What is the general ledger used for?
Avarni calculates Scope 3 emissions from the spend in your general ledger. It multiplies the spend in each emissions category by an emission factor for that category. The result is in tonnes of carbon dioxide equivalent (tCO2e).
Every dollar in an included account becomes emissions. The decision to include or exclude an account changes the result directly.
Which files does Avarni need?
Export these files from your finance system, then upload them to Avarni. See Upload your chart of accounts and trial balance and Upload your general ledger.
File | What it contains | Notes |
Chart of accounts | One row per account: account code, account name and account type (Asset, Liability, Equity, Revenue or Expense) | Export it flat, with no grouping, indenting or merged cells. Each account code must appear once. Avarni rejects a duplicate code. |
General ledger | One row per transaction, for the included accounts, for the full reporting period. Required: account code, date and amount. Also include the supplier name and the line description. | Export transaction-level detail, not a summary. For a group, add an entity column. For more than one currency, add a currency column. |
Trial balances | Account code and balance, at two dates | Opening: the day before the reporting period starts. Closing: the last day of the reporting period. |
Upload the chart of accounts first. The general ledger extract depends on which accounts are included.
Which accounts should be included?
Count each supplier purchase once, in the account where the supplier invoice first lands.
Account type | Default |
Expense | Include, except payroll, tax, depreciation and intercompany. |
Asset | Include only where supplier invoices post first: plant and equipment, vehicles, IT hardware, inventory and prepayments. Exclude cash, bank, debtors, investments and accumulated depreciation. |
Liability | Exclude, except an invoice clearing account where supplier invoices post first. |
Revenue | Exclude. |
Equity | Exclude. |
If you are unsure about an account, include it and flag it. Rows for an excluded account are not loaded. Rows in an included account can be left out later with a rule.
What is left out?
Payroll and superannuation.
Taxes: GST, income tax and payroll tax.
Intercompany accounts and charges.
Cash and bank accounts.
Month-end accruals and their reversals.
Rebate and refund income. Keep a credit note inside an expense account, because it corrects a purchase.
Investments.
Fines, statutory levies and donations. Include a charge for a service you receive, such as council waste collection.
Depreciation, amortisation and accumulated depreciation.
For insurers: claims paid and claims provisions. Include your own claims-handling costs.
How is inventory treated?
Include the account where stock invoices first land, as Purchased goods and services. Exclude cost of goods sold and stock movements. Never count both.
If stock is expensed when it is bought, with a stock adjustment at year end, see How do I treat inventory and cost of goods sold?
When is a liability account included?
Most liability accounts hold the other side of a purchase. The cost is already in an expense or asset account. Exclude accounts payable, GRNI and GR/IR, accrued expenses, provisions, loans and tax payable.
Include a liability account only when supplier invoices post to it first, and a journal later moves the cost to an expense or asset account. Then exclude those transfer journals. See Which liability accounts can hold purchases?
How do you decide a flagged account?
Avarni suggests a category for each account from its code, name and type. It flags an account when it is uncertain, or when the category does not suit the account type.
For each flagged account, answer three questions:
Do supplier invoices post to this account first?
What does the account mainly buy?
Is the same spend also recorded in another account?
Answers | Decision |
1 is no | Exclude. The account holds journals, allocations or the other side of a purchase. |
1 is yes, 3 is no | Include. Set the category from the answer to 2. |
3 is yes | Count the spend in one account only: the account where the invoice first lands. Exclude the other. |
Write the answers in one or two sentences. This becomes the justification your auditor reads. For example: "Supplier invoices post here first. Holds contractor repairs to plant and buildings. Not recorded in another account."
If your finance team and your sustainability team share the review, the finance team answers the three questions. The sustainability team sets the category and records the justification.
Which accounts should you review first?
Use the trial balance. Start with the accounts that have the largest movement between the opening and closing balance. These have the most effect on the result.
For an expense account, the movement is the closing balance, because the account opens the year at zero.
What happens after the general ledger is loaded?
Avarni checks each included account against the trial balances:
Opening balance + ledger transactions = closing balance
If an account does not tie out, find the cause. Check for these:
A month missing from the extract.
An entity or account left out of the extract.
Opening balance journals included in the extract.
To add missing transactions, upload a separate file that contains only the missing rows. A row that is in two files is counted twice.
What if the chart of accounts changes during the year?
Upload the full updated chart of accounts. Decisions stay on accounts whose codes do not change. An account with a new code is a new account and needs a decision.
Avarni cannot change an account type. If a type is wrong, correct it in the file and upload the chart of accounts again.
What carries over to next year?
The chart of accounts carries over. The account decisions and the classification rules are set up again in each year's assessment.