Principles of Chart of Accounts structure

All accounts are grouped according to meaning. First digit means separation of accounts to different types:

0 - Regular accounts (Assets, Liabilities, Owner’s Equity, Revenue, Expenses)

1 – Adjustments

Adjustment operation are touched pair of accounts (e.g. Dr Accrued Expense Cr Accrued Accounts Payable), the structure of Adjustment accounts is the same as structure of Regular accounts.

Normally Adjustments are separated from regular accounts. In particular, it is to reflect events after closing date of financial period. Therefore, the similar set of accounts is created for these operations. Leading code of account is 1, all other digits repeat codes of regular accounts (with leading zero).

2 - Foreign currency accounts

Foreign currency accounts related to operations which can be accounted in foreign currency with its reflection in Regular accounts in parallel. Such accounting is important in revaluation and management purposes. In particular, such accounts are related to bank accounts in foreign currencies, Account Receivable and Account Payable accounts which are related to invoices in foreign currencies, inventory bought in foreign currency and should be evaluated in historical exchange rate etc.

3 – Tax Accounts (in the terms of Corporate Tax)

For example, depreciation of Fixed Assets, if method of tax depreciation differs from financial depreciation.

4 - Budget accounts

Budget accounts are used for keeping of comparative or purpose numbers against regular accounts. Budgets should reflect Closing balances of assets, for example for Asset or Liability accounts, and turnovers per day, week, bi-week period, month or year – this is typically applied to Revenue and Expense accounts.

6 - Non-related accounts

Non-related accounts are auxiliary indicators non related to financial accounting. This can be quantitative accounts like total number of rooms in the hotel, number of guests visited restaurants or venue per day.

9 - Technical accounts

These are accounts which are related to technical purpose of the system. For example, error accounts for residue of unbalanced transaction, rounding residue, calculation error etc

CoA Headers are not used as most of reporting engines cannot use it. Therefore, groups of accounts are finished with zeroes in Chart of Accounts.

All groups of accounts specified as accounts with finishing zeroes, e.g. 080000 – group of revenue accounts.

000000 Regular accounts

This account type is used to describe complete financial position of the company which is standardly included into financial reports including Statement of Company’s Financial Position, Statement of Comprehensive Income All regular accounts are separated to the following categories:

Assets:

  • 010000 Assets - High-liquidity accounts
  • 020000 Accounts Receivable and Shotr-term assets
  • 030000 Long-Term Assets, Fixed and Intangible Assets

Liabilities:

  • 040000 Short-term Liabilities
  • 050000 Long-term Liabilities

Owner’s Equity:

  • 060000 Owner's Equity
  • 070000 Revenue
  • 080000 Expenses

Other accounts:

  • 090000Clearing, reconciliation, allocation and other accounts

Accounts 01*, 02*, 03*, 04*, 05*, 06* are balance accounts.

Accounts 07*, 08*, 09* are Profit and Loss accounts.

After End-Year procedure closing balance of accounts 07*, 08*, 09* should be reset to zero via moving all collected closing balances from revenue and expense accounts to Income Summary account, and then to Capital account: the account of Retained Profit/Outstanding Losses.

Accounts 09* are accounts for temporary operations, they shouldn’t have any balances on regular basis. All amounts on these accounts should be re-allocated to other accounts or should be eliminated.