TWEET IT! The accounting chart of accounts helps you organize information in your company. Write down how and why it can help you!
Therefore, investing time in understanding and planning it will translate into many benefits in its use. And, from there, advantages will be derived in the work democratic republic of the congo email list
productivity of the accounting team and in the quality of the financial information .
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1)What is an accounting chart of accounts?
It is a disaggregated list of all the accounts that you will use in your accounting. Typically, it includes the following elements for each account:
Name .
Account numbering . This can be, for example, a decimal or alphanumeric code.
Account description . You should write down what you include in your account. This will help you avoid confusion with other accounts.
Relationships with other accounts . When and why the account is charged or credited and which accounts are credited or debited.
2)What is this tool for?
It is a tool for organizing accounting information . With it, you will achieve several purposes:
Organize accounts into different groups, subgroups, and other levels. In each of these, you will have accounts that share something and whose amounts you may be interested in, adding up, or comparing with others.
Organize the processes of accounting for entries . It is even an instrument that favors automation , since we know what the possible combinations are behind the most common operations.
Format your reports , which will be generated from the information organized by your chart of accounts. This is very important when you want to access data with a high level of disaggregation. In short, it determines how far the detail of your accounts can go and where it is focused.
A good accounting chart of accounts adds greater value to your company's accounting information.
3) How does the General Accounting Plan affect?
The General Accounting Plan is a reference, but it does not force you to follow its steps to the letter to prepare your own accounting chart of accounts. You can call the accounts whatever you want, with the codes and names you want. In fact, if it suits you, you can follow its structure and adapt it to your needs, including new accounts or levels of disaggregation not foreseen.
However, you must respect the chart of accounts of the General Accounting Plan in everything that involves recording and valuation criteria . For example, if it says that certain operations must be carried out at closing , you must proceed in this way to reflect it in your annual accounts and in your accounting books.
On the other hand, other sections of the General Accounting Plan will determine your own chart of accounts . Keep in mind that the mandatory parts will require you to maintain a certain order in the way you organize your accounting.
4)How is it ranked?
The normal thing is that you break it down progressively . Let's look at an example to understand it better. Imagine that you have a business in which you manufacture and sell handcrafted wood products, both your own and from other producers, and that:
You have a group 3 which contains your inventory accounts. Within it you will have accounts for merchandise; raw materials; other supplies; work in progress, semi-finished products; finished products; by-products, waste and recovered materials, as well as accounts representing the impairment of these assets.
Within group 3, you create a subgroup 30 to reflect the accounts for the goods you purchase from other artisans to sell in your shop.
You break down subgroup 30 by type of wood: oak, beech, chestnut, walnut, birch, holm oak, pine, etc. For example, account 300 could include oak goods.
Within account 300 you could break down oak merchandise intended to be used as construction material, furniture, kitchen utensils, tools, etc. Construction materials could go into account 3,000.
In the breakdown of account 3,000, you could include beams, battens, joists, jambs, lintels, etc.
You can continue to break down the wood as much as you need. The important thing is to enter information that is relevant to you at each level . Another company might have prioritized the wood by national origin, others by size, by paints and varnishes applied, by year of cutting… Maybe you do it at different levels because your needs are different.
And you repeat this same process with any other type of accounts . Just as you classify your stock, you will do the same with your clients and debtors, your real estate investments, bank financing, personnel expenses and everything else.
5)How is the accounting chart of accounts used?
The ideal is to use specific software , such as Sage 50 , for example. With this type of tool, you can perform various tasks, such as :
Configure the accounting chart of accounts according to your needs. For example, you can add, merge or delete an account, change its name, etc.
Take advantage of the structure you have designed to generate filters . You will be able to see the information related to specific accounts and extract extracts of what interests you at any given time.
Apply arithmetic operations to calculate financial statement figures, ratios , and other accounting and financial indicators. For example, you can add the amount in two or more accounts and divide it by the amount in another account.
An accounting chart of accounts is an ally in converting accounting data flows into truly useful information for your company . Configuration decisions will affect how you can access the details of what is happening in your business.
