Chart of Accounts and Bookkeeping for a Consulting Business

Our account management team is staffed by CPAs and accountants who have, on average, 11 years of experience. He has helped hundreds of high-profile enterprises worldwide with their technology initiatives, including Nucor Steel, Fisher and Paykel Healthcare, Kodak, Coors, Boeing, and Duke Energy. He has helped manage ERP implementations and reengineer global supply chains across the world.

Revenue and Expenses

The general ledger provides a comprehensive view of your financial activities. However, a profit and loss (P&L) statement overviews revenues and expenses. Consider creating separate line items in your chart of accounts for different types of income.

Liability Accounts

Each account in the chart of accounts is typically assigned a name and a unique number by which it can be identified. Focus on categories recording transactions that align with your business activities and financial reporting needs. For a simple example, let’s assume your startup issues an invoice to a customer for $10,000. Your accountant will record the $10,000 as a debit to your accounts receivable (an asset account). At the same time, your accountant will record a $10,000 credit in your revenue account.

Income Statement Analysis

In a chart of accounts, assets are usually classified into current or non-current categories. Current assets are those that can be converted into cash or used up within one year, such as cash and inventory. Non-current assets are long-term resources, such as property, plant, and equipment. This classification helps businesses assess their liquidity and long-term financial health. There are five main account type categories that all transactions can fall into on bookkeeping for consultants a standard COA.

• If your firm has significant interest income or expense, income tax, or other one-time items, those should be booked to GL accounts coded to “Other Income” or “Other Expense” account types.
• The difference is that most businesses will have many more types of accounts than your average individual, and so it will look more complex; however, the function and the concept are the same.
• When defining your COA, consider what kind of reports and insights you need.
• The Chart of Accounts is an excellent a way to record all of these transactions for income, expenses, or liabilities.
• This can help you visualize how your chart of accounts translates into formal financial reporting.
• (Some corporations have preferred stock in addition to their common stock.) Shares of common stock provide evidence of ownership in a corporation.

Therefore, keeping track of billable and non-billable hours gives you a more accurate picture of business profitability. Most consulting businesses work as partnerships, which are networks of legally autonomous organizations led by partners, principals, and directors. Sales returns are amounts refunded to customers or deducted from the total income due to product returns, discounts, or cancellations.

• A bookkeeper is in charge of maintaining accurate and current records of your company’s financial situation.
• It helps businesses comply with financial reporting standards, identify areas of improvement, and make informed business decisions.
• If you employ people whose primary job is marketing and selling your firm’s services, then also use a third payroll cost account in the marketing and sales section of your chart of accounts.
• This can result in multiple, inconsistent charts of accounts across different parts of the business.
• As your company grows and evolves, you may need to add new accounts or revise existing ones to accommodate new types of transactions.
• For instance, if you rent, the money moves from your cash account to the rent expense account.
• For instance, if you have cash on hand, you could assign the account number 1010 for easy reference.

Understanding its structure, types, and best practices is key to maintaining an organized financial record-keeping system. The Chart of Accounts (COA) is a foundational tool in accounting, serving as the backbone of a company’s financial recordkeeping system. This guide offers an in-depth exploration of the chart of accounts, providing definitions, an example, and a downloadable template to enhance your financial organization and reporting.

Embrace this opportunity to refine your COA and set the stage for future success. However, an Bookkeeping for Chiropractors ERP implementation provides a perfect opportunity to streamline and optimize your COA. By consolidating and cleaning up your COA, you can ensure it aligns with your business objectives and supports efficient financial reporting. It will help if you consider merging your project management system with your accounting program to simplify your billing through third-party project management and accounting software. In setting up a COA, it’s important to have a systematic structure that is easily understandable and scalable as the company grows.

• This guide offers an in-depth exploration of the chart of accounts, providing definitions, an example, and a downloadable template to enhance your financial organization and reporting.
• Before you decide to set up another account, ask yourself whether you can track this item another way.
• If you don’t see the account type you want, then select the Other Account Types option and then choose from the drop-down menu shown below.
• Code the other expense accounts as child accounts under this parent account.
• The revenue account would be on the same pattern as the income statement.

• This chart of accounts example includes a variety of common account types and their typical numbering.
• These numbers are typically four digits, and each account has a unique number.
• The COA serves as the backbone of a company’s accounting system, ensuring that financial data is accurately recorded, easily accessible, and comprehensible.
• Retained earnings represent the accumulated net income that has not been distributed as dividends to the shareholders.
• Moreover, a chart of accounts lists the general ledger accounts for an organization in a structured manner.
• Therefore, keeping track of billable and non-billable hours gives you a more accurate picture of business profitability.

Bookkeeping and a chart of accounts are essential for a consulting business to understand its financial budgeting and planning. A chart of accounts displays a list of all financial accounts in the general ledger, enabling you to categorize all your company’s transactions into separate groups. It provides insight into the efficiency of various parts of your organization by segmenting your assets, liabilities, equity, revenue, and expenses.