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chart of transactions for accounts

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Sample Chart of Accounts for a Small Company

This is a partial listing of another sample chart of accounts. Note that each account is assigned a three-digit number followed by the account name. The first digit of the number signifies if it is an asset, liability, etc. For example, if the first digit is a "1" it is an asset, if the first digit is a "3" it is a revenue account, etc. The company decided to include a column to indicate whether a debit or credit will increase the amount in the account. This sample chart of accounts also includes a column containing a description of each account in order to assist in the selection of the most appropriate account.

Asset Accounts

Liability Accounts

Owner's Equity Accounts

Operating Revenue Accounts

Operating Expense Accounts

Non-Operating Revenues and Expenses, Gains, and Losses

Accounting software frequently includes sample charts of accounts for various types of businesses. It is expected that a company will expand and/or modify these sample charts of accounts so that the specific needs of the company are met. Once a business is up and running and transactions are routinely being recorded, the company may add more accounts or delete accounts that are never used.

At Least Two Accounts for Every Transaction

The chart of accounts lists the accounts that are available for recording transactions. In keeping with the double-entry system of accounting, a minimum of two accounts is needed for every transaction-at least one account is debited and at least one account is credited.

When a transaction is entered into a company's accounting software, it is common for the software to prompt for only one account name-this is because the software is programmed to automatically assign one of the accounts. For example, when using accounting software to write a check, the software automatically reduces the asset account and prompts you to designate the other account(s) such as Rent Expense, Advertising Expense, etc.

Some general rules about debiting and crediting the accounts are:

Expense accounts are debited and have debit balances

Asset accounts normally have debit balances

To increase an asset account, debit the account

To decrease an asset account, credit the account

Liability accounts normally have credit balances

To increase a liability account, credit the account

To decrease a liability account, debit the account

To learn more about debits and credits, see our Explanation of Debits and Credits and Quiz for Debits and Credits.

To learn more about the role of bookkeepers and accountants, see our Accounting Career Center.

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Please Note...

You should consider our materials to be an introduction to selected accounting and bookkeeping topics, and realize that some complexities (including differences between financial statement reporting and income tax reporting) are not presented. Therefore, always consult with accounting and tax professionals for assistance with your specific circumstances.

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Sample Chart of Accounts for a Small Company | AccountingCoach

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This is a partial listing of another sample chart of accounts. Note that each account is assigned a three-digit number followed by the account name. The first digit of the number signifies if it is an asset, liability, etc.

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record of the transactions

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Purchases Ledger Control Account is a summary account which checks the arithmetical accuracy of the Purchases Ledger. It enables us to see at a glance whether the general ledger balance for the purchases ledger agrees with the total of all the individual trade payable accounts held within the purchases ledger.

This Control Account typically looks like a "T-Account" or a replica of an Individual Trade Payable ( Creditor) account, but instead of containing transactions related to one trade payable (creditor) it contains transactions related to all the trade payables (all the creditors) in the business. As this control account contains the summarized information of all the trade payables accounts in the purchases ledger, it is also called as "Total Trade Payables Account"("Total Creditors Account").

Check out the format of this control account below and try to perceive the similarities with individual trade payables account (creditors account).

Format:

Purchases ledger control account is generally prepared at the end of the financial year or "whenever" it is required to check the arithmetical accuracy of the individual trade payable accounts.

As we discussed earlier, this control account is prepared as an independent check on the arithmetical accuracy of the purchases ledger (creditors ledger). So, we should not obtain the information required to prepare this control account from the purchases ledger (creditors ledger), instead all the information required should be obtained from books of original entry or prime entry.

How to check the arithmetical accuracy of the purchases ledger:

Once the control account is prepared using the above format with the information obtained from various books of prime entry/original entry, the total of balances on the individual trade paybales accounts (creditors accounts) in the purchases ledger should match with the closing balances on the Purchases Ledger Control account.

If the closing balances of purchases ledger control account and the total of balances on the individual trade payables accounts in the purchases ledger agrees, we can presume that there are no errors in the purchases ledger or fraud occurred in the business. If the balances differ, it indicate that there are errors in the individual trade payables accounts in the purchases ledger or in the control account. So to locate these errors, accountants need to check each and every trade payables account in the purchases ledger carefully until the error is found or the fraud is detected.

Source of information for Purchases Ledger Control Account:

The following table provides the details of source of information for the purchases ledger control account items.

Items should not be entered in the Purchases Ledger Control Account.

The following items are often seen in the control account questions. As these times are closely related to the "purchases and trade payables", students often confuse and record them in the P L Control Account. But these items should not be recorded in the control accounts. Lets check these items below.

1. Cash Purchases:

Cash purchases are recorded cash book but not in the purchases ledger. So cash purchases should not be entered in the P L Control account which checks the arithmetical accuracy of the purchases ledger.

Reasons for opening and closing credit balances in the P L control account:

Trade payables (creditors) accounts generally shows credit balance in the business books. This balance represents money owed to the trade payables (creditors) by the business. However some times trade payable (creditor) account may show a debit balance. It indicates trade payable owes money to the business. It may happen due to one of the following reasons:

An error in one of the individual trade payables account.

Over payment made to the credit supplier (trade payable).

Advance payment to the trade payable for the goods.

Accountant forgot to deduct the cash discount before paying the amount to the credit supplier.

Business returned the goods after making the full payment to the credit supplier but the supplier has not yet refunded the amount.

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Purchases Ledger Control Account is a summary account which checks the arithmetical accuracy of the Purchases Ledger. It enables us to see at a glance whether the general ledger balance for the purchases ledger agrees with the total of all the individual trade payable accounts held within the purchases ledger.

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the cost of materials needed for the company

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useful or valuable thing, person, or quality

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A liability is an obligation and it is reported on a company's balance sheet. A common example of a liability is accounts payable.

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Revenue is income from the sale of goods and services.

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Owner's equity represents the owner's investment in the business minus the owner's draws or withdrawals from the business plus the net income (or minus the net loss) since the business began.

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An efficient tool for analyzing double entry accounting transactions is a T account. The T account, so called because of its T shape shows the dollar increase or decrease in an account that is caused by a transaction. T accounts help the accountant analyze the parts of a business transaction.

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An account's normal balance is always on the side used to record increases to the account. The word normal used here means usual.

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Accountants use the double entry accounting system to analyze and record a transaction. Double-entry accounting records the different sides of business transactions as debits and credits.

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Charts of accounts and ledger (Zack)
Asset (Dylan)
liability, owners Eq (Alexia)
Normal balance, revenue (Jose)
T accounts, Double balance (Teonna)