chart of accounts for dummies

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Subject Author Date chart of accounts for dummies Rob 01-07-2009  Re: chart of accounts for dummies Haskel LaPort 01-07-2009  Re: chart of accounts for dummies Laura 01-07-2009  Re: chart of accounts for dummies Haskel LaPort 01-08-2009  Re: chart of accounts for dummies Rob 01-08-2009  Re: chart of accounts for dummies Haskel LaPort 01-08-2009
Posted by Rob on January 7, 2009, 4:56 pm Please log in for more thread options Hello, I am just starting accounting for dummies and I probably haven't got there yet but I have a question about chart of accounts vs real accounts and transactions. From what I am understanding Chart of Accounts aren't always actual accounts but ways of keeping track of different categories of expenses? For example I learned about account numbering where they start 1-9 for assets liabilities etc., ie. 1000 checking That seems logical because I'm very familiar with checking accounts but then there might be accounts such as Inventory, prepaid tax (fed/state), vehicles I guess what I'm failing to understand is why you need a chart of account for Inventory, prepaid tax (fed/state), vehicles Many banks allow you to download all of your transactions and these days they sometimes automatically categorize the expenses. So when you import it into a program such as microsoft money or quicken Taco Bell would come up as expense: dining out (or something similar). But even if they don't do that for you, you can do that on your own after you download it or when you manually enter them from receipts or monthly statement. Now because of this it seems like I should have an account called Groceries/Take Out (expense other 8000? or expense accounts 6000). BUT to me it just seems reduntant. The money that paid for taco bell might have been A: Cash (withdrawl or petty cash) B: Check C: Credit card (which then would probably be paid off through checking account) In summary it seems to me that CoA is just a way to track types of expenses but if you can flag an individual transaction as a certain type or category it seems like you could just run a report that would tell you the same thing. Rather than requiring a 2nd entry of that transaction into a chart of accounts. I just wonder why this is the way it is. Or maybe I have it all wrong. Hoping to get some good conversation going about this. Posted by Haskel LaPort on January 7, 2009, 7:43 pm Please log in for more thread options > Hello, I am just starting accounting for dummies and I probably haven't > got there yet but I have a question about chart of accounts vs real > accounts and transactions. > > From what I am understanding Chart of Accounts aren't always actual > accounts but ways of keeping track of different categories of expenses? > > For example I learned about account numbering where they start 1-9 for > assets liabilities etc., ie. > 1000 checking > > That seems logical because I'm very familiar with checking accounts but > then there might be accounts such as > Inventory, prepaid tax (fed/state), vehicles > > I guess what I'm failing to understand is why you need a chart of account > for Inventory, prepaid tax (fed/state), vehicles > > Many banks allow you to download all of your transactions and these days > they sometimes automatically categorize the expenses. So when you import > it into a program such as microsoft money or quicken Taco Bell would come > up as expense: dining out (or something similar). But even if they don't > do that for you, you can do that on your own after you download it or when > you manually enter them from receipts or monthly statement. > > Now because of this it seems like I should have an account called > Groceries/Take Out (expense other 8000? or expense accounts 6000). BUT to > me it just seems reduntant. The money that paid for taco bell might have > been > A: Cash (withdrawl or petty cash) > B: Check > C: Credit card (which then would probably be paid off through checking > account) > > In summary it seems to me that CoA is just a way to track types of > expenses but if you can flag an individual transaction as a certain type > or category it seems like you could just run a report that would tell you > the same thing. Rather than requiring a 2nd entry of that transaction into > a chart of accounts. > > I just wonder why this is the way it is. Or maybe I have it all wrong. > Hoping to get some good conversation going about this. Because in this universe there is always a good and evil, a right from wrong, a ying and a yang, a start of accounting for dummies and an end. Some people are not content in knowing where they are but need to know how they got there. > Posted by Laura on January 7, 2009, 8:12 pm Please log in for more thread options > Hello, I am just starting accounting for dummies and I probably haven't > got there yet but I have