The Chart of accounts | Intro, Example with Explanations

The Chart of accounts | Intro, Example with Explanations

Chart of Accounts Tools to Use Serving Financial Statement Entity.

A chart of accounts is a list of name of all accounts used in the general ledger of an organization. The chart of accounts is used by the organizational tool that serves complete listing of the transaction for the entity financial statements and also important tools chart of accounts for small business. The chart is usually used the numeric number to an easy task to track each type of assets, liability, equity, revenue and expenses.

A chart of accounts named of accounts that the company has traced and made available accounts transaction in its general ledger. That indicates establishing the level of detail tracked in the recording system. Generally, a cash of accounts keeps records the accounts name, brief description and identification codes and also help to prepare cash flow statement.

The accounts are listed on the financial statement as their appearance; the starting point is balance sheet and continuing with the income statement. The charts of accounts start with cash, liabilities and stakeholder’s equity then continue with accounts for revenue and then expenses. Most of the organizations maintain their chart of accounts structure. So that reasons, expense information is separately implemented by the department, such as sales department, engineering department, and accounting department all are the same expense accounts and it’s also help the users of the financial statement. 

Distinctive accounts found in the chart of accounts are:

Assets:

  • Cash (main account)
  • Cash (payroll account)
  • Petty cash
  • Marketable security
  • Accounts receivable
  • Allowance for doubtful accounts
  • Prepaid expense
  • Inventory
  • Fixed assets
  • Accumulated depreciation
  • Other Assets

Liabilities:

  • Accounts payable
  • Notes payable
  • Tax payable
  • Wages payable
  • Accrued liabilities

Stake holder’s equity:

  • Common stock
  • Preferred stock
  • Retained Earnings

Revenue:

  • Sales return and allowance
  • Revenue

Expenses:

  • Cost of Goods Sold
  • Advertising Expense
  • Bank Fees
  • Depreciation Expense
  • Payroll Tax Expense
  • Rent Expense
  • Supplies Expense
  • Utility Expense
  • Wages Expense
  • Other Expenses

The chart of accounts

Chart of Accounts Example and Templates:

Chart of accounts example is given below:

Chart of accounts

NumberDescriptionAccount TypeFinancial statement
1-010CashAssetsBalance Sheet
1-020Accounts ReceivableAssetsBalance Sheet
1-030Prepaid ExpensesAssetsBalance Sheet
1-040InventoryAssetsBalance Sheet
1-050Fixed AssetsAssetsBalance Sheet
1-060

 

Accumulated DepreciationAssetsBalance Sheet
1-070Others AssetsAssetsBalance Sheet
1-080Accounts payableLiabilityBalance Sheet
1-090Accrued LiabilityLiabilityBalance Sheet
1-100 

Tax payable

 

Liability

 

Balance Sheet

1-110Payroll payableLiabilityBalance Sheet
1-120Notes payableLiabilityBalance Sheet
1-130Common StockEquityBalance Sheet
1-140Retained EarningsEquityBalance Sheet
1-150Additional Paid capitalEquityBalance Sheet
1-160RevenueRevenueIncome statement
1-170Sales retune and AllowanceRevenueIncome statement
1-180Cost of goods soldExpensesIncome statement
1-190Advertising expenseExpensesIncome statement
1-200Bank feeExpensesIncome statement
1-210Depreciation expensesExpensesIncome statement
1-220Payroll tax expensesExpensesIncome statement
1-230Utility ExpensesExpensesIncome statement
1-240Wages ExpensesExpensesIncome statement
1-250Other ExpensesExpensesIncome statement

Best practices of Chart of accounts:

The chart of accounts concepts for a company is as following below;

  • Consistency: One of the most popular methods to initially create the chart of accounts that is unlikely to charge for several years. In this way, you may compare the results in the same accounts over a multiyear period of time. You start up the business the number of accounts was small but it will grow gradually after some days. It will more difficult to get compare financial information with past year.

 

  • Lockdown: without a very good reason do not permit the subsidiary to charge the standard chart of accounts. Since it has many version in use makes it more difficult to consolidate the result of business.

 

  • Size reductions: If any account contains relatively immaterial amounts then no need this report in the special reports. Close these accounts and doing the account manageable level.

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