Chart Of Accounts

Module 1:
Foundations of Accounting

Duration:
45-60 minutes

Level:
Beginner to Diploma-Level

➛ Define what a Chart of Accounts is.

➛ Understand account numbering systems.

➛ Classify accounts into Assets, Liabilities, Equity, Revenue, and Expenses.

➛ Create a simple Chart of Accounts for a small business.

➛ Recognize why COAs improve financial reporting.

➛ Chart of Accounts
➛ Account Number
➛ Classification
➛ Sub-account
➛ General Ledger
➛ Control Account

A Chart of Accounts is an organized list of every account the business uses to record transactions

It acts like a dictionary of accounts, helping ensure:

➛ consistency
➛ easy posting
➛ accurate financial reports

Assets
1000-1999

Liabilities
2000-2999

Equity/Capital
3000-3999

Revenue
4000-4999

Expenses
5000-5999

This numbering makes it easy to sort and search.

Category
Assets

Range
1000 - 1999

Examples
1001 Cash
1100 Accounts Receivable
1500 Equipments

Category
Liabilities

Range
2000 - 2999

Examples
2100 Accounts Payable
2500 Loan Payable

Category
Equity

Range
3000 - 3999

Examples
3000 Capital
3100 Drawings

Category
Revenue

Range
4000 - 4999

Examples
4100 Sales Revenue

Category
Expenses

Range
5000 - 5999

Examples
5100 Rental Expense
5200 Salaries Expense

Assets | 1000 Series
1000 Cash
1010 Bank Account
1100 Accounts Receivable
1200 Inventory
1500 Equipment

Expenses | 5000 Series
5100 Rent Expense
5200 Utilities Expense
5300 Supplies Expense
5400 Depreciation Expense

➛ Avoid confusion
➛ Simplify posting to the ledger
➛ Make financial reporting consistent
➛ Useful for audits and analysis
➛ Helps separate business activities

Which category do these accounts belong to?

➛ Cash
➛ Loan Payable
➛ Utilities Expense
➛ Sales Revenue
➛ Capital

Give an appropriate account number for each

➛ Rent Expense
➛ Equipment
➛ Accounts Payable
➛ Service Revenue
➛ Owner’s Drawings

Create a simple COA with 8 accounts for a small bakery.

Include the 5 categories:
➧ assets
➧ liabilities
➧ capital
➧ revenue
➧ expenses.

Assign numbers to these accounts using the standard ranges

➧ Office Supplies
➧ Inventory
➧ Salaries Expense
➧ Bank Loan Payable
➧ Service Revenue

A new graphic design studio is creating its Chart of Accounts.

Here are the items they need to include:
➛ Cash
➛ Computer Equipment
➛ Design Revenue
➛ Rent Expense
➛ Owner’s Capital
➛ Utilities Expense
➛ Accounts Receivable
➛ Loan Payable

Questions

➛ Classify each item into its correct category.

➛ Assign each item a suitable account number.

➛ Which accounts will appear on the income statement?

➛ Which accounts will appear on the balance sheet?

➛ What is a Chart of Accounts?

➛ What number range is usually used for assets?

➛ True oe False | Capital is an asset.

➛ Give one example of a revenue account.

➛ Which category does "Inventory" belong to?

---

Answers ➧ Here

---

Journals | Special & General ➧ Here