Introduction to Chart of Accounts
A chart of accounts (COA) is a financial statement that displays a total listing consists of all accounts in an accounting system. An account is a distinct record for every type of revenue, liability, expense, equity and asset (Also see Intangible Assets). This is a tool where all accounting firm in Johor Bahru used to prepare accounts.
A COA consists of the names of the accounts and transactions that are recorded in the general ledger. Usually, a COA includes the accounts’ names, short descriptions and identification numbers.
The COA acts as the structure for a business’s financial bookkeeping system. It offers a logical framework to add new accounts and remove old accounts.
In the COA, accounts in the financial statements are listed in order. Regularly, balance sheet accounts are listed first; the profit and loss accounts are behind the balance sheet accounts (Also see Accounting – How Balance Sheet relate to Profit and Loss?).
Balance sheet accounts consist of assets accounts, liabilities accounts, owner’s or shareholder’s equity (Also see Accounting – Equity and Liabilities). Income statement accounts include operating revenues accounts, operating expenses accounts, non-operating revenues and gains accounts and non-operating expenses and losses accounts. The accounts in the categories of operating expenses and operating revenues could be organized according to the business’s functions, product lines or company divisions. Examples of business functions are for selling, producing, financing or administrative.
One of the crucial function of a COA is to separate revenue, expenses, liabilities and assets to enable viewers to understand the business’s financial status quickly. A well-prepared COA gives the information that the management needs and also helps a company to adhere to financial reporting requirements. A company has the versatility to customize its chart of accounts to fit its requirements. In the categories of operating expenses and operating revenues. For example, accounts could be further arranged by company divisions or by business functions.
A COA is probably as complicated and as large as the company. A worldwide corporation with numerous divisions might have countless accounts, whereas a small merchant might require a few accounts.