Accountancy Chart of Accounts, Balance Accounts, Chart of Accounts Ideas
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Accountancy Chart of Accounts, Balance Sheet Accounts, Chart of Accounts Ideas

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Chart of Accounts (COA)
A Chart of Accounts is a list of all accounts tracked by a single accounting system, and should be designed to capture financial information to make good financial decisions.

Each account in the chart is assigned a unique identifier, typically an account number. Each account in the Anglo-Saxon chart is classified into one of the five categories:

Assets, Liabilities, Equity, Income and Expenses.
A chart of accounts is a listing of the names of the accounts that a company has identified and made available for recording transactions in its general ledger.

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A company has the flexibility to tailor its own chart of accounts to best suit its needs, including adding accounts as needed in their business.
 
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Important Note
Because the material covered here is considered an introduction to the topic of Accountancy and Accounting, there are many complexities that may not be presented. You should always consult with a business accounting professional for assistance with your own specific circumstances.

The chart of accounts is a listing of all the accounts in the general ledger, each account accompanied by a reference number. To set up a chart of accounts, one first needs to define the various accounts to be used by the business.

Practitioners of accountancy are known as accountants. There are many professional bodies for accountants throughout the world. Many allow their members to use titles indicating their membership or qualification level. Examples are Chartered Certified Accountant (ACCA or FCCA), Chartered Accountant (FCA, CA or ACA), Management Accountant (ACMA, FCMA or AICWA), Certified Public Accountant (CPA) and Certified General Accountant (CGA or FCGA).

Accounting - accountancy attempts to create accurate financial reports that are useful to managers, regulators, and other stakeholders such as shareholders, creditors, or owners. The day-to-day record-keeping involved in this process is known as bookkeeping. Accounting scholarship is the academic discipline which studies accounting/accountancy.


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Introduction to Chart of Accounts

Each account that a business is going to use should have a number to identify it. For very small businesses, three digits may suffice for the account number, though more digits are highly desirable in order to allow for new accounts to be added as the business grows.

With more digits, new accounts can be added while maintaining the logical order. Complex businesses may have thousands of accounts and require longer account reference numbers.

It is worthwhile to put thought into assigning the account numbers in a logical way, and to follow any specific industry standards.

Within the chart of accounts you will find that the accounts are typically listed in the following order:

Balance Sheet Accounts

  • Balance Sheet Accounts
    • Assets

    • Liabilities

    • Owner's (Stockholders') Equity

Income Statement Accounts

  • Income Statement Accounts
    • Operating Revenues

    • Operating Expenses

    • Non-operating Revenues and Gains

    • Non-operating Expenses and Losses

Within the categories of operating revenues and operating expenses, accounts might be further organized by business function (such as producing, selling, administrative, financing) and/or by company divisions, product lines, etc.

A company's organization chart can serve as the outline for its accounting chart of accounts. For example, if a company divides its business into ten departments (production, marketing, human resources, etc.). Each department will likely be accountable for its own expenses (salaries, supplies, phone, etc.). Each department will have its own phone expense account, its own salaries expense, etc.

A chart of accounts will likely be as large and as complex as the company itself. An international corporation with several multi-national divisions may need thousands of accounts, whereas a small local retailer may need as few as one hundred accounts or less.


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Types of Accounts

Asset Accounts

Asset Accounts represent the different types of economic resources owned by a business. Common examples of Asset Accounts are cash, cash in bank, building, inventory, prepaid rent, goodwill, accounts receivable.
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Liability Accounts

Liability Accounts represent the different types of economic obligations by a business, such as accounts payable, bank loan, bonds payable, accrued interest.
Read more on Liability Accounts...


Equity Accounts

Equity Accounts represent the residual equity of a business (after deducting from Assets all the liabilities) including Retained Earnings and Appropriations.
Read more on Equity Accounts...


Revenue or Income Accounts

Income or Revenue Accounts represent the company's gross earnings and common examples include Sales, Service revenue and Interest Income.
Read more on Revenue or Income Accounts...


Expense Accounts

Expense Accounts represent the company's expenditures to enable itself to operate. Common examples are electricity and water, rentals, depreciation, doubtful accounts, interest, insurance.
Read more on Expense Accounts...


Contra Accounts

Contra Accounts, from the term contra, meaning to deduct, the value of which are opposite the 5 above mentioned types of accounts. For instance, a contra-asset account is Accumulated depreciation. This label represent deductions to a relatively permanent asset like Building.


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Sample Chart of Accounts

Balance sheet accounts tend to follow a standard that lists the most liquid assets first. Revenue and expense accounts tend to follow the standard of first listing the items most closely related to the operations of the business. For example, sales would be listed before non-operating income. In some cases, part or all of the expense accounts simply are listed in alphabetical order.

The following is an example of some of the accounts that might be included in a chart of accounts.


