Sample Chart of Accounts for a Small Company

For starters, your accounting data can quickly become unreliable and outdated, which is an especially poor turn of events when timely insights are essential. While creating a chart of accounts can be done using a spreadsheet, there’s also accounting software available designed to help facilitate your bookkeeping process. We’ll walk through the basic steps of making a chart of accounts. The best way for you or your bookkeeper to manage your chart of accounts is by using accounting software tailored for your business type.

Put another way, don’t build your COA for what your company looks like today. Instead, set it up for what you anticipate three to five years down the road, even if some of the elements you use aren’t applicable yet. Yes, we understand we are venturing into Accounting 101 territory here, but we assure you it’s for a good reason. As a matter of fact, this high-level review provides a perfect segue into our next topic. Imagine someone plops you down in the middle of a massive city and asks you to find a particular address. Even if you know that city fairly well, without a GPS or map to direct you, you’re either going to spend an awfully long time finding that address or not find it at all. Includes interest paid and accrued on debts owed by the company to lenders.

Chart of Accounts: The Small Business Owner’s Guide to the COA

It includes a list of all the accounts used to capture the money spent in generating revenues for the business. The expenses can be tied back to specific products or revenue-generating activities of the business. When setting up your chart of accounts, be sure to pay special attention to your handling of trust liability accounts to ensure you are keeping accurate records and following the rules. You can track trust bank accounts—like your IOLTA or pooled trust accounts and separate interest bearing trust accounts—on your law firm chart of accounts. This is followed by the income statement, which includes revenue and expense accounts.

It will be different for each business type, with a manufacturing company using a different chart of accounts than a service business or a nonprofit organization. If you have existing sub-accounts that you want to map sales and payments to, or you want to customise your chart of accounts, you can use the Advanced setup method. Generally, this is recommended if you’re a bookkeeper or accountant, or if you’re working with one.

How to Download Previous Transactions on Quicken

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Similarly, suppose you are drastically expanding your lines of business in the near future. In that case, it just makes sense to set up your COA to take those new lines into account, even if they aren’t operational for another year or two. This way, you’ll have room in your numbering system to add multiple cash accounts, cost accounts, or whatever else you might need. Speaking of your statements, they can play a major role in how you customize your chart of accounts. As a slight aside, it’s also important to keep in mind the relationship between your COA, GL, and financial statements. It’s actually your COA that comes first in the data chain, where your categories and identifiers funnel transactions into the ledger, which classifies them accordingly.

Liabilities

They need to be mindful of theGenerally Accepted Accounting Principles and theFinancial Accounting Standards Board, however. Your financial statement will provide details of the cash flow (i.e., credit and debit balance). Current assets will include accounts for cash on hand, such as cash in your checking and savings accounts.

The organization of accounts within the COA varies from company to company. It usually consists of the accounts that a company has identified and made available for recording transactions in itsgeneral ledger. For example, a business vehicle you own would be recorded as an asset account. A general ledger is a record-keeping system for a company’s financial data, with debit and credit account records validated by a trial balance. The current liabilities section will include short-term debt accounts like accounts payable, the account where you will record what you owe your suppliers. It also will include your accrual accounts, which include what you owe in payroll taxes and sales taxes. You might also have a current liability account for credit cards payable and short-term loans payable.

Software Company

To ensure you start out on the right foot, we’re providing you with a COA template to download and customize to your heart’s content. Ideally, you’ll take our template and bend it to your specific needs. For example, what if there’s a significant change in a technical accounting standard coming up in a couple of years?

When you log in to your account online, you’ll typically go to an overview page that shows the balance in each account. Similarly, if you use an online program that helps you manage all your Sample Chart Of Accounts For A Small Company accounts in one place, like Mint orPersonal Capital, what you’re looking at is basically the same thing as a company’s COA. You can see all your assets and liabilities, all on one page.

The balance sheet accounts

Examples of asset accounts include cash, prepaid insurance and rent, accounts receivable and equipment. As we showed with the law firm chart of accounts samples in this post, the exact details of the chart will vary depending on your firm’s situation and jurisdiction. While it’s important to do your own research , you can use the samples and the template in this post to guide you. Using technology—such as QuickBooks Online and Clio Manage together—also make this process easier and more efficient. Creating and managing a law firm chart of accounts doesn’t need to be a completely manual endeavor.

When setting up your firm’s chart of accounts, the details matter, so be sure to review each item to make sure that it is always properly attributed in your accounting system. Below, we’ll discuss using accounting software to make this easier. This means setting up your chart to include as much relevant information as possible. As time goes by, you may find yourself wanting to create a new line item for each transaction. However, doing so could litter your company’s chart and make it confusing to navigate. Instead, take advantage of your accounting software’s sub-accounts.

Starting with a small number of accounts, as certain accounts acquired significant balances they would be split into smaller, more specific accounts. However, following this strategy makes it more difficult to generate consistent historical comparisons. In this respect, there is an advantage in organizing the chart of accounts with a higher initial level of detail.

In order to get the best breakdown of transactions occurring, you’ll want to make sure you’ve set up relevant sub-accounts in your chart of accounts. For example, a brick-and-mortar store might not deal with shipping costs or revenue from charging shipping fees.

Balance Sheet Accounts

Here’s a sample chart of accounts to give you a typical overview. Your chart of accounts will likely have slightly different codes and more accounts listed. To see a working example of the entire hierarchy, click the button to download the chart of accounts template that we actually use as a starting point on our engagements. Grouping accounts under Personnel Expense and Office Administration Expense on your chart of accounts lets you easily see the total cost of personnel, or of administering the office. And, when necessary, you can drill down to the lowest level and see, for example, the exact cost of providing benefits to your team and how it compares to their salaries. Within each of these top level accounts, create sub-accounts that belong there, and then do the same for Level 3 and Level 4.

Simply put, without an informative chart of accounts that’s customized to your particular needs, your decision-makers are leading your organization with blinders on. Includes the cost of travel, meals, housing, and related expenses incurred during employee travel on company business. Includes all sales related to the provision of services to customers. For tracking purposes, it may be easier to create a separate account for each loan payable. Next, you’ll need to give each of your five main categories account numbers. Below, we’ll delve into the different types of accounts and how to number them. Mary Girsch-Bock is the expert on accounting software and payroll software for The Ascent.

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• If you needed to create a new account for the loan, you’d click Add.
• You’d credit $300 to the business’s bank account and debit $300 to the equipment account .
• The QuickBooks ‘account type’ serves as level 1 in the hierarchy.
• Instead, take advantage of your accounting software’s sub-accounts.
• Once withdrawn, the line of credit would no longer be counted as an asset—it would become a liability .
• But ultimately, how effective it is in informing your decision-makers and ensuring an efficient record-to-reportprocess is up to you.