would equal the Summary “Travel” Roll-up account.Īccount is the base element where the transaction is recorded. The total of the following related accounts Air, Train, Taxi, Hotel, etc. “Travel” would be the Summary Account Roll-up account.
Summary Account Roll-up totals up a group of like accounts, for example: The Income Statement includes account categories, such as Revenue, Cost of Goods Sold (COGS), Operating Expenses, Other Income, Other Expenses, Interest, Depreciation, Amortization and Taxes. The Balance Sheet includes account categories, such as Cash, Accounts Receivable, Inventory, Current Assets, Fixed Assets, Long-Term Assets, Accounts Payable, Short-Term Liabilities, Long-Term Liabilities, and Equity. Depending on whether your company is on Cash or Accrual basis will assist in guiding the type of accounts that will be required.įor the purpose of this blog, we have defined the following structure: The 1 st part is the Balance Sheet and the 2 nd part is the Income Statement. When designing the COA, you will need to look at it in 2 parts. Keep it Simple Allow for Flexibility Develop a Logical Numbering Sequence There are 3 fundamental rules that need to be followed when designing a new chart of accounts. Designing a new COA, in accordance with Generally Accepted Accounting Principles (GAAP), for a new company or changing an existing COA is easy to accomplish if you understand the basic fundamentals.
