WHAT IS A CHART OF ACCOUNTS? MAIN FEATURES - CULTURE VOCABULARY - 2024

The chart of accounts is a document used to record the operations of a company. Currently there are various electronic programs that make the recording of operations easier.

The chart of accounts is important for a company as it contains a list where all the assets, liabilities, income, expenses and capital of a company are classified.

The chart of accounts is considered a learning tool for all students of accounting-related careers, since it serves to familiarize themselves with the terms of accounting.

These must be prepared in such a way as to allow the incorporation of new accounts that appear in the company.

That is why it is said that it is necessary that, when creating it, a deep analysis of the operations be made, thinking about the present and the future of a business.

Functions of a chart of accounts

- The chart of accounts allow all the workers of a company to keep a record of the operations of the same.

- Facilitates the consolidation of financial figures.

- Facilitates the estimation of a budget for a client or user of the company.

Main features

They must be flexible

It is said that the chart of accounts must be flexible since they must allow new accounts to be added according to the reality of the company.

There are several accounts that are not always present in the catalogs and it is necessary that they can be incorporated once they arise.

They must be accurate

Once you have established what type of account catalog you intend to use, it is necessary that the symbols used to classify the accounts do not resemble each other. The idea of ​​this is to avoid confusion and ambiguity.

They must be rational

Chart of accounts should allow accounts to be easily grouped.

They must be simple

The symbols used in the chart of accounts should be simple, easy to memorize and remember.

The aim is to facilitate the recording of the company's operations: if the symbols are difficult to remember, it will be necessary for the catalog keeper to be constantly looking for its manual. This would waste time and make it difficult to keep the catalog.

The 5 main types of chart of accounts

1- With alphabetical system

They organize the beads by applying the letters of the alphabet.

2- With decimal system

The decimal system of the charts of accounts classifies them taking the numbering from 0 to 9.

3- With numerical system

In this type of catalog, all the accounts of a company are organized, classifying them into groups and subgroups to which a number is assigned.

Each group and subgroup is identified with a string of numbers, a situation that makes it easier for third parties to identify which group each account belongs to.

4- With mnemonic system

This type of catalog classifies the accounts in such a way that they can be easily remembered. In this a letter is given to each account.

For example, assets are assigned the letter “A”, liabilities are assigned the letter “P”, income is assigned the letter “I”, and so on.

However, these groups have subgroups, and the letters are still used to classify them. For example, a current asset is assigned the letter "A" for assets and the letter "c" for current assets, thus: "Ac".

In the case of capital, the assignment of the letters would be as follows:

First, the letter "C" is assigned to capital, then it starts from there to assign the letter to the rest of the accounts belonging to it. For example, the capital stock would be assigned the C for capital and the S for social.

This type of catalog is little used.

5- With combined system

This type of catalog organizes the accounts through a combination of all the aforementioned types.

Structure of the chart of accounts

The catalogs are made up of category, accounts and subaccounts.

Heading

It is called heading to the subdivisions of the operations that make up the financial situation of a company.

Accounts

It is the denomination with which each of the operations that make up the items are classified; that is to say, assets, liabilities, capital, income and expenses.

Subaccounts

Sub-accounts are made up of all those elements that make up a main account.

List of accounts that make up the asset

Box

It is a current asset that reflects the available money of a company at a certain time.

Petty cash

It is a current asset and this represents the amount of money that the company has to make smaller payments.

Bank

It is a current asset and includes all available cash that the company has deposited in banks.

Accounts receivable

They are a current asset and represent everything that customers owe to the company.

Fixed assets

They are the tangible assets that a company has and that are acquired with the purpose of always using them.

These include: office equipment, buildings, land, stationery and stationery, machinery, among others.

List of accounts that make up the liability

- Taxes to pay.

- Interest collected in advance.

- Rentals charged in advance.

- Debts to pay.

- Mortgage creditors.

- Suppliers.

- Long-term accounts payable.

List of accounts that make up the capital

Social capital

It refers to the amounts corresponding to the shareholders' contributions.

Retained earnings

It is the amount of the profit obtained.

Accumulated losses

It refers to the losses that the company has had throughout its history, which cause the capital obtained to decrease.

References

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2. Chart of accounts. Retrieved on December 8, 2017, from wikipedia.org
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4. Account types or kinds of accounts. Retrieved on December 8, 2017, from futureaccountant.com
5. Account types. Retrieved on December 8, 2017, from principlesofaccounting.com
6. Types of accounts. Retrieved on December 8, 2017, from slideshare.net
7. Accounting basics. Retrieved on December 8, 2017, from keynotesupport.com