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:
Income Statement (Profit & Loss):
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.
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.