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ANALYZING, RECORDING, AND CLASSIFYING

Chart of Accounts

Before recording transactions into the journal, we should first know what accounts to
use. This is where a chart of accounts comes in handy.
A chart of accounts is a list of all accounts used by a company in its accounting

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system. It makes the bookkeeper's life easier.

The accounts included in the chart of accounts must be used consistently to prevent

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clerical and technical errors in the accounting system.

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Nevertheless, take note that there is no standard chart of accounts because its
contents depend upon the need of the company using it.

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Accounts are grouped in their respective classifications (assets, liabilities, capital,

income, and expenses) and each is given a unique account number. A coding system
is used to organize the accounts according to their classification. Here's a sample
chart of accounts for a small sole proprietorship business:

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Chart of Accounts

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ASSETS
Current Assets (10000-19999)

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suggestions?

10000

Cash

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10100

Accounts Receivable

10101

Allowance for Doubtful Accounts

10200

Notes Receivable

10300

Interest Receivable

10400

Service Supplies

Non-Current Assets (20000-29999)

20000

Leasehold Improvements

20100

Furniture and Fixtures

20101

Accumulated Depreciation Furniture and Fixtures

20200

Service Equipment

20201

Accumulated Depreciation Service Equipment

LIABILITIES (30000-39999)
30000

Accounts Payable

30100

Notes Payable

30200

Salaries Payable

30300

Rent Payable

30400

Interest Payable

30500

Unearned Revenue

30600

Loans Payable

OWNER'S EQUITY (40000-49999)

40000

Mr. Gray, Capital

40100

Mr. Gray, Drawing

INCOME (50000-59999)
50000

Service Revenue

50100

Interest Income

50200

Gain on Sale of Equipment

EXPENSE (60000-69999)
60000

Rent Expense

60100

Salaries Expense

60200

Supplies Expense

60300

Utilities Expense

60400

Interest Expense

60500

Taxes and Licenses

60600

Depreciation Expense

60700

Doubtful Accounts Expense

70000

Income Summary

Additional accounts can be added, as the need arises. For bigger companies, the
accounts may further be classified into different departments.
For example, employee salaries may have various accounts and be included in the
chart as: 60101 Salaries Expense Administration; 60102 Salaries Expense Service
Department; 60103 Salaries Expense Delivery Department; etc.
Again, take note that the chart of accounts of one company may not be suitable for
another company. It all depends upon their needs. In any case, it serves as a guide
for bookkeepers in recording business transactions.

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