Asset Accounts

Current Assets

Account No. Description
1000 Petty Cash
1010 Cash on Hand (e.g. in cash registers)
1020 Regular Checking Account
1030 Payroll Checking Account
1040 Savings Account
1050 Special Account
1060 Investments - Money Market
1070 Investments - Certificates of Deposit
1100 Accounts Receivable
1140 Other Receivables
1150 Allowance for Doubtful Accounts
1200 Raw Materials Inventory
1205 Supplies Inventory
1210 Work in Progress Inventory
1215 Finished Goods Inventory - Product #1
1220 Finished Goods Inventory - Product #2
1230 Finished Goods Inventory - Product #3
1400 Prepaid Expenses
1410 Employee Advances
1420 Notes Receivable - Current
1430 Prepaid Interest
1470 Other Current Assets

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Fixed Assets

Account No. Description
1500 Furniture and Fixtures
1510 Equipment
1520 Vehicles
1530 Other Depreciable Property
1540 Leasehold Improvements
1550 Buildings
1560 Building Improvements
1690 Land
1700 Accumulated Depreciation, Furniture and Fixtures
1710 Accumulated Depreciation, Equipment
1720 Accumulated Depreciation, Vehicles
1730 Accumulated Depreciation, Other
1740 Accumulated Depreciation, Leasehold
1750 Accumulated Depreciation, Buildings
1760 Accumulated Depreciation, Building Improvements

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Other Assets

Account No. Description
1900 Deposits
1910 Organization Costs
1915 Accumulated Amortization, Organization Costs
1920 Notes Receivable, Non-current
1990 Other Non-current Assets

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Liability Accounts

Current Liabilities

Account No. Description
2000 Accounts Payable
2300 Accrued Expenses
2310 Sales Tax Payable
2320 Wages Payable
2330 401-K Deductions Payable
2335 Health Insurance Payable
2340 Federal Payroll Taxes Payable
2350 FUTA Tax Payable
2360 State Payroll Taxes Payable
2370 SUTA Payable
2380 Local Payroll Taxes Payable
2390 Income Taxes Payable
2400 Other Taxes Payable
2410 Employee Benefits Payable
2420 Current Portion of Long-term Debt
2440 Deposits from Customers
2480 Other Current Liabilities

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Long-term Liabilities

Account No. Description
2700 Notes Payable
2702 Land Payable
2704 Equipment Payable
2706 Vehicles Payable
2708 Bank Loans Payable
2710 Deferred Revenue
2740 Other Long-term Liabilities

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Equity Accounts

Account No. Description
3010 Stated Capital
3020 Capital Surplus
3030 Retained Earnings

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Revenue Accounts

Account No. Description
4000 Product #1 Sales
4020 Product #2 Sales
4040 Product #3 Sales
4060 Interest Income
4080 Other Income
4540 Finance Charge Income
4550 Shipping Charges Reimbursed
4800 Sales Returns and Allowances
4900 Sales Discounts

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Cost of Goods Sold

Account No. Description
5000 Product #1 Cost
5010 Product #2 Cost
5020 Product #3 Cost
5050 Raw Material Purchases
5100 Direct Labor Costs
5150 Indirect Labor Costs
5200 Heat and Power
5250 Commissions
5300 Miscellaneous Factory Costs
5700 Cost of Goods Sold, Salaries and Wages
5730 Cost of Goods Sold, Contract Labor
5750 Cost of Goods Sold, Freight
5800 Cost of Goods Sold, Other
5850 Inventory Adjustments
5900 Purchase Returns and Allowances
5950 Purchase Discounts

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Expenses

Account No. Description
6000 Default Purchase Expense
6010 Advertising Expense
6050 Amortization Expense
6100 Auto Expenses
6150 Bad Debt Expense
6200 Bank Fees
6250 Cash Over and Short
6300 Charitable Contributions Expense
6350 Commissions and Fees Expense
6400 Depreciation Expense
6450 Dues and Subscriptions Expense
6500 Employee Benefit Expense, Health Insurance
6510 Employee Benefit Expense, Pension Plans
6520 Employee Benefit Expense, Profit Sharing Plan
6530 Employee Benefit Expense, Other
6550 Freight Expense
6600 Gifts Expense
6650 Income Tax Expense, Federal
6660 Income Tax Expense, State
6670 Income Tax Expense, Local
6700 Insurance Expense, Product Liability
6710 Insurance Expense, Vehicle
6750 Interest Expense
6800 Laundry and Dry Cleaning Expense
6850 Legal and Professional Expense
6900 Licenses Expense
6950 Loss on NSF Checks
7000 Maintenance Expense
7050 Meals and Entertainment Expense
7100 Office Expense
7200 Payroll Tax Expense
7250 Penalties and Fines Expense
7300 Other Taxes
7350 Postage Expense
7400 Rent or Lease Expense
7450 Repair and Maintenance Expense, Office
7460 Repair and Maintenance Expense, Vehicle
7550 Supplies Expense, Office
7600 Telephone Expense
7620 Training Expense
7650 Travel Expense
7700 Salaries Expense, Officers
7750 Wages Expense
7800 Utilities Expense
8900 Other Expense
9000 Gain/Loss on Sale of Assets

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Business Tips

Some tips on how to avoid business failure:

  • Don't underestimate the capital you need to start up the business.

  • Understand and keep control of your finances - income earned is not the same as cash in hand.

  • More volume does not automatically mean more profit - you need to get your pricing right.

  • Make sure you have good software for your business, software that provides you with a good reporting picture of all aspects of your business operations.


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Important Note
Because the material covered here and other pages is considered an introduction to the topic of Accountancy and Accounting, there are many complexities not presented. You should always consult with a business accounting professional for assistance with your own specific circumstances.







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