Sample Chart Of Accounts For A Small Corporation
A chart of accounts is a list of all the accounts used by a business to record its financial transactions. It's a vital tool for managing a company's finances, and it helps to keep track of income, expenses, assets, and liabilities. If you're starting a small corporation, you need to create a chart of accounts that works for your business. In this article, we'll take a look at a sample chart of accounts for a small corporation.
What Is A Chart Of Accounts?
A chart of accounts is a list of all the financial accounts used by a business. It's a system that helps to organize and categorize financial transactions. Each account has a unique number, name, and a description. A chart of accounts is used to track the financial performance of a business.
Why Is A Chart Of Accounts Important?
A chart of accounts is important because it helps to keep track of a business's financial transactions. It allows a business owner to see where the money is coming from and where it's going. A chart of accounts helps to organize financial information in a way that's easy to understand. It's also necessary for tax purposes and for preparing financial statements.
How To Create A Chart Of Accounts?
Here are the steps to create a chart of accounts for a small corporation:
- Start by identifying the accounts you need to track. This will depend on the nature of your business, but typically includes assets, liabilities, equity, income, and expenses.
- Create a numbering system for your accounts. This will help you keep track of them and organize them. For example, assets could be numbered 100-199, liabilities 200-299, equity 300-399, income 400-499, and expenses 500-599.
- Name each account. Use descriptive names that are easy to understand. For example, "Cash" for the asset account and "Rent Expense" for the expense account.
- Assign each account to a category. This will help you organize and track financial transactions. For example, the "Cash" account would be assigned to the "Assets" category.
- Set up your chart of accounts in your accounting software. This will allow you to track financial transactions and generate financial reports.
Sample Chart Of Accounts For A Small Corporation
Here is a sample chart of accounts for a small corporation:
Assets
- 100 Cash
- 110 Accounts Receivable
- 120 Inventory
- 130 Prepaid Expenses
- 140 Property, Plant, and Equipment
Liabilities
- 200 Accounts Payable
- 210 Accrued Expenses
- 220 Notes Payable
- 230 Unearned Revenue
Equity
- 300 Common Stock
- 310 Retained Earnings
Income
- 400 Sales Revenue
- 410 Interest Income
Expenses
- 500 Cost of Goods Sold
- 510 Rent Expense
- 520 Salaries and Wages Expense
- 530 Utilities Expense
- 540 Advertising Expense
- 550 Depreciation Expense
This is just a sample chart of accounts, and it may not be suitable for every business. You'll need to customize it based on the nature of your business and the accounts you need to track.
Conclusion
A chart of accounts is an essential tool for managing a small corporation's finances. It helps to keep track of income, expenses, assets, and liabilities. Creating a chart of accounts can be time-consuming, but it's worth the effort. Use this sample chart of accounts as a starting point, and customize it based on your business's needs.