Chart of Accounts
The structured list of every account a business uses to record financial transactions, organized into assets, liabilities, equity, revenue, and expenses.
Detailed Explanation
A well-designed chart of accounts is the foundation of useful financial reporting. It typically follows the order of the financial statements: assets (1000s), liabilities (2000s), equity (3000s), revenue (4000s), cost of goods sold (5000s), and operating expenses (6000s and up). Industry-specific accounts (e.g., construction job costing, restaurant food vs beverage) can be layered in. A poorly structured chart of accounts produces financial statements that hide the metrics owners and lenders care about most.
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Learn about Bookkeeping ServicesRelated Terms
Bookkeeping
The systematic recording, classification, and reconciliation of a business's financial transactions to produce accurate financial statements.
Accrual vs Cash Basis Accounting
Two methods for timing when income and expenses are recognized: cash basis records transactions when money changes hands, accrual records them when economic activity occurs.
Profit and Loss Statement (P&L / Income Statement)
A financial report summarizing revenue and expenses over a period of time (month, quarter, year) to show net profit or loss.
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