Monday, May 6, 2013

Chart of Accounts


Chart of Accounts (COA) is the list of accounts used by business entity to identify each class of items for which any value of money or the equivalent cash in and out. The chart of accounts used to organize the finances of the business and to place in different category the expenses, revenue, assets and liabilities in order to help the users of financial statements.

The list can be numerical, alphabetic, or alpha-numeric identifiers. It is typically arranged in the order of the customary presentation of accounts in the balance sheet, income statement and other financial reports.

The account in the chart of accounts has its name and a unique code number for their identification specifically for any adapted company software. Code numbers might be three, four, five, or more digits to represent each designated accounts.

The following sample of chart of accounts accompanied with their categories:

Balance Sheet Accounts

Assets Accounts

Asset accounts represent the different types of economic resources of the company and used in the business operation to generate income.



1010     Cash on Hand
1020     Cash in Bank
1030     Petty Cash Fund
1040     Accounts Receivables  
1041     Allowance for Doubtful Accounts / Bad Debts
1050     Deposits
1060     Advances to Employees
1070     Marketable Securities
1080     Merchandise Inventory
1090     Investment
1100     Prepaid Rent
1110     Prepaid Insurance
1120     Prepaid Supplies

Fixed Assets / Property, Plant & Equipment

1210     Land
1220     Building
1221     Accumulated Depreciation – Building
1230     Leasehold Improvement
1231     Accumulated Depreciation – Leasehold Improvement
1240     Furniture & Fixtures
1241     Accumulated Depreciation – Furniture & Fixtures
1250     Office Equipment
1251     Accumulated Depreciation – Office Equipment
1260     Vehicle
1261     Accumulated Depreciation – Vehicle

Intangible Assets

1310     Goodwill

Liability Accounts

Liability accounts represent the different types of economic obligations of the business.

Current Liabilities

2010     Accounts Payable
2020     Notes Payable
2030     Accrued Expenses
2040     Accrued Rent
2050     Accrued Interest
2060     Accrued Salaries
2070     Tax Payable
2080     SSS Premium Payable
2090     Philhealth Premium Payable
2100     HDMF Premium Payable
2110     Deferred Income
2120     Salaries Payable
2130     Interest Payable
2140     Unearned Revenues

Long-term Liabilities

2210     Mortgage Loan Payable
2220     Bonds Payable
2221     Discount on Bonds Payable

Stockholders' Equity Accounts

Equity accounts represent the residual equity of the business.

2310     Common Stock
2320     Treasury Stock
2330     Retained Earnings
2340     Dividends
2350     Drawings

Profit & Loss Accounts

Revenue Accounts

Revenue accounts or income represents the company's gross earnings.

4010     Sales Revenue
4011     Sales Returns & Allowances
4012     Sales Discounts
4020     Interest Income (Non-Operating Revenue)

Expense Accounts

Expense accounts represent the company's expenditures used to operate the business in order to generate income.

Cost of Goods Sold Accounts

5010     Purchases
5011     Purchase Returns & Allowances
5012     Purchase Discount

Selling and Administrative Expenses

6010     Commission Expense
6020     Professional Fee
6030     Audit Fees
6040     Legal Fees
6050     Salaries
6060     SSS Contribution Expenses
6070     Philhealth Contribution Expenses
6080     HDMF Contribution Expenses
6090     Rent Expense
6100     Insurance Expense
6110     Interest Expenses
6120     Advertising Expense
6130     Supplies Expense
6140     Bank Fees
6150     Training Expense
6160     Income Tax Expense
6170     General Expense
6180     Maintenance Expense
6190     Communication Expense
6200     Traveling & Conveyance Expenses
6210     Depreciation Expense
6220     Utilities Expense
6230     Telephone Expense
6240     Doubtful Accounts
6250     Miscellaneous Expense

The chart of accounts lists help financial statements to record the accounting transactions. It makes the double entry easy to classify the correct accounting system. Every entry has a minimum of two accounts needed for every transaction. The entry should be one account is debited and one account is credited.

To debit and to credit the accounts there are some general rules:
  • Asset accounts normally have debit balances
  • To increase an asset account, debit the account
  • To decrease an asset account, credit the account
  • Liability accounts normally have credit balances
  • To increase a liability account, credit the account
  • To decrease a liability account, debit the account
  • Expense accounts are debited and have debit balances
  • Revenue accounts are credited and have credit balances