Q: Could you please define what is an inserted account with an example of when we would use it?
A: It depends on the spreading system you use. Some systems allow no accounts to be inserted while others allow an array of accounts to be inserted in various sections of the income statement and balance sheet.
One of the more commonly inserted accounts is an operating expense account that is not captured by the default set of operating expense accounts. For example, a company may have a particular operating expense, such as “Employee Weekly Lunches and Recreational Fees”, and wishes to use an account to capture this expense separately rather than burying it in a more general account such as “Other Operating Expenses”. If so, it could insert an additional account in the operating expense section of the income statement and give the account that particular name.
In addition, it is common to insert accounts in the revenue section of the income statement if a company provides details about revenue from several product lines.
In any case, be careful to clearly understand where the inserted account shows up in a) the income statement or balance sheet, b) the ratios report, and c) the cash flow statements.
Course overview: Spreading Financial Statements