Chart of Accounts – Definition

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Chart of Accounts Definition

A chart of accounts is a list of elements necessary to undertake an accounting of operations performed by a company. The list of accounts has these elements; assets, liabilities, and owners capital in addition to revenues and expenses received and incurred respectively.

A Little More on What is a Chart of Accounts

The chart of accounts enables the simplification of bookkeeping and accounting. For instance, in activities that impact on the social capital, it is necessary to show the establishment of numbering in the chart of accounts in this would be 100. There is splitting up of elements at different levels in the table of accounts from more generic to more concrete as per the following;

The group is the maximum general level, and numbering is based on digits. The chart of accounts is divided into nine groups namely;  basic financing, non-current asset, stock, creditors, and debtors for various operations, financial accounts, purchases and expenses,  sales and income, expenses credited to net worth, income recognized to net worth. For example, basic financing corresponds to group one.

The subgroup has a lesser generic range compared to the Group. It is represented by a double coded number. For instance, Tangible fixed assets subgroup is represented by 21 while 44 referring to various debtors.

The account is the highly used subdivision in accounting, and it is represented by triplet digit number. Use of accounts is important because accounts are concrete in addition to being less complex than the sun account. Accounts examples include; customers’ accounts coded by 430 and 640 referring to wages and salaries.

It is the most specific level presented by the chart accounts and represented by a quadrat digits number. It is not compulsory for companies to apply the use of a chart of accounts. It is at the discretion of the company to use this chart of account or develop theirs as done by many because this one provided by General accounting Plan may have insufficient specifications. There are some companies applying account tables that are more convenient and confidential. Chart of accounts is handy for smaller companies in guiding them to undertake their accounting. Besides the above charts; there is Chart of SME accounts that are more simplified than the general one and is meant for small and medium-sized institutions.

References for Chart of Accounts

Academic Research for Chart of Accounts

  • Voluntary corporate disclosure by Swedish companies, Cooke, T. E. (1989). Journal of International Financial Management & Accounting, 1(2), 171-195.  The author puts a lot of consideration to Sweden as a result of its Stockholm Stock Exchange’s quick progress in addition to the country’s multi-national enterprises’ disproportionate number. This paper outlines the degree of voluntary disclosure in the corporate annual reports of both listed and unlisted companies in Sweden. A wide range definition of voluntary disclosure is adopted because of its flexibility in Sweden. This interpretation problem of what constitutes generally accepted accounting principles in Sweden rather than Swedish accounting not being largely regulated. The paper assesses the possibility of a relationship between independent variable numbers and the degree of disclosure.
  • The origin and evolution of charts of accounts in Poland, Jaruga, A. A., & Szychta, A. (1997). European Accounting Review, 6(3), 509-526. Since the Second World War, Charts of accounts have significantly contributed to the accountancy development in Poland. In the era of the centrally-run economy, the enterprises accounting was based on the similar requirements that included: Necessity of conducting according to the standard chart of account, which changed frequently or temporarily modified. The changes were intended for the reduction of their numbers and complexity. New legislation allows companies to develop their plans of accounts matching with both their financial reporting and management accounting activities.
  • The evolution of accounting chart models in Europe from 1900 to 1945: some historical elements, Richard, J. (1995). European Accounting Review, 4(1), 87-124. The paper is about the activities performed by standardized national accounting codes European context currently and its relevance to developing opinions and its impacts on financial accounting reporting needs of an institution’s market economy. It started from France being the first European nation to implement the accounting code following the Second World War for an enterprise’s accounting system and annual accounts’ presentation. The French model has influenced both Other European and Francophone nations to implement related account codes.
  • Breakeven budgeting and programming to goals, Charnes, A., Cooper, W. W., & Ijiri, Y. (1963). Journal of Accounting Research, 16-43.  The paper is about the exploration of linear programming’s application to break even analysis. The linear programming is relatively new to mathematics and accounting tool. There has been widespread attention received by mathematical techniques related to linear programming. Some managerial applications, for instance, operation research, management science too have received the greater attention and are getting to be used in accounting where they have been put into considerations as a replacement of breakeven analysis. For example, objective optimization has the possibilities of offering advantages than that provided by breakeven analysis.
  • Developing accounting and audit in a transition economy: the Romanian experience, King, N., Beattie, A., Cristescu, A. M., & Weetman, P. (2001). European Accounting Review, 10(1), 149-171. The paper carries out evaluation and investigation of the stages of development that began in 1996 while undertaking the comparison of that development’s outcome with some other transition economies’ experiences. Romania’s social and economic aspects were put into consideration in addition to the political conflicts as a result of global markets’ growing benefits and international developments influence the shaping strategy in accounting matters. Conclusion based in this paper is that accounting developments since 1996 neglected some pitfalls experienced in other transition economies in addition to shortening development process by making parallel instead of sequential changes
  • Accounting research and researchers of the nineteenth century and the beginning of the twentieth century: an international survey of authors, ideas and publications, Mattessich, R. (2003). Accounting, Business & Financial History, 13(2), 125-170. There was a decline of Italian glory and France, England, Germany, America, and other nations were prioritized. The associations of the theories of accounts that dominated both earlier and later after Italian accounts had reclaimed its glory to the chart that became prominent in continental Europe is historically significant. Personality and materialistic accounts controversies and that between entity and proprietary in addition to the emergence of others are discussed I regard to individual authors. The paper was about the investigation of topics beginning with railroad accounting and auditing to some other matters of cost accounting.
  • The relevance of International Financial Reporting Standards to a developing country: Evidence from Kazakhstan, Tyrrall, D., Woodward, D., & Rakhimbekova, A. (2007). The international Journal of accounting, 42(1), 82-110. The research was on the examination of IFRS’s relevance and implementation to the emerging economy of Kazakhstan from its independence from 1991 to 2006. The conclusion was made that even though there was no possibility of making a strong case of IFRS, could not be made by 2016, Kazakhstan continuing with IFRS was not an option, and there was the likelihood of IFRS relevance increasing with the continued economic developments. A conclusion was made that if IFRS was the only accounting option, then its relevance discussion was effectively closed leaving the issue of the pathway of change that nations are probable of succeeding as IFRS execution occurs.
  • Development of the Estonian Accounting Policy within the European Framework, Haldma, T. (2004). Economic Policy Perspectives of Estonia in the European Union, 544-555. This paper carries out an explanation of contextual factors impacting innovation and motivators of these processes in Estonian local government accounting during the previous decade based on the contingency approach. The transition from cash to accrual bases accounting in Estonian local government also faced some challenges that are also discussed. The paper carries out an analysis of the local government reform factors during the Estonian accounting transformation stages that include the introduction, system building, and system improvement.
  • Polish financial reporting principles in transition, Leśko, D. (2007). Baltic Journal of Management, 2(1), 55-66. The paper states that the Polish financial reporting principles managed to successful convert from socialistic to financial market-oriented during the change period. This provided financial managers and investors with a powerful leading tool.
  • Accounting history publications 1997, Anderson, M. (1998). Accounting, Business & Financial History, 8(3), 371-382.  The paper lists the 1997 publications in English and within the general accounting events of the past. What constitutes the accounting article definition is not always a straightforward issue, and there has been an interpretation of fair and broad description to include any significant historical input accounting article. This excludes business history articles because of their examination in the yearly survey article printed by Business history.

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