What is a chart of accounts?
We recently had a few inquiries submitted to the Bean Counter (Have a question? Submit it here) about chart of accounts, what they are, and why they matter.
A chart of accounts is a way of sorting the information gathered from all the activities of your business. It is a list of categories used to collect information.
These categories could be something like:
- A Bank Account for all your checks and deposits
- A Sales account to accumulate all your information for invoices to you customers
- A Cost of Goods account to accumulate all the costs for the materials or goods that you sell
- Office Expenses for all the paper, ink, pens and pencils, etc that you purchase
A Chart of Accounts organizes these categories in a certain order so that you will know the status of your business and if you are making a profit.
