The Chart of Accounts is your list of categories, or “accounts”, that every business transaction is recorded to. Think of it as the skeleton of your accounting system. QuickBooks or QuickBooks online includes a setup wizard that asks you a series of questions about the nature of your business which it uses to set up a default Chart of Accounts, among other things. Wave Accounting includes a generic Chart of Accounts. You can always edit the account list to suit your particular needs so here are a few tips to get it right from the beginning:
- When designing any reporting system, you should always start at the end. What sort of information will you need to access to help you manage and grow your business?
- Do you want to track different types of sales? If so, you should consider setting up various sales accounts to track and report these.
- Think of the different expenses that you as a manager would like to see separated. It’s easy to add accounts together but difficult to break them apart. For example if you have multiple cell phones and you want to know what each one is costing you, why not set up separate accounts for each? That way you can easily see how much each phone is costing you, and you can add the account balances together to get the total picture of your cell phone expense.
- Sole proprietors should review the Statement of Business Activities form T2125, available on the Canada Revenue Agency website. This form will need to be completed as part of your personal tax package and has specific expense categories listed. Consider the categories on this form to be the minimum level of detail that you will need in your Chart of Accounts and go from there.
When BookSmarts sets up your accounting system, we go through your reporting needs in detail, making specific suggestions that will greatly improve the quality of reports that will be available to you, so give us a call today!