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.
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.
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.
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
- Owner's (Stockholders') Equity
Income Statement Accounts
- Income Statement Accounts
- Operating Revenues
- Operating Expenses
- Non-operating Revenues and Gains
- Non-operating Expenses and Losses
- Operating Revenues
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.
Types of 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.
Read more on Asset 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 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 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, 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.
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.
|1010||Cash on Hand (e.g. in cash registers)|
|1020||Regular Checking Account|
|1030||Payroll Checking Account|
|1060||Investments - Money Market|
|1070||Investments - Certificates of Deposit|
|1150||Allowance for Doubtful Accounts|
|1200||Raw Materials Inventory|
|1210||Work in Progress Inventory|
|1215||Finished Goods Inventory - Product #1|
|1220||Finished Goods Inventory - Product #2|
|1230||Finished Goods Inventory - Product #3|
|1420||Notes Receivable - Current|
|1470||Other Current Assets|
|1500||Furniture and Fixtures|
|1530||Other Depreciable Property|
|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|
|1915||Accumulated Amortization, Organization Costs|
|1920||Notes Receivable, Non-current|
|1990||Other Non-current Assets|
|2310||Sales Tax Payable|
|2330||401-K Deductions Payable|
|2335||Health Insurance Payable|
|2340||Federal Payroll Taxes Payable|
|2350||FUTA Tax Payable|
|2360||State Payroll Taxes 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|
|2708||Bank Loans Payable|
|2740||Other Long-term Liabilities|
|4000||Product #1 Sales|
|4020||Product #2 Sales|
|4040||Product #3 Sales|
|4540||Finance Charge Income|
|4550||Shipping Charges Reimbursed|
|4800||Sales Returns and Allowances|
Cost of Goods Sold
|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|
|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|
|5900||Purchase Returns and Allowances|
|6000||Default Purchase Expense|
|6150||Bad Debt Expense|
|6250||Cash Over and Short|
|6300||Charitable Contributions Expense|
|6350||Commissions and Fees 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|
|6650||Income Tax Expense, Federal|
|6660||Income Tax Expense, State|
|6670||Income Tax Expense, Local|
|6700||Insurance Expense, Product Liability|
|6710||Insurance Expense, Vehicle|
|6800||Laundry and Dry Cleaning Expense|
|6850||Legal and Professional Expense|
|6950||Loss on NSF Checks|
|7050||Meals and Entertainment Expense|
|7200||Payroll Tax Expense|
|7250||Penalties and Fines Expense|
|7400||Rent or Lease Expense|
|7450||Repair and Maintenance Expense, Office|
|7460||Repair and Maintenance Expense, Vehicle|
|7550||Supplies Expense, Office|
|7700||Salaries Expense, Officers|
|9000||Gain/Loss on Sale of Assets|
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
- 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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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.