Charts of Accounts, Income Statement and Balance Sheet ENT630

The Accounting for Profitability website for Alicia Sisk-Morris, CPA was very helpful for understanding and developing core information for Charts of Accounts, Income Statements and Balance Sheets. A summary of information is listed below.

Charts of Accounts

A general ledger is the portion of the accounting system that contains the balance sheet and income statement and where transactions are recorded. A chart of accounts is a master list of all of the account names that a company has identified for recording their financial transactions in their general ledger. Line items categories are industry specific. The categories can have sub-categories to organize departments.

  • NetMBA suggests the following numbering system for your chart of accounts:
    • 1000-1999: Asset accounts
    • 2000-2999: Liability accounts
    • 3000-3999: Equity accounts
    • 4000-4999: Revenue accounts
    • 5000-5999: Cost accounts for goods sold
    • 6000-6999: Expense accounts
    • 7000-7999: Misc. Revenue (interest income, etc.)
    • 8000-8999: Misc. Expenses (taxes, etc.)

Brighthub.com notes that account numbers should be spaced out to allow new accounts to be added. Also, the types of accounts will be different according to type of business, years in business, and the organization structure. Below you will find addition charts that could be included.

  • Asset Accounts
    • 1000 Petty Cash
    • 1010 Cash on Hand
    • 1020 Business Regular Checking Account
    • 1050 Savings Account
    • 1100 Accounts Receivable
    • 1400 Prepayments
    • 1500 Equipment
    • 1550 Vehicles
    • 1600 Land
    • 1700 Depreciation, Equipment
    • 1800 Deposits

Liabilities

    • 2000 Accounts Payable
    • 2300 Wages Payable
    • 2600 Notes Payable

Equity Accounts

    • 3000 Market Shares
    • 3500 Retained Earnings

Revenue Accounts

    • 4000 Service Earnings
    • 4500 Product Earnings
    • 4600 Interest Income

Cost of Goods Sold

    • 5500 Product Cost
    • 5600 Labor Costs

Expenses

    • 6000 Marketing and Advertising
    • 6100 Bad Debts
    • 6500 Employee Benefits

Chart I- Charts of Accounts

SMALL BUSINESS
CHART OF ACCOUNTS
10000 – ASSETS
11000 – Cash
11100 – Primary Checking Account
11200 – Primary Savings Account
11300 – Money Market Account
12000 – Accounts Receivable
15000 – Fixed Assets
15100 – Furniture
15200 – Computer Equipment
15500 – Building
15600 – Tenant Improvements
20000 – LIABILITES
21000 – Accounts Payable
22000 – Credit Card Account
25000 – Mortgage / Long-term Debt
30000 – EQUITY
31000 – Beginning Capital
31100 – Beg. Capital – Mary Smith
31200 – Beg. Capital – John Smith
32000 – Contributions
32100 – Contributions – Mary Smith
32200 – Contributions – John Smith
33000 – Distributions
33100 – Distributions – Mary Smith
33200 – Distributions – John Smith
39000 – Ending Capital
39100 – End. Capital – Mary Smith
39100 – End. Capital – John Smith
39900 – Retained Earnings
40000 – REVENUE
41000 – Sales
41100 – Sales – Customer 1
41200 – Sales – Customer 2
50000 – EXPENSES
51000 – Salaries & Wages
52000 – Supplies
53000 – Utilities
53100 – Electric
53200 – Gas
53300 – Water
54000 –
55000 –
70000 – OTHER INCOME
71000 – Interest Income
80000 – OTHER EXPENSE
81000 – Interest Expense

Income Statement

The income statement is one of four primary financial statements. It is also referred to as the profit and loss statement, statement of operations or the P & L statement. It tracks profitability for a specific time period such as monthly, quarterly or annually. Income statements come in a single-step format using only one subtraction to calculate a net income or a multiple-step format using multiple subtractions in calculating the net income. Either step results in a net income calculation. The format will be determined by the business activities. AccountingCoach.com gives these basic elements which include:

  • Expenses and Losses
  • Expenses involved in primary activities
  • Expenses from secondary activities
  • Losses (e.g., loss on the sale of long-term assets, loss on lawsuits)

 

See Chart II-Income Statement

ENT Company Income Statement
ENT Company
Month ending October 31, 2016
Financial Statements in U.S. Dollars
Revenue
Gross Sales/ Earned 10000
    Net Sales 10000
Cost of Goods Sold
Beginning Inventory 2000
Add: Purchases 1000
Direct Labor 300
Inventory Available 3300
Less: Ending Inventory
    Cost of Goods Sold 3300
   Net Income   Gross Profit (Loss) 6700
Expenses
Advertising 200
Commissions 500
Insurance 150
Equipment 600
Rent 1500
Utilities 350
    Total Expenses 3300
    Net Operating Income 3400
Other Income
Gain (Loss) on Sale of Assets
Interest Income
    Total Other Income 0
    Net Income (Loss) 3400

Balance Sheet

The balance sheet, also known as the statement of financial position, shows the financial condition of the company at the end of a specific date in time. It is a “snapshot” or “moment in time” that shows the company’s assets (items of financial value), liabilities (items of debt owed), and stockholder’s or owner’s equity (book value of the company). Reports are usually reviewed monthly, quarterly and yearly depending on board meetings.

John Tracy explains in the article Connecting the Income Statement and the Balance Sheet that the income statement and the balance sheet are connected. A sale increases an asset or decreases a liability, and an expense decreases an asset or increases a liability. Therefore, one side of every sales and expense entry is in the income statement, and the other side is in the balance sheet. You can’t record a sale or an expense without affecting the balance sheet.

See Chart III- Balance Sheet

ENT Company
Balance Sheet
  Year end Dec 31, 2015
Sales revenue                                                                               110,000
(Less sales returns and allowances)
Service revenue                                                                                 70,000
Interest revenue
Other revenue
                                                          180,000
   
Advertising                                                                                   1,000
Bad debt
Commissions
Cost of goods sold                                                                                 65,000
Depreciation
Employee benefits
Furniture and equipment
Insurance
Interest expense                                                                                   4,200
Maintenance and repairs
Office supplies
Payroll taxes
Rent
Research and development
Salaries and wages                                                                                 55,000
Software
Travel
Utilities
Web hosting and domains
Other                                                                                 17,460
                                                          142,660
Net Income Before Taxes                                                                                 37,340
Income tax expense                                                                                 14,936
                                                            22,404
{42}
   
Income from discontinued operations
Effect of accounting changes
Extraordinary items
                                                            22,404

Resources

10 Free Sample Income Statement Templates. (n.d.). Retrieved November 27, 2016, from https://www.sampletemplates.com/business-templates/income-statement-template.html

Chart of Accounts. (n.d.). Retrieved November 26, 2016, from http://www.netmba.com/accounting/fin/accounts/chart/

Chart of Accounts, Income Statement, and Balance Sheet. (n.d.). Retrieved November 29, 2016, from http://www.siskmorriscpa.com/chart-of-accounts-income-statement-and-balance-sheet/

Connecting the Income Statement and Balance Sheet – dummies. (n.d.). Retrieved November 26, 2016, from http://www.dummies.com/business/accounting/connecting-the-income-statement-and-balance-sheet/

Income Statement (Profit and Loss Statement) | Explanation | AccountingCoach. (n.d.). Retrieved November 25, 2016, from http://www.accountingcoach.com/income-statement/explanation/1

Sample Chart of Accounts – Free Template for Download. (2010). Retrieved November 26, 2016, from http://www.brighthub.com/office/finance/articles/72875.aspx

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