Chart of Accounts

A chart of accounts is a financial organizational tool that provides a complete listing of every account in an accounting system. An account is a unique record for each type of asset, liability, equity, revenue and expense. A chart of accounts, which lists the names of the accounts that a company has identified and made available for recording transactions in its general ledger, establishes the level of detail tracked in a record-keeping system. Typically, a chart of accounts contains the accounts’ names, brief descriptions and identification codes. In practice, the chart of accounts serves as the foundation for a company’s financial record keeping system. It provides a logical structure that facilitates the addition of new accounts and deletion of old accounts.

General Ledger Classification

At the heart of all accounting systems is the General Ledger (often called the 'GL' for short). The General Ledger is the place where all account entries are kept. To help organize the account entries, the General Ledger is divided up into several 'Accounts'. Each Account holds similar types of entries e.g. bank account, rent expenses, salary income, etc. The list of basic categories are: Assets- Things of commercial value (cash, property, furniture, equipment, etc.); Liabilities - Money you owe (mortgages, unpaid bills, etc.); Equity - How much you (or the business) is currently worth (i.e. assets less liabilities); Income - Money coming in (proceeds from sales, interest income, etc.); Expenses - Money going out (bill payments, staff salaries, etc.). We review all or your transactions each month and classify them into the appropriate GL account.

Fixed Asset & Depreciation

Large purchases that are an investment in the future of your business can greatly affect the presentation of your financial books, making an otherwise successful financial period look dismal. Basic accounting principles state that if an asset is going to be used over multiple accounting periods, the cost of that asset can also be spread over multiple periods in your financial records. A guideline to help determine whether you to depreciate an asset or just count it as a normal expense is whether this is an asset will last over the course of multiple accounting periods. Purchases such as Office Furniture, Equipment involved in the production of your products, Computer Hardware: these assets are in continual use over many years of business. Anything that provides value over the course of several years, should be considered a depreciable asset. The IRS requires that anything costing more than $2,500 be depreciated.

Short Term Loan Activity

Short term debt, also called current liabilities, is a firm's financial obligations that are expected to be paid off within a year. It is listed under the current liabilities portion of the total liabilities section of a company's balance sheet. Operating debt arises from the primary activities that are required to run a business and is expected to be resolved within 12 months, or within the current operating cycle. This is known as short term debt and is usually made up of short-term bank loans taken out, or commercial paper issued, by a company. The value of the short-term debt account is very important when determining a company's performance. The higher the debt to equity ratio, the greater the concern about company liquidity.

Long Term Loan activity

A company takes on debt to obtain immediate capital. For example, startup ventures require substantial funds to get off the ground and pay for basic expenses such as research, insurance, licenses, equipment, supplies, and advertising. Mature businesses also use debt to fund their regular operations as well as new capital-intensive projects. Overall, all businesses need to have capital on hand and debt is one source for obtaining immediate funds to finance business operations. Long-term debt is debt that matures in more than one year. Entities choose to issue long-term debt with various considerations, primarily focusing on the timeframe for repayment and interest to be paid. Long-term debt liabilities are a key component of business solvency ratios which are analyzed by stakeholders and rating agencies when assessing solvency risk. Therefore, accounting for long-term debt is critical when posting this type of financial activity on the books and records of a company.