The chart of accounts is like the skeletal structure of your bookkeeping and accounting software and plan. The initial setup can be pivotal for how much you get back out of your accounting. Remember, we are always trying to go beyond just getting to tax season and really know your numbers and your business! Customizing your chart of accounts (COA) is essential.
Custom Liabilities and Assets
Have a separate COA account for each bank account, credit card account, loan or credit line labeled as such. Set yourself up so you can track your assets and liabilities easily.
You want to know where your money is coming from and what is doing the best so don’t just throw it all into “revenue”. You can add classes and sub-accounts as well, but consider setting it up to track departments, locations of sales (i.e. retail store vs. online), new construction vs. remodeling, etc.
You also need to know where your money is going particularly to ensure you are turning a profit and charging enough. For the expenses, you may want to reflect some of the similar categories as revenue or other ways to group the expenses that provide you the information that is most useful to you.
Don’t just let it sort via alphabet, utilize a 3-5 digit number and think about long term vs. short term and what you need to know faster (i.e. sales revenue) over what isn’t as important (i.e. other revenue from misc. sources). Use the chart provided as a guide:
Have an Ask my accountant/bookkeeper account so that instead of guessing (if you are entering), you can print a report to go over the proper placement of those transactions or you can just hand those over and have it taken completely off of you.