Аll companies should maintain accounting records. As a general rule, accounting is carried out by double entry. These accounts are summarized in the Chart of Accounts approved by the Ministry of Finance. The exception is banks and government agencies.
Chart of accounts are an effective tool that allows you to register and summarized information about the state of property (capital, liabilities) in monetary terms.
Another function of the chart of accounts is that it allows you to control the correct accounting and use of company property. This data can be clearly seen in the annual balance sheet. And it clearly shows how much the company has earned, how much cash it has in the bank, and how much is invested in assets.
The plan summarizes the same indicators in different forms. As a result, they will go to one account, where you can trace the dynamics.
The chart of accounts of accounting consists of eight sections:
The first one is “Non-current assets”. The second is “Inventory”. The third is “Production costs”. The fourth is “Finished products and goods”. Fifth – “Cash”. Then comes the “Calculations”. The seventh is called “Capital”. And the final section “Financial Results”.
Each of the sections of the plan contains accounts Active – reflect the accounting of the movement of economic assets. Their opening and closing balances are always recorded on debit basis. If there is an increase in the asset, it is entered in debit, a decrease in the loan; Passive – reflect the sources through which the assets of the enterprise were formed. The opening and closing balances are always in credit. An increase occurs on a loan, a decrease – on a debit; Active-passive – take into account both assets and the sources of their financing. The balance can be both debit and credit.
If you want to understand in more details of the chart of accounts and get advice on accounting and financial management of the company, it will be very helpful for you, to contact the “Valen Group” company. By ordering a consultation, a business owner can receive comprehensive information on accounting in an understandable form.