Chart of Accounts


J

James Reardon

Looking for some examples of a chart of accounts for a law office.

Any suggestions?
 
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P

Paul A Thomas

James Reardon said:
Looking for some examples of a chart of accounts for a law office.

Any suggestions?

As mentioned earlier, you can "borrow" one from another practice. But most
likely you will want to adapt it to your specific needs.

In most cases it is almost better to start from scratch.

You can use longer variations, but a minimum of three digits is necessary.

100's = Assets
200's = Liabilities
300's = Equity
400's = revenues
500's = reserved
600's - Expenses
700's = Expenses
800's = Expenses
900's = special items


I generally save the 500's accounts for cost-of-sales used in retail or
manufacturing.

Spread out the expenses in alpha, leaving room to add others later as the
need arises.
 
D

durand26

I have listed below the standard chart of accounts as used in
Australian pulic companies. Although this isn't prescribed by
accounting standards, my text book asserted that it covers all types
of assets, liabilities and equity that you could possibly come across.
Because they're standard, they help make it easier to calculate cool
ratios that really help you understand how the business is doing. See
your local bookshop to see what those ratios are, or contact your
accountant, or even just hang around alt.accounting for a while :)

NB: Assets and liabilities are each sub-divided into Current and
Non-current. If an asset (or liability) will last for less than a
year, it's current. Otherwise, it's non-current. Right, with that
caveat out of the way, here is The Official Chart Of Accounts Of The
Australian Economy.....


ASSETS
Cash, Receivables, Inventory, Investments, Other financial assets,
Property plant & equipment, Tax assets, Intangibles, Other
(The Acronym is "CRI-I-OPTIO". Sing it to the tune of "Brown Girl in
the Rain, Tra la la la la". Or if you follow Manchester United: "Ruud
van Nistelrooy, Tra la la la la")

LIABILITIES
Payables, Interest-bearing liabilities, Tax liabilities, Provisions
("PITP")

EQUITY
Contributed Equity, Retained earnings, Other, Reserves
("CROR")

So, CRI-I-OPTIO, PITP, CROR.

As for income and expenses, each business is different so it's hard to
prescribe what they should be. But financiers like to see Interest
expenses, Tax expenses, Depreciation and Amortisation listed as their
own separate accounts. This is because if you sell your company, the
buyer might have different tax expenses, might want to fund it with a
different amount of debt, and may choose to use a different
depreciation / amortisation method. Separating these out means you
can calculate EBIT (Earnings before Income and Tax), which tells you
how much money the actual business made, as opposed to the company,
and makes it easier to work out a value when you want to sell out.

*********

Now the big question: Is this useful? Well, using this chart is useful
for outside investors who want to compare your company with all the
other ones they could possibly invest in, because it breaks everything
down into nice little columns that are comparable to other companies.
eg, I can see that company X has a lot more intangible assets than
company Y, which would help me decide which one to invest in. But I
guess you're trying to run your business, not choose between two
investments. Therefore, you want a chart that will help you decide
stuff like ...
1) Which market niche are you getting the most business from?
Solutions: a) Have, say five different income accounts (with
corresponding COGS accounts), one for each market niche. b) Use job
costing, with one "job" per market niche. c) Run reports such as
"Sales by Customer" to see who your most important customers are, and
then dump the list to Excel and classify them by customer type, with
one customer type per market niche.
2) If I asked the bank for more money, would they give me any?
Solutions: Keep track of the following brilliant ratios - Debt to
equity ratio, Interest cover, inventory turnover, acid test ratio....

Hope that's been useful :)
 
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D

durand26

Oh btw, those accounts are all header accounts. For instance, you'd
want to keep track of the book value of each, say, car you own. So
each car would have its own separate account as a sub-account of the
asset Property, Plant & Equipment.

Regards,

Durand
 

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