Chart Of Accounts…Just The Basics!!

The Chart of Accounts (COA) is critical to the financial management of your business.

A regularly maintained #bookkeeping system, with a well-ordered COA, makes the retrieval and tracking of your financial records simple.

• This will allow you to make better fiscal decisions based on updated and “real” information.

What is a Chart of Accounts (COA)?

The COA is an index and record keeping system to keep the financial records and transactions organized in the company’s general ledger.

The general ledger is the main record keeper for all a business’s financial accounts.

• Debit and credit account records are validated by a “trial balance”.

The COA tells you where to record each transaction, thus making lookup and retrieval of records manageable.

• The COA replaces the systematic paper indexing used prior to computers and appropriate software, becoming readily available.

How a Chart of Accounts (COA) Works

The COA follows the standardized principle known as Double-Entry Accounting.

• Every time something is logged into the COA, two entries are made: a debit from one account and a credit to another account.

There are five major account types in the COA which are divided into balance sheet accounts and income statement accounts (P & L).

• All COA’s will include the following categories: assets, liabilities, equity, income/revenue, and expenses.

A COA will vary between different businesses, reflecting the specifics of each business and industry.

Next up: The Inner Workings of a COA

If you have any questions regarding bookkeeping, please do not hesitate to contact us and schedule a FREE 30 minute consultation.