A chart of accounts is a tool to categorise a company┬┤s financial
activities, thus creating a better overview.
Companies must have a suitable chart of accounts and there are no provisions
as to the contents and structure of a chart of accounts. Only an outline
provision stating that a company must have a chart of accounts designed for its
individual requirements. This means that you are allowed to design your own
Structure of the accounts
The purpose of a chart of accounts is to secure a fixed structuring of the
accounts created in the bookkeeping.
Typically, the chart is structured like this:
Standard chart of accounts
- Accounts concerning the day-to-day running of the company - show the
company┬┤s earnings and expenses (Profit and loss)┬á
- Asset accounts - show the values in the company (Assets)
- Liability accounts - show the debt/financing of the company (Liabilities)
In all bookkeeping programmes for PC there is a standardised chart of accounts.
Therefore, you need to adjust it to suit your company┬┤s specific requirements.
However, in many aspects it suits most small companies as it is. There are
probably a lot of unnecessary accounts for your specific needs. Just delete
Account and information
When you make an account plan for your company you need to know which
activities you want to have information about. The shortest account plan you can
make consists of two accounts:
If you have only got these two accounts for registering information about
your company┬┤s economy, you will not be able to find out which activities are
working well or badly. The only thing you can see is if the company in general
is loosing or making money. This is too little information for a modern project
Consider carefully what information you need from your new business. The
information you need should be shown in the account plan.
Account and numbering
Each account has - besides its name - its own number. It makes it easier to
work with in the daily work with the accounting.
- Go to next business issue: Example of an Account Plan