If you have your own business then you need to know the basics of chart of accounts (COA). It is important that you learn about these accounting matters so that you are able to identify if there is any discrepancy in the accounts.
You cannot trust anyone when it is the mater of your own business. But as you are not able to be present everywhere all the time, you do need to hire the people to do the job for you. In that matter, never trust someone completely but also keep a check by yourself.
Briefing about Chart of Accounts
Let’s learn briefly about the chart of accounts (COA) so that you can have the rough idea. If you like it interesting then you can also enroll in the programs who give you complete and comprehensive direction of getting the information regarding chart of accounts (COA).
Basically chart of accounts (COA) involves the ledger which is in every organization. If you do not have it in your organization then it is time you start it. It helps you in making the financial statements of the business through an accounting software.
Account Numbers
You will be able to mention about the account numbers in this software with having the allocation of tasks in it. There are different accounts which are associated with the chart of accounts (COA). Mostly they are in the form of numerals but there is also an option for them to be in alphabets.
We all know that income statement and balance sheet works best when you have to make the analysis of the financial conditions of the business. It helps you in proceeding further along with keeping the liabilities on your end.
The Format
The format of chart of accounts (COA) begins with having the amount o cash and then it proceeds to the assets and liabilities. It ends over the owners’ equity part just like in the income statement. Rest of the expenses and revenues are also mentioned in the statement.
The best thing about these statements is that if you do not understand one, then you are able to try another one. The result and the total balance is going to be the same for one or another. If you do not believe this then you can try it on your own.
Learning about Statements
All the statements have the same category but with different names which you have to mention. If you do not change the figures of the categories, the results will be same for it.
Here is a quick review for you that it starts with the heading of assets. The assets would include cash, payroll account, petty cash, prepaid expenses, account receivables, fixes assets and others.
Liabilities
The liabilities heading has the account payable, notes payable, wages payable and others. Other part is for the equity which includes the stocks common and preferred both along with the retained earnings. Rest of it is the revenue and the expenses which are mentioned along. Basically it is a detailed version of the statements where you have the chance to balance it off.
To have the right track of chart of accounts, you have to stay consistent in the records. Even if you miss it for one day, you will forget the details and then it will end up in the mess.
Starting Early
You have to start it from day one of the business with keeping the record on the computer and in hard copy as well. Compare the financial conditions from month to month and make sure that it is easy for you to do the analysis without any help.
Do not deviate from the basic standards of the statement as it helps you stay on track. If you miss out one of the categories then you can simply add it up upon the requirement whether it falls under the assets or liabilities section.
You have to do all this carefully without any mistake so make sure that you do not fall back on it. Completely understand it and then attempt it otherwise get the help from the accountant who will be doing all this work perfectly for you along with helping you learn all this as well.
