Chart of Accounts
Was anyone else about ready to pull their own hair out because they too had to complete this step not once, not twice but three times? Because, me too. After downloading my transactions from my online banking I went ahead and simplified and classified the transactions for the last two weeks, then linked all the data to my income statement in the next tab. I saved it all and when I came back the next day to start the written aspect the spreadsheet was missing the second tab and the formatting was all wrong. I did it all again except when I went back in the first tab was missing and the formatting was all wrong. So what happened you ask? The file type that I used, i.e. downloaded from my bank, was not an excel file and only saved the current tab deleting all other information… So as they say third time’s a charm?
Crisis aside, I found the chart of accounts straightforward and reasonably easy to complete, my biggest issue was deciding just how I would categorize my chart of accounts. In the end I went with a simpler approach. One of the biggest insights I gained from this task is just how much I spend willy-nilly and that those sale purchases do, in fact, add up. I don’t believe that this is something I am going to be continuing on a regular basis as my finances do not change a whole lot, however, it will be something I will revisit if I am wanting to make changes to my finances or find I am not reaching my savings goals that I have set.
| Chart of Accounts Revenue 1-1 Interest Income 1-2 Income – salary and wages Expense 2-1 Private Health Insurance Expense 2-2 Income Protection Insurance Expense 2-3 Telephone Expense (mobile) 2-4 Vehicle Expense (registration) 2-5 Expense – Donations/Gifts 2-6 General Living Expense (Food, fuel) Liabilities Assets Equity | My Chart of Accounts Revenue 1-1 Income (interest) 1-2 Income (wages) Expense 2-1 Expense (general living) 2-2 Expense (rent) 2-3 Expense (utilities) Assets Liabilities Equity |
A: My chart of accounts is very similar to the example shown, albeit with less expenses. My accounts are rather simple, I have chosen to lump all my bills under one over arching heading that is utilities. I have no insurances or registrations due in the time frame that I selected, although I could have added extra categories in my chart of accounts, I decided to leave it on the simple side.
B: The chart of accounts shown in the activity could be broken down into individual accounts for both the husband and wife, e.g. each mobile phone plan or vehicle registration. This further breakdown of detail might come in handy when trying to pinpoint exactly where overspending is come from.
C: My income statement (thankfully) provided a profit, not that it is surprising as I keep an eye on my income and expenses regularly. The transaction has been useful in providing me an efficient way of examining my income and expenses and just where my money is going. It’s easy to see where each transaction is going but by putting it into each section in my chart of accounts, I can more clearly identify what is being spent essential expenses like utilities and rent and where I can cut down my expenses i.e. general living (aka take out).
D: There were no transactions in my account that could apply the accrual basis of accounting to, mostly because there were no lump sum transactions for items like registration or insurance deducted from the account.
Accounting 101 