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A chart of accounts (COA) is an organizational tool essential to bookkeeping and accounting that

comprises a company's financial records. It allows the owner to show all of their financial information in one place in order to get a clear understanding of the company's financial health.

The chart of accounts is a list of financial accounts found in the general ledger of your company's books. The accounts are separated into different categories like assets, liabilities, revenue, and expenses. They can be further broken down depending on your company's specific needs, including company division, business function, and product line. Over the years, it will help you determine if your business is as effective as it can be because it acts as a company financial health report for owners, investors, and shareholders, helping them understand earnings, debt, spending habits, tax filings, and reporting. Having a clear picture of financial health allows a business to make informed and educated decisions regarding the company.

When creating a chart of accounts, it is important to be consistent in naming accounts, subcategories, and labeling. This allows for establishing accounts that help you identify the purpose of each category and prevents confusion across accounts. However, just because you can break your accounts down as much as possible doesn't necessarily mean you should. For instance, office supplies coffee, office supplies notepads, and office supplies plastic forks are probably too much. It is better to have a general office supplies account to prevent too much information on reports that is not useful.

Regardless of the size of your business, a chart of accounts will help you stay financially aware of the overall health of your company and make billing for expenses and time more efficient. Having a knowledgeable bookkeeper help you set up your chart and look over it periodically will ensure your books are accurate for tax season, which will help your accountant make sure your taxes are done correctly.


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