There’s a lot of bookkeeping terminology out there. Debits, credits, depreciation, fixed assets, etc. It can be daunting to work through your own numbers, or to converse with a bookkeeping professional if you’re unsure of terms. For those who are a bit lost, I’ve started the category “Bookkeeping Terminology” for you to follow. Today, we’re going to talk about the chart of accounts.

What does chart of accounts mean? The chart of accounts is the master list of all accounts utilized by a business. It’s typically organized in order by assets, liabilities, equity, revenue, and expenses.

QuickBooks Online creates a default chart of accounts based on the industry selected during account creation. It will have such accounts as “Petty Cash,” “Undeposited Funds,” “Owners Equity,” and “Office Expenses.” However, each company is a bit different than the next, so even though nearly every business will have a similar chart of accounts, each one will be unique.

Why the chart of accounts is important: The main duty of the bookkeeper is to keep track of where money is coming from and where it’s going — to paint an accurate picture of how a business’s finances are shaping up in each accounting period.

Without a chart of accounts, there would be no way to differentiate between money spent on donuts for office morale or money spent on internet services. There would be no way to tell if money coming in was from the sale of goods or for the sale of a work van no longer in use — much less what the best selling merchandise is!

Photo by Wesley Tingey on Unsplash