The Chart of Accounts

If you've been tinkering around with your accounting software, you might have come across the Chart of Accounts. Now what is a COA and why is it important? The COA is essentially a master list of all accounts used in the entire accounting cycle and the origin point of financial statements. It is imperative to have your COA setup as accurately as possible since it's the origin point of all transactions. The following types of accounts can be found in the COA:

Asset: Any equipment, device, or item the company owns or has a future benefit of.

Liability: Shows any amounts owed to vendors, suppliers, or any other entity

Equity: Shows level of ownership in company. Note, this can vary depending on business entity types

Revenue: Shows money earned by the business

Expenses: Lists expenses incurred operating a business

Both the revenue and expense accounts flow to the income statement.

The asset, liability, and equity accounts flow to the balance sheet.