Do you want to get a good ‘picture’ on how your business is going? Do you want to know what your assets are and how much Equity, you as the Owner has in the business. If so then you need to have an awesome Chart of Accounts.

What is a Chart of Accounts I hear you say, well a Chart of Accounts is a listing of all the accounts used in the General Ledger. The accounts are what the business uses for recording transactions when doing their bookkeeping. Businesses have the flexibility to tailor their Chart of Accounts to what best suits their needs. The better you set up your chart of accounts the better reports you will get from your accounting program.

One of the first things you need to know when starting to do your bookkeeping is about your Chart of Accounts. This subject makes quite a long blog so I have broken it into two so that you don’t get bored

The Chart of Accounts is set up in a way similar to the Accounting Equation and you will find they are typically listed in the following order:

  • Balance Sheet Accounts:
    • Assets
    • Liabilities
    • Owner’s Equity
  • Profit & Loss Accounts:
    • Operating Income
    • Operating Expenses
    • Non-Operating Income and Gains
    • Non-Operating Expenses and Losses

In today’s blog we will cover the Assets, Liabilities and Owner’s Equity.

Assets

Assets are the businesses resources – items of value owned by the business. In the Chart of Accounts you have different types of Assets, there are Current Assets and Fixed Assets.

Current Assets include, cash, accounts receivable, inventory etc. They are assets that the business can reasonably expect to convert to cash within one year in the normal course of business.

So your Chart of Accounts would be made up of Bank Accounts, Trade Debtors, Inventory and any short term loans that the business may have given to other businesses etc. You also may have some clearing accounts in the Current Assets as well, these are usually set up as Bank Accounts, so you can check how much money you owe to the Tax Office and for Superannuation etc.

Your Current Assets in your Chart of Accounts maybe set up like this:

Current Assets

11000  Bank Accounts

11110  Cheque Account

11120  GST/Savings Account

11130  any other bank accounts you may have

11140  Petty Cash Account

11150  Payroll Clearing Account

11160  ATO Clearing Account

11170  Super Clearing Account

11180  General Clearing Account

11190  Un-deposited Funds

11200  Account Receivable

11210  Trade Debtors

11300 Short Term Loans

11310  Staff Loans

11400  Inventory

11410  Opening Stock

11420  Closing Stock

Fixed Assets are pieces of property that a firm owns (or will own) for the long-term and they use it in the production of its income and therefore is not expected to be consumed or converted into cash in under one year. Fixed Assets are sometimes collectively referred to as ‘plant’.

Most Fixed Assets are depreciated over time. Accumulated Depreciation, which sits in the Fixed Assets section of the Chart of Accounts, is the cumulative depreciation of the assets. The depreciation of an asset during a single period (which is an expense) is added to the previously period’s accumulated depreciation to get the current accumulated depreciation amount.

To get the current value of an asset, you find the difference between its purchase price and accumulated depreciation.

Your Fixed Assets in your Chart of Accounts maybe set up like this:

Fixed Assets

13100  Computer Equipment

13110  Computer Equipment at Cost

13120  Accumulated Depreciation – Computer Equipment

13200  Leasehold Improvements

13210  Leasehold Improvements at Cost

13220  Accumulated Depreciation – Leasehold Improvements

13300  Motor Vehicles

13310  Vehicle 1 (AAA-111)

13311  Vehicle 1 (AAA-111) at cost

13312  Accumulated Depreciation – Vehicle 1(AAA-111)

13320  Vehicle 2 (ZZZ-222)

13321  Vehicle 2 (ZZZ-222) at cost

13322  Accumulated Depreciation – Vehicle 2(ZZZ-222)

13400  Office Equipment

13410  Office Equipment at cost

13420  Accumulated Depreciation – Office Equipment

13500  Plant & Equipment

13510  Plant & Equipment at cost

13520  Accumulated Depreciation – Plant & Equipment

Liabilities

Liabilities are the monies the company owes to people outside the business. As with the Assets, in the Chart of Accounts you have different types of Liabilities. There are Current and Non-Current Liabilities.

Current Liabilities are the company’s debt or obligations that are due within one year. They include short term debt, accounts payable, accrued liabilities and other debt.

Your Current Liabilities in your Chart of Accounts maybe set up like this:

Current Liabilities

24000  Accounts Payable

24100  Trade Creditors

21000  Credit Cards

21100  Credit Cards

21110  VISA Card – 8902

21120  AMEX – 1234

21400  Payroll Liabilities

21410  Staff Superannuation

21415  Unpaid Superannuation

21420  PAYG Withholding Payable

21440  PAYG Instalment

25000  Tax Liabilities

25500 Tax Payable (this can be split to be GST Paid and GST Collected)

26000 Unpaid ATO Liabilities

22000  Other Liabilities

22100  Directors Loans

22200  Premium Funding – Insurance

22210  Unexpired Interest – Insurance

22300  Premium Funding – Workcover

22310  Unexpired Interest – Workcover

Long Term Liabilities are obligations of the company that become due more than one year in the future. They include things like debentures, loans, deferred tax, pension obligations.

Your Long Term Liabilities in your Chart of Accounts will look something like this:

Long Term Liabilities

23000  Long Term Liabilities

23100  Business Loan

23110  Unexpired Interest – Business Loan

23200  Motor Vehicle Loan

23210 Unexpired Interest – Motor Vehicle Loan

23300  Plant & Equipment Loan

23310  Unexpired Interest – Plant & Equipment Loan

23200  Other Long Term Liabilities

Owner’s Equity

Owner’s Equity is money invested in the business by the owner. It can also be defined as, when all the assets of the company are sold and all the liabilities are paid off, what is left over is the Owner’s Equity.

Capital is the amount of money the owner personally puts into the business. Drawings are what the owner personally take out of the business.

Your Owners Equity in your Chart of Accounts will look something like this:

Owners Equity

31000  Owner’s/Shareholder’s Equity

31100  Owner’s/Shareholders Capital

31200  Owner’s/Shareholders Drawings

39100  Retained Earnings

Hopefully this helps you understand your Chart of Accounts, or if you don’t have one, or want to change things then this will steer you in the correct direction.  If you would like to download a copy of the Chart Of Accounts that is listed throughout this post, just click HERE.

If you would like to download an Excel version so you can import it into your accounting program please click on the button below.

Click Here to download my Chart of Accounts Spreadsheet

Let me know what you like and don’t like about your chart of accounts 🙂