Now that you have formed your company and know where you are doing business, it is time to set up the chart of accounts. Creating the chart of account is like building a foundation for a house. A good chart of accounts leads to useful financial statements, logical information and meaningful output. A poor chart of accounts will leave you tripping over your own feet trying to figure out what is going on in your company.
All charts of accounts will contain 5 main types of accounts: Assets. Liabilities. Equity, Income and Expenses. Tools such as QuickBooks will allow you to easily break them down further into sub categories. The sample in the above graphic is a great template to start with when creating your chart of accounts. It is imperative to provide descriptions for the accounts as well as indicate what kind of transactions would flow into that account. This information is usually contained within an accounting manual.
See the graphic below for more tips related to your chart of accounts.