Chart of Accounts (COA)

What Is a Chart of Accounts (COA)?

A chart of accounts (COA) is an index of all the financial accounts in the general ledger of a company. In short, an organizational device gives an edible breakdown of all the financial transactions that a company led during a specific accounting period, broken down into subcategories.

How Charts of Accounts (COA) Works

Organizations utilize a chart of accounts (COA) to sort out their finances and give closely involved individuals, like investors and shareholders, a clearer knowledge into their financial wellbeing. Isolating expenditures, revenue, assets, and liabilities help to accomplish this and guarantee that financial statements are in compliance with reporting standards.

The rundown of each account a company claims is normally displayed in the order the accounts show up in its financial statements. That means that balance sheet accounts, assets, liabilities, and shareholders' equity are listed first, trailed by accounts in the income statement — revenues and expenses.

For a small corporation, COAs could incorporate these sub-accounts under the assets account:

• Cash
• Savings account
• Petty cash balance
• Accounts receivable
• Undeposited reserves
• Inventory assets
• Prepaid insurance
• Vehicles
• Structures

Liabilities account might have sub-accounts, for example,

• The company credit card
• Accrued liabilities
• Accounts payable
• Payroll liabilities
• Notes payable

Shareholders' equity can be broken down into the accompanying accounts:

• Common stock
• Preferred stock
• Retained earnings

To make it more straightforward for perusers to find specific accounts, each chart of accounts ordinarily contains a name, brief description, and an identification code. Each chart in the rundown is assigned a multi-digit number; all asset accounts generally start with the number 1, for instance.

Here is a method for thinking about how COAs connect with your own finances. Let's assume you have a checking account, a savings account, and a certificate of deposit (CD) at a similar bank. At the point when you sign in to your account online, you'll commonly go to an outline page that shows the balance in each account. Essentially, assuming you utilize an online program that assists you with dealing with every one of your accounts in a single place, similar to Mint or Personal Capital, what you're taking a gander at is fundamentally exactly the same thing as a company's COA. You can see every one of your assets and liabilities, all on one page.

Illustration of a COA

Inside the accounts of the income statement, revenues and expenses could be broken into operating revenues, operating expenses, non-operating revenues, and non-operating losses. Also, the operating revenues and operating expenses accounts may be additionally organized by business function or potentially by company divisions.

Numerous organizations structure their COA so that expense data is separately incorporated by department; in this manner, the sales department, engineering department, and accounting department all have a similar set of expense accounts. Instances of expense accounts incorporate the cost of goods sold (COGS), depreciation expense, utility expense, and wages expense.

Special Considerations

COAs can vary and be tailored to mirror a company's operations. Be that as it may, they likewise must respect the rules set out by the Financial Accounting Standards Board (FASB) and generally accepted accounting principles (GAAP).

Of essential significance is that COAs are kept something very similar from one year to another. Doing so guarantees that accurate examinations of the company's finances can be made after some time.

Features

• A chart of accounts (COA) is a financial organizational device that gives a complete listing of each and every account in the overall ledger of a company, broken down into subcategories.
• It is utilized to sort out finances and give closely involved individuals, like investors and shareholders, a clearer understanding into a company's financial wellbeing.
• To make it more straightforward for perusers to find specific accounts, each chart of accounts normally contains a name, brief description, and an identification code.