Chart of Accounts

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Definition

• Chart of Accounts (CoA): The complete list of all accounts a company uses to record its financial transactions, organized systematically.
• Ledger Accounts: The individual accounts within the CoA that track specific categories such as assets, liabilities, equity, revenues, or expenses.

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Purpose

• The Chart of Accounts provides the backbone for financial reporting by ensuring all transactions are consistently classified.
• Ledger Accounts hold the detailed records of each type of financial activity and serve as the foundation for journals, entries, and financial statements.

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Structure

• Chart of Accounts
  • Organized by account codes or numbering ranges
  • Can be hierarchical (main accounts, sub-accounts)
  • Includes account type classifications (Asset, Liability, Equity, Revenue, Expense)
• Ledger Accounts
  • Each has an account number, name, description, and type
  • Store balances and transaction history
  • Can be customized per folder/company while following the general framework

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Relationships

• Each folder has one Chart of Accounts.
• The Chart of Accounts contains all ledger accounts.
• Ledger accounts are referenced by journal entries (debit and credit lines) and invoice lines.
• Account balances are continuously updated through journal entries.
• The CoA is the basis for generating financial statements.