a question about chart of accounts vs real > accounts and transactions. > > From what I am understanding Chart of Accounts aren't always actual > accounts but ways of keeping track of different categories of expenses? > > For example I learned about account numbering where they start 1-9 for > assets liabilities etc., ie. > 1000 checking > > That seems logical because I'm very familiar with checking accounts but > then there might be accounts such as > Inventory, prepaid tax (fed/state), vehicles > > I guess what I'm failing to understand is why you need a chart of account > for Inventory, prepaid tax (fed/state), vehicles > > Many banks allow you to download all of your transactions and these days > they sometimes automatically categorize the expenses. So when you import > it into a program such as microsoft money or quicken Taco Bell would come > up as expense: dining out (or something similar). But even if they don't > do that for you, you can do that on your own after you download it or when > you manually enter them from receipts or monthly statement. > > Now because of this it seems like I should have an account called > Groceries/Take Out (expense other 8000? or expense accounts 6000). BUT to > me it just seems reduntant. The money that paid for taco bell might have > been > A: Cash (withdrawl or petty cash) > B: Check > C: Credit card (which then would probably be paid off through checking > account) > > In summary it seems to me that CoA is just a way to track types of > expenses but if you can flag an individual transaction as a certain type > or category it seems like you could just run a report that would tell you > the same thing. Rather than requiring a 2nd entry of that transaction into > a chart of accounts. > > I just wonder why this is the way it is. Or maybe I have it all wrong. > Hoping to get some good conversation going about this. Why don't you start here: http://www.dwmbeancounter.com/tutorial/Tutorial.html Lesson 1 actually does a nice job of explaining the various sections (assets, liabitiies, equity, income, expenses) that make up the Chart of accounts. Posted by Haskel LaPort on January 8, 2009, 8:12 am Please log in for more thread options >> Hello, I am just starting accounting for dummies and I probably haven't >> got there yet but I have a question about chart of accounts vs real >> accounts and transactions. >> >> From what I am understanding Chart of Accounts aren't always actual >> accounts but ways of keeping track of different categories of expenses? >> >> For example I learned about account numbering where they start 1-9 for >> assets liabilities etc., ie. >> 1000 checking >> >> That seems logical because I'm very familiar with checking accounts but >> then there might be accounts such as >> Inventory, prepaid tax (fed/state), vehicles >> >> I guess what I'm failing to understand is why you need a chart of account >> for Inventory, prepaid tax (fed/state), vehicles >> >> Many banks allow you to download all of your transactions and these days >> they sometimes automatically categorize the expenses. So when you import >> it into a program such as microsoft money or quicken Taco Bell would come >> up as expense: dining out (or something similar). But even if they don't >> do that for you, you can do that on your own after you download it or >> when you manually enter them from receipts or monthly statement. >> >> Now because of this it seems like I should have an account called >> Groceries/Take Out (expense other 8000? or expense accounts 6000). BUT to >> me it just seems reduntant. The money that paid for taco bell might have >> been >> A: Cash (withdrawl or petty cash) >> B: Check >> C: Credit card (which then would probably be paid off through checking >> account) >> >> In summary it seems to me that CoA is just a way to track types of >> expenses but if you can flag an individual transaction as a certain type >> or category it seems like you could just run a report that would tell you >> the same thing. Rather than requiring a 2nd entry of that transaction >> into a chart of accounts. >> >> I just wonder why this is the way it is. Or maybe I have it all wrong. >> Hoping to get some good conversation going about this. > > Why don't you start here: > http://www.dwmbeancounter.com/tutorial/Tutorial.html Lesson 1 actually > does a nice job of explaining the various sections (assets, liabitiies, > equity, income, expenses) that make up the Chart of accounts. Excellent site, well written and explains it far better than I can or far better than what I am willing to explain. > Posted by Rob on January 8, 2009, 12:03 pm Please log in for more thread options I appreciate the link I'll check it out. I didn't know what to make of that your post Haskel, it sounded like you were just yankin my chain. Similar Threads Posted Chart of Accounts? 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