Bookkeeping Chart of Accounts

Do yo need to create a bookkeeping chart of accounts?

Whether you choose to do your bookkeeping yourself or pay someone to do it for you, you will need to develop a bookkeeping chart of accounts.

So What is a Chart of Accounts?

A chart of account is basically a list of the accounts within your accounting system that are used to record all of the transactions that occur as you run your business. The accounts are classified as Assets, Liabilities, Equity, Revenue and Expenses. Liabilities, Equity and Revenue are credit accounts, and Assets and Expenses are debit accounts.

The actual accounts in the Asset, Liability and Equity categories are usual fairly standard and will match the accounts reported in the Balance Sheet.

The number and type Revenue, Cost of Goods Sold (a special category of expenses) and Expenditure accounts will vary depending on the kind of business you are running. Your revenue accounts should match your major products or services, your cost of goods sold should be aligned to the revenue items. All of your other expenses would normally be further broken down into selling and administrative expenses.

Your revenue, cost of goods sold and expenditure accounts will be reported in your Income Statement.

Getting the Balance Right

The more accounts you add to your chart of accounts, the better the information you can get out of your accounting system will be. The downside of that argument though, is that the more accounts you have, the more work is involved in recording your transactions.

The decision about which accounts to include in your chart of accounts is about getting the balance right between the amount and quality of information you need to run your business and time investment required to maintain your books.

A Sample of a Simple Chart of Accounts

Would you like to see a sample of a simple chart of accounts?

Just click on this link to open a page where you can download or print a copy for yourself.

Where to get Help with your Chart of Accounts

Talk to your Accountant. If you don't have one - get one.

A good Accountant with relevant experience working with small business is not only a good idea, it is vital if you want your small business to succeed.

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