Setting Up Chart of Accounts

Chart of accounts

Actually many people perhaps do not know that how easy it is to set up a chart of accounts. It will be very much easier if you have already accounting software program. By reading these steps below, you’ll find some guidelines to have the task well done.

1. You need to make sure that each account type is distinguished in some way

Assets, liabilities, owner equity, revenue and expense need to be distinguished in some way. By making each type of account with a different number is a good way to do. You can make each type of account in thousands numbers. For4 example 1000 numbers for assets, 2000numbers for liabilities, 3000 numbers for owners equity, 4000 numbers for revenue and 5000 numbers for expenses. You can make accounts receivable in number 1010 or accounts payable could be in number 2020. That’s just for simple example to choose. You can still find some other way to set up a chart of accounts as any methods can still work.

2. You need to make sure that accounts are numbered leaving room for new accounts

By doing this, you can still have a space to insert the new number for your new chart of accounts. So making the number of accounts doesn’t have to be made sequentially. For example if you make stock investment in number 1010 and bond investment in number 1020, it means that you still have 10 numbers blank that will allow you to make 10 new additional investments. By having this way, you can have an easy track on your work book. The numbers of blank space that you make is usually depending on how many accounts of business that you have.

3. Using a logical numbering system will simply help you

Of course by having the logical system will make you easy to understand your chart of accounts. Actually as long as you are comfortable with the system you make, there’s no right or wrong way that may come. Organizing your accounts really depends on your comfort. But by having the simple and easy system of chart of accounts will of course save your time and avoiding you not too long in finding your accounts so that you can directly go to your journal entries.

4. Using the good software to do the task

The program or software that you are using is really influencing the way of setting up your chart of accounts. In this case, having the reliable and credible software will of course give effect to your work, especially to your accounts. For recommendation, you can use Profit works’ Easy To Use Accounting software to be your partner in setting up your chart of accounts. Only in a few minutes, you can finish to do your work without any serious problem as you will find the simple guidelines to arrange all your tasks.

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