A chart of account refers to a list of accounts, each of which is assigned a unique number. This number is used to organize financial information in a master ledger of accounts. A chart of accounts can track all kinds of business information, including expenses, revenues, assets and liabilities. A business chart of accounts can be managed on paper or through software programs made specifically for accounting chart of accounts.

Standard chart of accounts training can be found through many resources. Some offer a sample, so you can get an idea of what your businesses chart of account would look like. You can find many chart of accounts education and training options through:

1. Business resources that offer a sample chart of accounts.

2. Instructional tutorials that go through the process step by step.

3. Training guides that take you through chart of accounting.

Action Steps
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Explore business resources that show you examples of chart of accounts

To learn about chart of accounts, many accountants and bookkeepers need to see an example. Online business resources can provide an overview of the chart of accounts process, as well as sample chart of accounts that can get bookkeepers started using their own system for business.

I recommend: The NetMBA Business Knowledge Center offers an outline of the chart of accounts process, complete with a sample chart of accounts. AccountingCoach provides similar samples, as well as a question and answer section that provides addition information on the topic.

Consider using tutorials to learn charts of accounts

If you want to have a step by step instruction guide to creating charts of accounts, consider using tutorials. These tutorials put this accounting practice in easy to understand language with plenty of examples to show you how different labeling and organization systems work.

I recommend: College-Cram.com provides a free tutorial that teaches the basics of chart of accounts and how to set one up. MiddleCity offers an accounting tutorial for businesses, which includes how to set up a chart of accounts.

Learn how to create standard chart of accounts with online training tools

Many businesses that use chart of accounts also provide employees with online access to training guides and tools that help them create charts of accounts. Most can be accessed for free and are another way to get detailed directions on organizing a chart of accounts for any type of business.

I recommend: The University of Vermont offers a training guide on the use of the PeopleSoft program for making a chart of accounts. Virginia State University offers many training opportunities for learning chart of accounts, including a PowerPoint presentation and training supplements.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  If you work for a particular industry, consult chart of accounts resources and tutorials that are specific to your field. You can learn to create chart of accounts for construction, manufacturing, non-profits and many other industries.

A business chart of accounts is the same as an accounting chart of accounts, they are both an organized list of all the accounts in the general ledger. To allow for easy identification, most accountants assign specific first digits to help identify the type of account. This step isn't required, but doing so makes organizing, adding and tracking all the accounts in a standard chart of accounts more efficient because they are so easily identifiable. This level of detail becomes increasingly important as the number of accounts listed grows.

The number of accounts listed in a chart of accounts is dependent upon the size of the company and the industry in which the company does business. The following is a typical sample chart of accounts list.

1. Current Assets chart of accounting includes all assets such as, cash, accounts receivable, inventory and supplies.

2. Property, Plant and Equipment chart of accounts give title to all land, equipment, buildings and vehicles the company owns or leases. This chart of accounts listing must also include all respective accumulated depreciation.

3. Liabilities and Owner's Equity chart of accounts includes all payable accounts, long and short-term liabilities, common stock, retained earnings and stockholder's equity.

Action Steps
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Begin building your business chart of accounts with a rough draft

Before making any permanent entries into the permanent chart of accounts, make a rough list of accounts and assign numbers to them.

I recommend: Look at a sample chart of account at Learning Link Finders, Inc. and The Entrepreneur Network to see what your business chart of account should look like.

Allow room to add new charts of accounts in the future

The chart of accounts list grows as your business grows. Leaving enough space between different accounts makes it easier to add the new accounts into your accounting software program.

I recommend: Use Peachtree Premium Accounting software from Sage Software and Quickbook financial software by Intuit Inc. makes organizing the chart of accounts for your business easy.

Make the chart of accounts list as detailed as possible

The more detail you have in your chart of accounts list, the easier and faster it is to track each account. Assign a specific first digit to all major accounts and then, break it down further by making charts of accounts for each individual department within the company.

I recommend: Buy industry specific chart of account software from Inphinet Interactions Communications, Inc. and Tech Target.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Keep the financial accounts of your business up to date by regularly maintaining and updating the information in the chart of accounts. In order to ensure that bookkeeping chart of accounts is up to date, enter all financial transactions on a daily basis.

A chart of accounts is a method of organizing all types of financial transactions into a single ledger so a business can get an accurate picture of its financial health. For a small business, a chart of accounts might be a very simple affair; a large business could have a lengthy and complex list.

Though there are standard ways of organizing a chart of accounts, the system also allows for flexibility. Accountants are free to track whatever accounts they see fit, and categorize accounts in whatever way makes the most sense.

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Account

In the context of the accounting cycle, 'account' can refer to any type of financial transaction, each of which is recorded into the chart of accounts ledger. In most accounting systems, accounts are divided into five categories: assets, liabilities, equity, revenue and expenses.

I recommend: AccountingAide.com lists these categories, as well as the types of accounts that might be recorded under each.

Index, code or key

When recording transactions in a master ledger, accountants assign each account a code, usually a number. Ideally, this is done in a systematic manner to prevent confusion and make it easy to prepare an account summary. The chart of accounts is the code that relates the numbers to the type of account.

I recommend: The Entrepreneur Network has a great tutorial with a detailed example of a chart of accounts system.

Assets

The assets category of a chart of accounts includes cash, accounts receivable and tangible items like equipment. This is usually the first category in a chart of accounts system; when an earnings statement is needed, the accountant can simply add up the first block of figures.

I recommend: QuickBooks explains how assets fit in to a chart of accounts.

Liabilities

Liabilities can include accounts payable, payments due on loans, payroll and taxes. In business, it is usually necessary to take on liability in order to pay employees and acquire inventory, for instance. Companies that pay their current liabilities will be able acquire more in the future.

I recommend: MoneyInstructor.com defines liability as it relates to business accounting.

Owner's equity

Owner's equity is essentially assets minus liabilities. The phrase itself implies sole proprietorship; otherwise, the correct term would be stockholder's equity. Accounts in this category might include common stock and retained earnings.

I recommend: AccountingCoach.com has a great tutorial on owner's equity.

Revenue and expenses

Revenues and expenses are much like assets and liabilities; but in a chart of accounts system, assets and liabilities carry over from year to year, while revenues and expenses start from zero.

I recommend: Bean Counter has an in-depth explanation of revenue and expenses.