chart of account template?

I was trolling through our site analytics today and I was surprised that almost 15% of the hits to the site were from the key word search: “chart of account template.”  What’s going on?

why is the chart of accounts so important?

Well, the chart of accounts is a listing of all the accounts that your accounting system tracks in the general ledger that you have the ability to book an entry to.  In essence, the chart of accounts captures everything to do with how you run your business.

Different types of businesses will have different accounts.  For example, to report cost of goods sold, a computer hardware business will have accounts for its various manufacturing costs; whereas a hosted software environment will have accounts for the cost of providing the hosted solution.  In order to decide what to include in your chart of accounts consider the following questions:

• what reports do you want to prepare?
• what financial decisions, evaluations and assessments do you need to make on a regular basis?
• what level of detail do you require?
• what is your capacity for tracking financial information (e.g. your accounting software)?

From here you can design your chart of accounts.

what is the best way to design a chart of accounts?

First you should consider what reports you want to prepare to satisfy external requirements and help you with internal management assessment and decision making.  You can then determine which categories to group by and what level of granularity you would like to achieve based on importance.

Each account is typically assigned, at a minimum, a four digit number, although more digits are highly desireable in order to allow for new accounts to be added as the business grows.  With more digits, new accounts can be added while maintaining the logical order.  Enterprise businesses may have thousands of accounts and require longer account reference numbers due to the complexity of the business.  Typically, businesses code their accounts as follows:

1000-1999: asset accounts
2000-2999: liability accounts
3000-3999: equity accounts
4000-4999: revenue accounts
5000-5999: cost of goods sold
7000-7999: expense accounts
8000-8999: other income and expense accounts

Thanks for the general guidance but could you provide an example specific to technology?

Fortunately the fine folks of Business Ready have a Chart of Accounts template already built.  But, if you are looking for a test ride, the Chart of Accounts is included in our Finance Ready Starter Pack which is availble for FREE for a limited time.  Really, it’s any excuse to use the present icon.  Hah!