What is Chart of accounts(COA)?
Chart of accounts (COA) is a list of the accounts used by an organisation. The list can be numerical, alphabetic, or alpha-numeric. Each nominal ledger account is unique to allow its ledger to be located. The list is typically arranged in the order of the customary appearance of accounts in the financial statements, profit and loss accounts followed by balance sheet accounts.
Simple Chart of Accounts
Group headings Sales Cost of Sales Direct Expenses Administration expenses Selling expenses Distribution expenses Establishment expenses Financial expenses
Within each of these headings will be the individual nominal ledger accounts that make up the chart of accounts. Establishment expenses may consist of rent, rates, repairs Balance Sheet Accounts
Asset Accounts —-
Cash Accounts Receivable Prepaid Expenses Supplies Inventory Land Buildings Vehicles & Equipment Accumulated Depreciation Other Assets
Liability Accounts —-
Accounts Payable Notes Payable – Current Notes Payable – Long Term
Stockholders’ Equity Accounts —-
Common Stock Retained Earnings Income Statement Accounts
Revenue Accounts —-
Sales Revenue Sales Returns & Allowances Sales Discounts Interest Income
Expense Accounts —-
Advertising Expense Bank Fees Depreciation Expense Payroll Expense Payroll Tax Expense Rent Expense Income Tax Expense Telephone Expense Utilities Expense
The trial balance is a list of the active general ledger accounts.A balanced trial balance does not guarantee that there is no error.
Types of accounts
- Asset accounts: represent the different types of economic resources owned by a business, common examples of Asset accounts are cash, cash in bank, building, inventory, prepaid rent, goodwill, accounts receivable
- Liability accounts: represent the different types of economic obligations by a business, such as accounts payable, bank loan, bonds payable, accrued interest.
- Equity accounts: represent the residual equity of a business (after deducting from Assets all the liabilities) including Retained Earnings and Appropriations.
- Revenue accounts or income: represent the company’s gross earnings and common examples include Sales, Service revenue and Interest Income.
- Expense accounts: represent the company’s expenditures to enable itself to operate. Common examples are electricity and water, rentals, depreciation, doubtful accounts, interest, insurance.
- Contra-accounts: from the term ciccia, meaning to deduct, the value of which are opposite the 5 above mentioned types of accounts. For instance, a contra-asset account is Accumulated depreciation. This label represent deductions to a relatively permanent asset like Building.