What is the Meaning & Definition of chart of accounts
The chart of accounts is the list with the necessary accounts for recording economic and financial events. It's all accounts part of the plan, ordered systematically. In order to facilitate the recognition (identification) of each of the accounts and sub-accounts, elements of the chart of accounts are ordered according to a kind of code. This process implies the attribution of a symbol, which can be a digit, a letter or two to each account.
The mnemonic system most used to encode the chart of accounts is the decimal numbering, allowing file unlimited items and facilitate the task of assembling and insert new accounts. For example: 1 active, 1.1 current assets, 1.2 assets non-current, 1.1.1 cash and banks, 1.1.2 current investments.
In general, the chart of accounts is accompanied by an accounts manual, which contains the necessary instructions for the use of accounts that belong to the chart of accounts.
The chart of accounts provides a basic structure to the Organization of the accounting plan, reason why it is considered as a means to obtain information from with ease. A chart of accounts must obey several requirements, such as consistency, integrity (he meant to represent all of the necessary accounts), the systematicity (it must follow a specific order) and flexibility (it must allow new accounts to be inserted).
On the other hand, it is important to develop the chart of accounts using clear terminology to designate each account, from the general to the particular.
The mnemonic system most used to encode the chart of accounts is the decimal numbering, allowing file unlimited items and facilitate the task of assembling and insert new accounts. For example: 1 active, 1.1 current assets, 1.2 assets non-current, 1.1.1 cash and banks, 1.1.2 current investments.
In general, the chart of accounts is accompanied by an accounts manual, which contains the necessary instructions for the use of accounts that belong to the chart of accounts.
The chart of accounts provides a basic structure to the Organization of the accounting plan, reason why it is considered as a means to obtain information from with ease. A chart of accounts must obey several requirements, such as consistency, integrity (he meant to represent all of the necessary accounts), the systematicity (it must follow a specific order) and flexibility (it must allow new accounts to be inserted).
On the other hand, it is important to develop the chart of accounts using clear terminology to designate each account, from the general to the particular.