WHAT IS CHART OF ACCOUNTS?

WHAT IS CHART OF ACCOUNTS?Basically, chart of account is categorising individual items of the accounts that the company have identified and placed it either under the same group or to its respective position.

The company can have the flexibility to modify its chart of accounts to suit its best for recording purpose.

With a proper chart of accounts being listed out, it will provide a clear understanding of the company’s transactions to the stakeholder. A chart of accounts can be seen in the company financial statements or management reports.  

 

Accounts are typically listed in the following order:

Balance Sheet:  

  • Assets
  • Liabilities
  • Owner’s Equity

Income Statement (Profit & Loss):

  • Revenue
  • Expenses
  • Non-operating Revenues and Gains
  • Non-operating Expenses and Losses

In large organisation, the accounts will be further organised based on its business functions.

Such as an organisation divides its business function into various departments, therefore each department will likely to be accountable for its own expenses.

A chart of accounts can be complex and extensive for a large organization. Whereas a small company may need as few as hundreds accounts.

Let us look at the chart of account a typical local retail business (beauty industry) have.

Balance Sheet

Current Assets 

  • Cash  
  • Petty Cash Fund
  • Accounts Receivable
  • Inventory
  • Prepaid Insurance

Non-Current Assets

  • Property, Plant, and Equipment 
  • Accumulated Depreciation – Equipment

 

Current Liabilities 

  • Accounts Payable
  • Wages Payable
  • Unearned Revenue

Equity 

  • Share Capital
  • Retained Earnings
  • Drawings

Income Statements

Operating Revenues 

  • Sales

Non-operating Revenues

  • Other Income
  • Gain on Sale of Assets
  • Loss on Sale of Assets

Operating Expenses

  • Cost of Goods Sold 
  • Salaries
  • CPF Expenses
  • Skill Development Levy
  • Foreign Worker Levy
  • Bonus
  • Director’s Remuneration  
  • CDAC
  • Staff Welfare
  • Wages
  • Utility
  • Telecommunication
  • Printing and Stationery
  • Toll and Parking
  • Petrol
  • Upkeep of Motor Vehicles
  • Upkeep of Office Equipment
  • Upkeep of Office  
  • Office Rental
  • Office Refreshment
  • Insurance
  • General Expenses
  • Penalty
  • Training & Development
  • Professional Fee
  • Accounting Fee
  • Bank Charges
  • Depreciation of Fixed Asset
  • Nets Charges
  • Advertisement
  • Travelling
  • Transportation
  • Entertainment
  • Gift and donation

 

Accounting software usually includes sample charts of accounts for various types of businesses to best suit their needs, However, It is expected that a company will modify these sample charts of accounts so that the specific needs of the company are met. Once the business is active, frequent recording of transactions is encourage to prevent backlog accounts. And for each transaction there will be 2 journal entries or double entry system of accounting. They are called credited and debited of the accounts.

To find out more on how accounting process work in your company, please contact us @ 6686 4882 today.

We provide routine bookkeeping services (monthly, quarterly, half-yearly or annually) to suit your needs.   

Are you still rushing to get your accounts up to date?

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