What are charts of accounts?

Charts of accounts are basically all the financial accounts of a company. This includes income categories, expense categories and all asset accounts.

For example:

Income accounts:

• Sports shoes
• Tennis rackets
• Swimming goggles

Expense accounts:

• Inventory
• Administrative expenses
• Rental

Asset accounts:

• OCBC business account
• PayPal account

How do I know which accounts my business needs?

You ought to talk to an accountant about this but here’s a general step-by-step guide:

1. Write down all the services and products you offer
2. If you offer hundreds of products, divide them into categories
3. These are you income accounts
4. Write down all the expenses that you business has
5. Divide them into general categories such as “Rent”, “Administrative expenses” and “Inventory”
6. Administrative expenses might include accounting fees, payroll fees etc.
7. Look at all the accounts you have with financial institutions such as OCBC or PayPal
8. This might be a long list if you’re operating a large company with a bank in every country

How is my chart of accounts connected with my transactions?

You must select an account from your chart of accounts every time you add a new traction. If you paid out $1,000 for inventory to your supplier, you must add it under the expense category “Inventory”. 

Likewise, if you received $100 from a custom for sports shoes, you must add $100 under the income category “Sports shoes” and add the asset account “OCBC”.

To learn more about charts of accounts and accounting, contact WLP Academy for more information!