're working in an existing company, a
warning window tells you that opening a new company will close the current company. If
you allow the system to close the current company, click No and click next.

Figure 2.1: How to create a new Company

Option One

Option Two
TwTwo

Once you follow one of the above two methods, the 'Create a New Company – Company
Information' window appears. Figure 2.2 shows this window. You use the company information
window to enter basic information about your company, such as
 name and address information
 telephone and fax numbers
 Web site address and primary e-mail address
Note: Enter the "http://" prefix in the Website address field.
 federal and state employer identification numbers
 state unemployment ID
 type of business

Figure 2.2: Create a New Company

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It is noted that you can change company information at any time.

Figure 2.3: Company Information Window

Class Activity 2.1: (LO 2)

Enter the following information in the Company Information Window
Company Name: AFMA 2022 (Pvt) Ltd.
Address Line 1: University of Sri Jayewardenepura
Address Line 2: Gangodawila
City: Nugegoda
Country: Sri Lanka
Telephone: +94112803456
Fax: +94112801297
Business Type: Limited Liability Company
Web Site: http://www.mgt.sjp.ac.lk/acc/
E-mail: [email protected]

2.2.1 Method to Create a Company

The second window in the creating a company process is selecting the method to create the
company. Once you click on the Next button in the Create a New Company – Company
Information Window (Figure 2.3), you will see the 'Create a New Company – Setup' window.
Figure 2.4 shows this window. It would help if you established how your new company would be
set up:

I. Use a sample business type that closely matches your style of company
II. Copy settings from an existing Sage 50 company

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 III. Convert a company from another accounting program
IV. Build your own company
V. Consolidate existing Sage 50 companies

Figure 2.4: Create a New Company – Setup window

I. Using a Sample Business Type

Select this option to copy basic setup information from a sample company, particularly a chart of
accounts. You can select a simplified chart of accounts containing only the basic accounts you
need to get started, or you can choose a detailed chart. Your selections will vary depending on
which version of Sage 50 you use. You can modify the accounts later, according to your needs.
Figure 2.5 shows the Create a New Company – Business Type window.

Figure 2.5: Create a New Company – Business Type window

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 a) Simplified Types

If you're setting up a retail, service, construction, manufacturing, or distribution

company, you have the option to set up your company using a simplified chart of
accounts. The simplified chart of accounts contains the basic accounts you need to get
started.

b) Detailed Types

If you're setting up another type of company or want to use a more extensive chart of
accounts, you can select from detailed standardized charts. These samples are customized
for a specific business type, such as a drug store, or are broader for a general company
type, such as a sales & service company.

II. Copying Settings from an Existing Sage 50 Accounting Company (LO 4)

Select this option if you want to copy setup information from another existing Sage 50 company
or are rebuilding a Sage 50 company. Figure 2.6 shows the Copy Company Window. Once you
do it, you'll see a third window that lets you select which elements you want to copy from the
existing company. Later, you can modify these elements to suit your new company. Figure 2.7
shows the Copy Company Information Window.

Figure 2.6: The Copy Company Window

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Figure 2.7: The Copy Company Information Window

III. Converting a Company from another Accounting Program (LO 5)

If you choose to convert a company that exists in another accounting software program format,
you'll see a window letting you decide on the Accounting Method. Figure 2.8 shows the
Accounting Method Window. Accounting methods will be discussed in the latter part of this
Chapter.

Figure 2.8: Accounting Method Window

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IV. Building Your Own Chart of Account (LO 3)

Select this option if you want to create a company from scratch. This option is only
recommended for experienced users comfortable setting up accounting information. If you
choose to build your own company from the ground up, you won't see any more Chart of
Accounts windows. Then you'll see a window that lets you decide if you want to divide your
account IDs into segments. You can create and define up to five segments for your account IDs.

Steps:
i. Select the 'Yes, I would like to use accounts masking' option in the Accounts
Segments Window.
ii. Enter Segment description
iii. Enter the length of the segment
iv. Select the separator

The account descriptions you enter will be used throughout the program. You'll be able to filter
reports and financial statements based on a particular segment simply by selecting the
appropriate segment from a drop-down list. Segments are helpful if you departmentalize your
chart of accounts or use any other parts of your account IDs to define different parts of your
company. Figure 2.9 shows the Define Accounts Segments Window.

Figure 2.9: Define Accounts Segments Window (LO 6)

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If you select the Building Your Own Chart of Accounts option, make sure you set up your chart
of accounts before setting up any other part of the company. Do this immediately after finishing
the Create a New Company wizard.

Class Activity 2.2 (LO 6)

AFMA 2022 (Pvt.) Ltd. has decided to build its own chart of accounts. Further, the
company decided to use segmentation of the chart of accounts as follows.
Level Segment Length Separator
description
1 Company 4 -
2 Division 2 N/A

Select the appropriate method to create the company and enter the segment parameters.

V. Consolidating Existing Sage 50 Accounting Companies (LO 7)

If you're working in Sage 50 Accounting, you can consolidate companies. A consolidated

company combines the charts of accounts of several existing Sage 50 companies to create a new
consolidated chart of accounts. The new consolidated company created in this way will let you
see consolidated financial statements for several subsidiary companies operating under an
umbrella organization, i.e., a parent company. To consolidate, you can easily add existing Sage
50 companies from the Subsidiary Companies Window. Figure 2.10 shows the Subsidiary
Companies Window.

