How to setup a Chart of Accounts

Establishing a chart of accounts is extremely easy, especially if you have a user friendly accounting computer software.

To accomplish this all that you should do is

1. Ensure each account type is distinguished in some manner

Which means that assets, liabilities, proprietors equity, revenue and expense are distinguished in some manner. A terrific way to do that would be to start each kind of account having a different number. For instance assets might be 1000 figures, liabilities be 2000 figures, proprietors equity be 3000 figures, revenue be 4000 figures and expenses be 5000 figures. So for instance a / r may be account number 1015 and accounts payable be 2020. Case an example of methods to differentiate the account types but any approach to distinguish them works.

2. Ensure accounts are numbered departing room for brand new accounts

You will need to number the accounts with space to insert new accounts. What this means is not numbering your accounts sequentially. For instance you may have two kinds of investments you need to separate in your body. One being stock investments, numbered 1020 and something being bond investments, numbered 1030. By numbering them in this way it enables you space for 10 accounts between 1020 and 1030 in situation you have to add yet another investment of some nature to trace inside your books. Just how much space you depart in between each number really depends upon your company and just how likely you’ll be to need to add new accounts.

3. Make use of a logical numbering system

Make use of a numbering system which makes sense for you. There’s no wrong or right way so pick one that you’re confident with which can help you organize your accounts. With a user friendly chart of accounts it can save you oneself considerable time looking for the best account number when entering your journal records.

What also plays a large roll in the way you generate a chart of accounts and just how easy or hard it will likely be relies upon this program or software you use. For instance with Profitworks’ Simple To Use Accounting software all that you should do is enter in the account name near the appropriate type (asset, liability, proprietors equity, revenue or expense), picking out a number after which typing the specific account near the selected number. Establishing a chart of accounts within this program can be achieved in just a couple of minutes.