There are crucial things you should keep in mind when you are building a chart of accounts. These factors need to be considered when developing the format used to make charts of accounts, they are
Reporting requirements in which the right information is captured in individual accounts to make the chart of accounts structure,
Nature of transactions differentiating between large material transactions and those that do not aid in structuring your charts accordingly and
as it is expected to be growth in an organization, it is recommended to leave spaces between your account numbers on your chart of accounts for this purpose.
Here are key steps to follow when creating your charts of accounts
Account Creation-Accounts are usually categorized into four subcategories. Therefore, you need to determine by listing these accounts names before subdividing them into subcategories as follows
Numbering Structure –In the charts of account, it is encouraged not to use simultaneous numbers for your account. Charts of accounts are based on four-digit numbering, which helps in the organization of all accounts. Additionally, you need to add accounts in the future. Assets account are usually numbered in common systems of assets accounts as 1000 to 1999, Liability accounts as 2000 to 2999, Equity accounts as 3000 to 3999 and Sales and cost of goods as 4000 to 4999 and finally the expense account follows suit and is numbered as 5000 to 5999.
Size-Set up your chart to have enough accounts to record transactions correctly. The few the accounts the better since while consolidating them into financial reports will be easier.
Variations –In future, you will need to add accounts to your chart in the future, but you should not drastically change the numbering structure and the number of accounts. Change, especially a significant one will make it challenging to compare accounting records in future.
Software, and packages Usage~ Accounting software packages like QuickBooks usually come with the default list of accounts, thus enabling one to customize their account structure to fit preferences. The software used will typically include account number, account description and account type. Spreadsheets are also useful tools when extracting information from financial statement to be used in the creation of charts of accounts.
Tip~Each account is typically assigned a number based on the order it appears on the financial statements.Create your financial statement formats on spreadsheets
From the definition, we know that a chart of account is the listing of all accounts that in the end, makes the comprehensive accounting system. When creating a chart of accounts, simplicity is recommended for uncomplicated numbering structure and interpretation based on information on charts of accounts. Most importantly is that one must have knowledge on the information needed to create the charts of account, this may be easy for some others not so easy and will have a worrying question “Who can I pay to do my accounting homework for me on creating charts of accounts. Well we say to you look no further, we are an expert team on accounting assignments.