Did you know that in accounting that the chart of accounts is the first and foremost important step to take before a company  even starts to input transactions into their financial records? It is considered like a foundation.  Everything builds up from it.  Without a good foundation, everything on it will fall.  In considering your chart of accounts, it can be rather basic but can become more complicated the larger the business is. When you set up a chart of accounts, you must first make sure you assign account numbers to all the accounts. This will make your chart of accounts easier to read, and if you have any subaccounts, it will allow you to create those with ease after you have created your original chart of accounts. The numbering scheme is important since it will categorize your types of transaction and group them accordingly in a numerically ordered fashion.  Looking at an example below, here is how you would set up the numbering.

Assets  
Current Assets  
1000 checking
1200 inventory
Fixed Assets  
1300 office equipment
Other Assets  
1400 leasehold improvements
Libilities and equity  
Current Liabilities  
2000 accounts payable
2060 note payable
Long Term Liabilities  
2700 line of credit
Equity  
3030 capital investments
3200 owners drawing
Sales and Cost of Goods Sold  
Sales  
4001 furniture
Cost of Goods Sold  
5001 furniture
Expenses  
selling expenses  
6000 commissions
administrative expenses  
6061 advertising
6062 automobile expense
6067 cleaning and maintenance
6092 insurance-workers comp
6100 meals and entertainment-owner
   

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