The Chart of Accounts ties in with the Accounting Equation
- the Assets are listed first
- then the Liabilities
- next is the
Equity (permanent capital)
- and finally the Revenue and Expenses (temporary
Example Chart of Accounts
Here is an example of a simple Chart of Accounts
Expenses on the general ledger accounts
Breaking down the expenses..
Expenses are usually the longest list found in the Chart of Accounts
(yes, those pesky items that reduce the profit!), and are usually kept
in alphabetical order.
It is best to group similar purchases under one account name to keep the list short and orderly.
- Pencils, papers, post it notes and paper clips can all go under ‘Stationery’.
- Items that are purchased only once a year, such as an
annual Post Box rental, or that are difficult to slot into any other
account can be grouped under the account ‘General Expenses’, but avoid the temptation of adding too many purchases here.
If your expenses list is long and cumbersome split the list into different groups with sub-totals to make them more manageable.
You could have a group called ‘Administration Expenses’ and another called ‘Operating Expenses’... really, anything that will work and make it easier is acceptable.