What is a chart of accounts?
Your chart of accounts consists of 11 digits divided into 5 segments. Click here for an example of a section’s chart of accounts. The first segment is one digit long. The “1” indicates this is the company “State Bar of Michigan”. You will always use a “1” in the first segment for all your account numbers. The second segment is also only one digit. Use a “7” to indicate revenue and a “9” for expenses. The third segment is two digits and will always be “99” indicating “section”. The fourth segment is three digits and represents the specific section. For example, “475” is the number for the Health Care section. The fifth segment is four digits long and represents the activity. For example, 1050 is dues revenue and 1826 is copying.
Charts of accounts are essentially a listing of the various categories for income and expenses associated with the finances of an organization. While the exact configuration of the line items on a chart of accounts may vary slightly from one entity to another, there are a few basic categories that will be found in just about every accounting ledger. Additional categories may reflect the nature of the business conducted by the organization, such as charitable funds set aside for specific purposes, or assets that are set aside for the an expansion project associated with the company. The core group of categories that are found in a chart of accounts are not unlike those found in just about every household budget. These would include such line items as rent or mortgage balances and payments, basic utilities, and any ongoing debt that is paid on each month, such as credit card balances. The exact order of these categories may be further defined by the establishment of a series of line item
A chart of accounts is the list of all accounts in which a companys data can be stored. 4. What does a general ledger contain? A general ledger contains the detail in each account in a company’s accounting system. The information in all journal entries is posted to the general ledger. 5. What is a journal entry? A journal entry is the result of a business event or transaction. It shows the effects of the transaction on the company’s accounts, through the debits = credits process. 6. Why are adjusting entries needed? Adjusting entries are needed in order to assure that the information in the general ledger, trial balance, and financial statements is reasonable. Without reasonable information, the financial statements cannot be relied upon for decision making. 7. What is the name given to a trial balance prepared after adjusting entries have been posted to the general ledger? Adjusted trial balance. 8. Why is unearned fees revenue a liability? Unearned fees revenue is created when a cust
