2017-02-15 00:00:00BookkeepingEnglishUtilize a standardized chart of accounts to improve consistency, clarity, and convenience of your financial records.https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/06/brewery-bookkeeper-reviews-chart-of-accounts.jpghttps://quickbooks.intuit.com/ca/resources/bookkeeping/standardization-chart-accounts/Standardization of Chart of Accounts

Standardization of Chart of Accounts

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A chart of accounts is a defined list of numbers that can be used in financial reporting. This list of accounts is used to group similar transactions. For example, a chart of accounts could contain an account for travel expenses. In this case, the chart of accounts would define that all travel costs are reported in one place. Alternatively, a chart of accounts could break travel expenses into different accounts, such as hotel expenses, car rental expenses, and meal expenses. By being consistent with the accounting placement, errors are easier to find, fewer errors are made, and certain modules that incorporate recurring vouchers or repeated payments can be used. From a financial analysis perspective, having guidelines on how a chart of accounts should be used makes reporting extremely simple. For example, if all accounts are five digits, all expenses related to compensation could start with “55xxx.” From here, more specific accounts can be used for varying purposes; 55001 could be salaries, and 55002 could be vacation pay. In this case, a single account has multiple meanings. Instead of employees trying to determine the best place to code their activity, they can focus on business operations and value-adding tasks. Although certain rules restrict the amounts maintained in financial statements from being reported on tax filings, the amounts held in the standardized chart of accounts can be used as a basis to draw information and manipulate as legally needed. From a time-saving perspective, this makes external reporting easier.

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Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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