Chart of Accounts
With the Chart of Accounts, you can manage the accounts and categories available for bookkeeping.
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With the Chart of Accounts, you can manage the accounts and categories available for bookkeeping.
Last updated
A chart of accounts is a list of all the accounts used by a company in its general ledger. These accounts represent the different categories of financial transactions: Assets, Liabilities, Equity, Income, and Expenses. The chart of accounts is used to classify and organize financial transactions in a way that makes them easy to understand and report on.
The chart of accounts is organized in a hierarchical structure, with main account types at the top level, account categories on the middle level, and the actual accounts at the bottom level. This allows for a high level of detail and flexibility in reporting. For example, a company will have a main account category of "Assets" with account categories such as "Cash and Bank", "Inventory", and "Property, Plant and Equipment". This allows the company to track and report on the specific types of assets it has.
The chart of accounts is an important tool for financial management, it helps to ensure that financial information is recorded in a consistent and accurate manner, and it enables the company to produce financial statements that provide meaningful information to management, investors, and other stakeholders.
There are 5 account types: Assets, Liabilities, Equity, Income, and Expenses. A type of account must be selected for every account and every account category. Different account types are available in different reports. For example, Income and Expenses are not relevant to the income statement.
Assets are things that a company owns and that have value. These can include physical things like property, equipment, and inventory, as well as intangible things like patents, trademarks, and intellectual property. Assets are important because they can be used to generate income or create value for the owner. For example, a company might use its assets to produce goods and services that it can sell for a profit. Asset accounts are used to track the value of a company's assets over time, and are reported on a company's balance sheet.
Liabilities are obligations or debts that a company or individual owes to others. These can include loans, bills, and other financial obligations that must be paid back at some point in the future. Liabilities are important because they represent the amount of money that a company owes and can impact their financial health. For example, if a company has a lot of debt, it may have difficulty making payments and meeting its financial obligations. Liability accounts are used to track the value of a company's obligations over time, and are reported on a company's balance sheet.
Equity accounts represent the ownership interest in a company. Equity is the residual value of a company's assets after subtracting all its debts or liabilities. Equity accounts include items such as investments made in the company, retained earnings from previous years, and dividends paid to shareholders. Equity is important because it shows how much of a company is owned by the shareholders, and it can be used as a source of financing. Equity accounts reflect the amount of the funds provided by the owner(s) and the retained earnings or losses of the business.
An income account is a type of account used to track the revenues earned by a business during a given period of time. It includes all the money earned by a company from its primary business activities, such as selling products or providing services. This can also include income from investments, interest on loans, or other sources of revenue. Income accounts are important because they allow a company to track its financial performance over time and make decisions about future investments and business operations. Overall, income accounts are a crucial part of accounting as they show a company's profitability and financial health.
An expense account is a type of account used in accounting to track the costs of doing business. It includes all the money a company spends on items like salaries, rent, supplies, and utilities. Expense accounts are important because they allow a company to track its expenses over time and see where its money is going. By analyzing expense accounts, a company can identify areas where it might be able to cut costs and become more profitable. Overall, expense accounts are an essential part of accounting as they help a company manage its finances and make informed business decisions.
To help you keep your accounts and bookkeeping organized properly, you must select an account category for all your accounts. For example, your bank accounts and cash on hand should be added to the default Cash and Bank category. This will make it easier for you to find your accounts when selecting an Account or Category for each of your transactions, and help us generate reports that are more easy to understand.
Dappr will automatically add the most commonly used account categories to your Chart of Accounts, but you can also create new ones that are relevant to your business and industry.
Every account category is assigned a prefix ID, which represents the first 2 digits in every account's account number. Every account number consist of 4 digits, the 2 last digits of which belong to the specific account. We refer to the last 2 digits of the account's account number as the "account suffix".