INTUIT | QUICKBOOKS | CHAPTER 7 OF 200
Navigating the Chart of Accounts in QuickBooks Pro 2021 Desktop: Your Key to Organized Financial Tracking! 📊💼
What is the Chart of Accounts? #ChartOfAccounts
Accounting 101
What exactly is a Chart of Accounts (COA)?
Examples of Account Types
- Purchase of stationery — Expense
- Electricity Bill — Utility Expense
- Purchase of goods for sale — Inventory
- Sales of goods — Revenue
- Acquiring of Air Conditioner — Asset
- Dinner for staff — Expense
- Purchase of Computer — Asset
- Raw Material Purchase — Inventory
Examples of account types with respect to the chart of accounts:
- Assets: These are resources that a company owns and that have economic value. Examples of assets include cash, accounts receivable, inventory, property, plant, and equipment.
- Liabilities: These are debts that a company owes to others. Examples of liabilities include accounts payable, accrued expenses, and loans payable.
- Equity: This is the ownership interest in a company. It is the difference between the company’s assets and liabilities.
- Revenue: This is the income that a company generates from its business activities. Examples of revenue include sales revenue, service revenue, and interest revenue.
- Expenses: These are the costs that a company incurs in order to generate revenue. Examples of expenses include cost of goods sold, operating expenses, and interest expense.
Specific examples of accounts within each of these categories:
Assets:
- Cash
- Accounts receivable
- Inventory
- Prepaid expenses
- Property, plant, and equipment
Liabilities:
- Accounts payable
- Accrued expenses
- Notes payable
- Long-term debt
Equity:
- Common stock
- Retained earnings
Revenue:
- Sales revenue
- Service revenue
- Interest revenue
- Dividend income
Expenses:
- Cost of goods sold
- Operating expenses
- Selling expenses
- Administrative expenses
- Interest expense
Various account types in relation to the chart of accounts are only briefly illustrated by these examples. Different businesses will use various accounts depending on the company's operations and industry.
What is a COA?
List of accounts, designed specifically for your company, that helps you track and report each class of items for which money is spent or received.
- Aligns with your financial structure
- Offers the level of detail required in your financial statements
- Indexed list of accounts — classifications and sub-classifications that are used to classify your financial transactions
The Core of Your Accounting System
That’s right! The chart of accounts (COA) is the core of your accounting system. It is a list of all the accounts that your business uses to track its financial transactions. The COA is used to categorize your transactions, which helps you to generate accurate financial reports.
A well-designed COA will be:
- Consistent: The COA should be consistent with generally accepted accounting principles (GAAP) and with the specific needs of your business.
- Flexible: The COA should be flexible enough to allow you to add or delete accounts as your business grows or changes.
- Easy to use: The COA should be easy to use for both you and your accountant.
The COA is an important part of your accounting system, so it is worth taking the time to design it carefully. A well-designed COA will help you to track your finances accurately and to generate useful financial reports.
The benefits of having a well-designed COA:
- Accuracy: A well-designed COA will help you to track your finances accurately. This is important for making informed business decisions and for complying with financial reporting requirements.
- Clarity: A well-designed COA will make it easy to understand your financial statements. This is important for investors, creditors, and other stakeholders.
- Efficiency: A well-designed COA will help you to save time and money. This is because you will not have to spend time trying to figure out where to record your transactions.
If you are not sure how to design a COA, you can consult with an accountant or with a bookkeeping software program. There are also many resources available online that can help you to learn more about COAs.
Select Your Industry Type:
- QuickBooks will prompt you to select your industry type. Choose the one that best fits your business.
Here are some additional things to keep in mind when selecting a COA:
- The COA that you select will determine how your transactions are categorized in QuickBooks. This is important because it will affect how your financial reports are generated.
- If you are still determining which COA to select, you can always start with the Account Chart and then customize it later.
- You can also add or delete accounts from your COA at any time.
QuickBooks Pro 2021 Desktop Numbering System
Once you have turned on the account numbers feature, you can assign account numbers to your accounts. You can use any numbering system that works for your business, but here is one that many businesses frequently use:
- 10000–19999: Assets
- 20000–29999: Liabilities
- 30000–39999: Equity
- 40000–49999: Income or Revenue
- 50000–59999: Job Costs or Cost of Goods Sold
- 60000–69999: Expenses or Overhead Costs
- 70000–79999: Other Income
- 80000–89999: Other Expense
QuickBooks Numbering system
Flash Cards for “What is a COA (Chart of Accounts)?
“What is a COA (Chart of Accounts)?”
Flash Card 1:
Question: What does COA stand for in accounting?
Answer: COA stands for “Chart of Accounts.”
Flash Card 2:
Question: What is a Chart of Accounts?
Answer: A Chart of Accounts is a structured list of all the accounts used in the financial records of a business or organization.
Flash Card 3:
Question: What is the purpose of a Chart of Accounts?
Answer: The purpose of a Chart of Accounts is to categorize and organize financial transactions, making it easier to record, track, and report on the company’s financial activities.
Flash Card 4:
Question: How is a Chart of Accounts structured?
Answer: A Chart of Accounts typically consists of a numerical or alphanumeric coding system assigned to each account, along with a description of the account’s purpose.
Flash Card 5:
Question: What are the main categories in a Chart of Accounts?
Answer: The main categories in a Chart of Accounts include assets, liabilities, equity, income, and expenses.
Flash Card 6:
Question: Why is a well-organized Chart of Accounts important?
Answer: A well-organized Chart of Accounts provides clarity and consistency in financial reporting, which facilitates decision-making and financial analysis.
Flash Card 7:
Question: Who creates a Chart of Accounts for a company?
Answer: The Chart of Accounts is typically created and maintained by the company’s accounting or finance department.
Flash Card 8:
Question: Can a Chart of Accounts be customized?
Answer: Yes, a Chart of Accounts can be customized to suit the specific needs and nature of the business or organization.
Flash Card 9:
Question: How often is a Chart of Accounts updated?
Answer: A Chart of Accounts is updated as the company’s financial needs change, such as when new accounts are added or existing ones are modified or removed.
Flash Card 10:
Question: What software is commonly used to manage a Chart of Accounts?
Answer: Accounting software like QuickBooks, Xero, or SAP are commonly used to manage and maintain the Chart of Accounts efficiently.
Feel free to use the above flashcards to learn about the Chart of Accounts! You can print them out or use digital flashcard apps to practice and reinforce your knowledge of this accounting concept.
Mind Map: What is a COA (Chart of Accounts)?
