For very small businesses, three digits may suffice for the account number, though more digits are highly desirable in order to allow for new accounts to be added as the business grows. With more digits, new accounts can be added while maintaining the logical order. Complex businesses may have thousands of accounts and require longer account reference numbers.
Different types of businesses will have different accounts. For example, to report the cost of goods sold a manufacturing business will have accounts for its various manufacturing costs whereas a retailer will have accounts for the purchase of its stock merchandise. Many industry associations publish recommended charts of accounts for their respective industries in order to establish a consistent standard of comparison among firms in their industry. Accounting software packages often come with a selection of predefined account charts for various types of businesses.
Some accounts must be included due to tax reporting requirements. For example, in the U.S. the IRS requires that travel, entertainment, advertising, and several other expenses be tracked in individual accounts. One should check the appropriate tax regulations and generate a complete list of such required accounts. Other accounts should be set up according to vendor. If the business has more than one checking account, for example, the chart of accounts might include an account for each of them.
No two businesses are exactly alike – each business needs a very specific chart of accounts that meets their needs. Because of this, AccountingSuite™ does not come with a full pre-installed Chart of Accounts, but instead a very minimal required set of accounts to get you started. In the next section, we’ve included some examples here for you to start with – take them and customize them for your specific needs. We recommend that an accountant review a new chart of accounts before using.
Next UP: View a sample chart of accounts.