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Figure 2.10: Subsidiary Companies Window

2.2.2 Accounting Methods (LO 8)

The Sage 50 allows you to use either an accrual or cash basis. Figure 2.11 shows the
Accounting method window.

a) Accrual Basis

In Accrual accounting, revenue is recorded in your general ledger as you invoice

customers, and expenses are recorded in your general ledger when you receive
bills from vendors, regardless of when cash is actually exchanged. This presents a
more accurate income and expenses for your Income Statement/Profit and Loss
Statement. Most companies use this method.

b) Cash Basis

In Cash-Basis accounting, revenue is recorded in your general ledger when cash

(checks, money orders, or currency) is received, and expenses are
recorded in your general ledger when paid. However, unpaid credit sales and
purchases do not show on ledgers, which can present a misleading picture of
income and expenses.

If you use cash-basis accounting, you may discover that the inventory valuation
report does not agree with the general ledger account for inventory. This is

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 because inventory uses the accrual method, while the general ledger is cash-
based. This means that the inventory records will be updated to reflect unpaid
purchases and sales, while the general ledger will not be updated until actual
money changes hands.

Note: Once you choose the accounting method and finish creating a New Company, you can't
change the method used for this company. So, be sure to select the right one.

Figure 2.11: Accounting Method Window

Class Activity 2.3 (LO 8)

Select Accrual as the accounting method of AFMA 2022 (Pvt) Ltd.

2.2.3 Posting Methods (LO 9)

Here, you must select one posting method for your data. Choose either Real-Time or
Batch. Figure 2.12 shows the Posting Method Window.

a) Real-Time Posting: Transactions are posted to the journals and the general
ledger as they are entered and saved. This method can save you time and is best
for most business and network environments. Most companies use this method.

b) Batch Posting: Transactions are saved by the program and then posted in a
group. When you use batch posting, you can print registers and check the batch of
transactions before posting them to the journals.

Note: You can switch posting methods at any time.

Figure 2.12: Posting Method Window

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Class Activity 2.4 (LO 9)
Select Real-Time as the posting method of AFMA 2022 (Pvt) Ltd.

2.2.4 Accounting Periods (LO 10)

Figure 2.13: Accounting Period Window

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You need to set your Sage 50 fiscal years along with accounting periods. The first window lets
you choose one of two options: 12 monthly accounting periods or Accounting periods that do
not match the calendar months.

Select the 12 monthly accounting period option and see the Fiscal year window. Figure 2.14
shows the Fiscal Year Window. Choose the month and year you want your fiscal year to start.

Figure 2.14: Fiscal Year Window

Suppose you choose to have some other accounting-period arrangement, select Accounting
periods that do not match the calendar months option. Then, you will see the Fiscal Year
window as depicted in Figure 2.15.

Figure 2.15: Fiscal Year Window

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Tell Sage 50 how many accounting periods you want in the fiscal year. Use the Calendar
button to choose the start date of your first fiscal year in Sage 50. Modify the dates of the
fiscal periods, if necessary.

Note: Once you finish the New Company Setup, you won't be able to change your fiscal year.
Make sure you have set these correctly before you select the Finish button.

Class Activity 2.5 (LO 10)

Enter the financial year of the AFMA 2022 (Pvt) Ltd as follows:
From 1st, April 2022 to 31st, March 2023

2.2.5 Finishing the New Company Creation Process

Congratulations! You're done when you see this window (as depicted in Figure 2.16). Click the
Finish button, and Sage 50 will create your new company. Of course, if you want to make any
changes beforehand, you can always click the Back button to return to the appropriate Create a
New Company wizard window.
Figure 2.16: Finish Window

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Class Activity 2.6
Finish the New Company Creation Process of the AFMA 2022 (Pvt) Ltd.

Figure 2.17: Creating Data Files

2.3 Viewing or Editing Company Information

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 Once you have finished creating the company, you can see or edit company information
(only allowable information). Figure 2.18 shows the Maintain Company Information
Window.

Steps:
Click Maintain from the menu bar – Select Company Information

Figure 2.18: Maintain Company Information Window

In the Maintain Company Information window (Figure 2.18), you can see your company
information, and if necessary, you can change company information except for Accounting
Method and the Fiscal Year.

2.4 Setup Guide:

The Setup Guide opens when you finish creating a new company. You can re-open it at any time
by selecting:

 File in the menu bar, then via the Setup Guide

The Setup Guide has a total of seven sections that are available from an overview page. These
pages tell you how to set up your company's

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  customers
 jobs
 vendors
 inventory and service items
 employees
 chart of accounts
 user security

The Setup Guide window is depicted in Figure 2.19. The Setup Guide assists you in entering all
the information you need to set up your company in an orderly fashion. Therefore, it can be a
handy feature in the system.

Figure 2.19: Setup Guide Window

2.5 Backup Date Files (LO 11)

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A backup is an extra copy of your data. Use one of the following ways to take a backup of your
data.

Click File Command – then Click Back Up – Select Include Company Name in the Backup
File Name – Click Back-Up Button – Select the Drive to Save the –Click Save Button.

Figure 2.20: Back-Up Data Files

Or

Select System navigation bar – Select Back Up Now tab - Include

Company Name in the Backup File Name – Click Backup Button – Select the Drive to Save
the File –Click Save Button.

Class Activity 2.7 (LO 11)

Back up the AFMA 2022 (Pvt) Ltd. data by creating a folder in the Z drive in your name.

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