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Chart of Accounts

Accounts are the Nominal Ledger headings that you use to classify all financial transactions: each Nominal Ledger Transaction described on these pages posts to two or more Accounts. The organisation of these Accounts is known as a "Chart of Accounts": a systematic list of how assets, liabilities, income and expenses are to be classified and thus the basis for your accounting reports. The logic that you use in this classification determines the usefulness of your reports. Drawing up a satisfactory Chart of Accounts requires careful consideration.

In designing a Chart of Accounts, it is usual practice to group Accounts together according to type. For example, all Sales Accounts should have similar Account Numbers, different Bank Accounts should have similar Account Numbers and so on. This will ensure that they appear together in reports. You should leave room in the structure so that you can insert new Accounts, the need for which is currently unforeseen, in the right place. If your business develops into new products, for example, you should be able to create Sales Accounts for those new products with similar Account Numbers to the existing Sales Accounts.

In traditional accounting systems, a Chart of Accounts is divided into account classes, following a decimal classification. Two or three classes are reserved for Balance Sheet Accounts, one class is normally reserved for internal accounting and year-end operations, and the remaining five or six classes are used for revenue and cost classification.

Typical Charts of Accounts, including the one supplied as a template with Standard ERP, follow the model illustrated below. They usually divide Accounts into two groups, named after the report in which they appear.

Profit & Loss
This report shows the trading profit or loss of your business, usually at the end of a month or year.

Balance Sheet
This report shows the assets, liabilities and capital of your business at the moment of printing.

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Your Chart of Accounts should be drawn up in consultation with your accountant or financial adviser.

Please refer to the Importing Set-up Data page for details about using the template Chart of Accounts supplied with Standard ERP.

Standard ERP uses Objects to augment the reporting capabilities of the Chart of Accounts. Please click here for details.

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