Chart of Accounts

The chart of accounts is the underlying structure for organizing financial information and reporting.

An entity records transactions with a set of codes representing balances by type, expenses by function, and other divisional or organizational codes that are important to its business.

A well-designed chart of accounts provides the following benefits:

• Effectively manages an organization's financial business.

• Supports the audit and control of financial transactions.

• Provides flexibility for management reporting and analysis.

• Anticipates growth and maintenance needs as organizational changes occur.

• Facilitates an efficient data processing flow.

• Enables delegation of responsibility for cost control, profit attainment, and asset utilization.

• Measures performance against corporate objectives by your managers.

Caution: Once you begin using your chart of accounts, making changes to its fundamental attributes is neither recommended nor supported. This includes your chart of account segments, including the segment labels as well as other characteristics of those segments.

The chart of accounts facilitates aggregating data from different operations, from within an operation, and from different business flows, thus enabling the organization to report using consistent definitions to their stakeholders in compliance with legislative and corporate reporting standards and aiding in management decisions.

Best practices include starting the design from external and management reporting requirements and making decisions about data storage in the general ledger, including thick versus thin general ledger concepts.