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What Is Chart of Accounts and Ledger?
In the simplest terms a general ledger is a complete record of all the financial transactions of your company throughout its life. The general ledger holds all of the information needed to prepare financial statements and includes assets, liabilities, equity, revenue and expenses. The charter of accounts is a list of the accounts of a business, and their numbers, arranged in numerical order. Each account is similar to a chapter in a book, with a separate account number.
Why is a chart of accounts important?
Financial management is all about money and keeping track of it.
The accounts of a business require organization. The chart of accounts is organized by a numbering system.
Recall that a balance sheet is divided into assets, liabilities, and owner’s equity. A chart of accounts is also divided into these sections. All assets begin with the number 1, all liabilities begin with the number 2, and all owner’s equity begin with the number 3.
The Chart of Account is a series of special pages, physical paper copies in a book or electronic pages on a computer program, that are used to record financial changes for each item affecting the financial position.
The accounts of a business require organization. The chart of accounts is organized by a numbering system.
Recall that a balance sheet is divided into assets, liabilities, and owner’s equity. A chart of accounts is also divided into these sections. All assets begin with the number 1, all liabilities begin with the number 2, and all owner’s equity begin with the number 3.
The Chart of Account is a series of special pages, physical paper copies in a book or electronic pages on a computer program, that are used to record financial changes for each item affecting the financial position.
General Ledger
A general ledger is made specific to each business it's meant to record transactions, such as a general contracting business will have different accounts than that of a hair stylist. The role of an accountant is to establish a record keeping system that can be used to track the financial position of a company's monthly transactions.
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The following image is an example of a chart of accounts for Clear View Window Cleaners.
The accountant has set up the accounts for assets to begin with a 100X numbering system. The liabilities, owner's equity, revenue, and expenses also have special numbers associated with each account. Within the accounting books for Clear Window Cleaners a separate page will be used to account for the monthly transactions for each area. For example, if a payment is made for Liability 2005; A1-Rentals the reference number associated with the transaction will reflect this in the ledger. |
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Practice Assignment - Charter of Accounts
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Refer to the information outlined in the Balance Sheet assignment for Chihaya Real Estate and create a charter of accounts using a new Google Sheet.
Follow these steps to begin: 1. Name the google sheet, chihaya.accounts.20xx 2. Copy the Balance Sheet information from the previous assignment into the first page of the General Ledger. 3. Name the first page. 4. Add a new sheet by selecting the '+' sign at the right bottom of the page. 5. Name the new page 'accounts'. 6. Use the outlined information from this section to list each account (Assets, Liabilities, Owner's Equity, Revenue, Expenses) 7. Upload a copy of the assignment to the google classroom for a mark. |
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Learn More @ ALIS
Alberta Careers Learning & Employment to explore more about Accounting Professionals (wages, education, potential job posting) ALIS Alberta |
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Assignment:
Go to the Google classroom and complete the Financial Statements material for BALANCE SHEET PRACTICE.