|
The Chart of Accounts is normally arranged or grouped by the Major Types of Accounts.
The Balance Sheet Accounts (Assets, Liabilities, & Equity) are presented first, followed by the Income
Statement Accounts (Revenues & Expenses).
Here we're going to discuss the Balance Sheet Portion of the Chart Of Accounts and how it's organized.
While most balance sheet accounts that need to be set up are common to all businesses, some
depend on the type of business. Inventory accounts are needed for those businesses that produce and sell goods
or "inventoriable" services as well as those that just buy and resell the goods.
The Assets, Liabilities, and Equity are presented in separate sections of a Balance Sheet in order that important
relationships and subtotals and totals can be presented.
Note: This USA Order may vary depending on your country.
-
Assets
Formal Definition:The properties used in the operation or investment activities of a business.
Informal Definition:All the good stuff a business has (anything with value). The goodies.
Additional Explanation:
The good stuff includes tangible and intangible stuff. Tangible stuff you
can physical see and touch such as vehicles, equipment and buildings.
Intangible stuff is like pieces of
paper (sales invoices) representing loans to your customers where they
promise to pay you later for your services or product.
Assets are generally assigned to sub-categories or sub-groups. Similar types of assets are grouped together.
The groups are based on the asset's purpose or use and liquidity (availability of the asset for paying debts).
The order that the Assets are presented are based on the following guidelines:
-
List the Items that are cash.
-
List the Items that are held primarily for converting into cash and list them in the order of their expected
conversion into cash (beginning with the fastest and moving toward the slowest).
-
List the Items used in operations that could be converted into cash listed in the order of their expected
conversion into cash (beginning with the fastest and moving toward the slowest).
-
List the Items whose cost provide future benefits or can not be converted into cash.
-
Current Assets
Current Assets include Cash and Assets that will be converted into cash or consumed in a relatively short period of
time, usually within a year or the business's operating cycle. Prepaid Expenses and
Supplies (already paid for or a liability incurred) are included because they will
normally be used or consumed within the operating cycle.
-
Liabilities
Formal Definition:Claims by creditors to the property (assets) of a business until they are paid.
Informal Definition:Other's claims to the business's stuff. Amounts the business owes to others.
Additional Explanation:
Usually one of a business's biggest liabilities
(hopefully they are not past due) is to suppliers where
they have bought goods and services and charged them.
Liabilities are listed in the order of their expected payment date (maturity).
In other words, how soon they must be repaid.
Liability accounts are separated into current (short-term) liabilities and long-term liabilities.
Short-Term Liabilities generally are debts that must be repaid within 1 year from the date of the balance sheet.
Long-Term Liabilities are debts that must be paid more than 1 year from the date of the balance sheet.
-
Current Liabilities
Current liabilities are the portion of obligations (amounts owed) due to be paid within the current operating cycle (normally a year)
and that normally require the use of existing current assets to satisfy the debt.
-
Short Term Notes (Demand Notes)
- Accounts Payable Trade
A sub ledger is normally maintained in order to keep up with and
track amounts owed to individual suppliers.
-
Accounts Payable Other
-
Payroll Liabilities
-
Accrued Salaries and Wages Payable
-
Employee Payroll Withholdings (Deductions)
-
Employee U.S. Federal Income Tax Withheld
-
Employee State Income Tax Withheld
-
Employee Local Income Tax Withheld
-
Employee FICA Withheld
-
Employee Medicare Withheld
-
Employee Garnishments Withheld
-
Employee Benefits
-
Employee Insurance Deduction Withheld
-
401 K Deduction Withheld
-
IRA Deduction Withheld
-
Other Payroll Withholdings
-
Employer Provided Benefits
- Mandatory
-
Employer FICA Contribution Payable
-
Employer Medicare Contribution Payable
-
Employer Federal Unemployment Payable
-
Employer State Unemployment Payable
-
Employer Workmen's Compensation Insurance Payable
-
Optional
-
Employer Provided Health Insurance Payable
-
Employer Provided Life Insurance Payable
-
Employer Provided 401 K Contributions Payable
-
Employer Provided IRA Contributions Payable
-
Sales Tax Payable
-
Unearned Revenues
-
Customer Advances and Deposits Payable
-
Interest Payable
- Bank Loans (Notes Payable) - Current principal portion of Long-Term Notes
-
Notes Payable (other than bank notes) - Current principal portion of Long-Term Notes
- Accrued and Estimated Liabilities
-
Accrued / Estimated Taxes Payable
-
Accrued Real Estate and Property Taxes Payable
- Accrued Income and Franchise Taxes Payable
-
Accrued Federal Taxes Payable
-
Accrued State Taxes Payable
-
Accrued Local Taxes Payable
-
Other Accruals Payable
-
Other Current Liabilities
Long-Term Liabilities
Long term liability accounts are the portions of debts with due dates greater than a year or the operating cycle.
These are obligations that are not expected to be paid within the current operating cycle.
- Bank Loans (Notes Payable) - Long Term principal portion
-
Notes Payable (other than bank notes) - Long Term principal portion
-
Other Long-Term Liabilities
Equity (Capital)
Formal Definition:The owner's rights or claims to the property (assets) of the business.
Informal Definition:What the business owes the owner(s). The good stuff left for the owner(s) assuming all
liabilities (amounts owed) have been paid.
The accounts set up in this section will depend
on the legal structure of your business.
These accounts report the Owner's Capital Invested and the Accumulated Profits or Losses for the business since it began.
Owner sub ledgers may also be maintained to keep up with and track shares and interests and amounts
owed individual owners.
-
Sole Proprietorship
-
Owner's Capital
-
Owner's Drawing
-
Partnership or Limited Liability Company
-
Partner's or Member's Capital
-
Partner's or Member's Drawing
-
Corporation
-
Capital Stock
-
Common Stock
-
Common Stock Par or Stated Value
-
Premium Paid on Common Stock
-
Preferred Stock
-
Preferred Stock Par or Stated Value
-
Premium Paid on Preferred Stock
-
Retained Earnings
Return To Tutorial
|
