Introduction to Accounting 120
Chapter 5:
Chart of Accounts
Reminders
• Be sure that you have completed
U5A2 on ClassMarker.com (as well as
the Income Statement practical
portion of U5A2).
• Please check Engrade.ca to ensure
all marks look correct and see or
email me with any discrepancies.
In Today’s Class..
• We will learn about the “Chart of
Accounts”.
• Following our Essential Learnings we
will:
– Identify users and uses of accounting
– Describe how technology is changing
accounting
• After this presentation and discussion we
will have a chance to check your
knowledge with a brief review.
Introduction
• It is customary to number each account in
the ledger. Numbers are assigned based
on classification:
– Assets: 100-199
– Liabilities: 200-299
– Owner's Equity
• Capital/Drawings: 300-399
• Revenue: 400-499
Introduction
• For larger companies, it is necessary to
increase the span by moving into higher
numbers:
– Assets 1000-1999
– Liabilities 2000-2999
• Owner's Equity
– Capital/Drawings 3000-3999
– Revenue 4000-4999
– Expenses 5000-5999
Chart of Accounts
(Continued)
• A chart of accounts is a list of the
ledger accounts and their numbers,
arranged in ledger order.
• When accounts are numbered, the
numbers are assigned in ascending
order, maintaining other accounting
regulations. For example, assets are
listed in order of liquidity and
numbered, beginning with Bank, as
100 or 101.
Chart of Accounts
(Continued)
• Examine the following chart of accounts:
Chart of Accounts-Assets
• Examine the asset section of a chart of
accounts:
• Note:
– Assets are in order of liquidity.
– Accounts are numbered within 100-199.
– Account numbers are in ascending order but
spaced to accommodate any addition of new
Chart of Accounts-Liabilities
• Examine the liability section of the chart of
accounts:
• Note:
– Liabilities are listed in order of retiring debt.
– Accounts are numbered within 200-299.
– Account numbers in ascending order but with spaces to
accommodate the addition of more accounts
Chart of Accounts-Owner's
Equity
• Examine the owner's equity section of the
chart of accounts:
• Note:
– Capital is listed before Drawings.
– Capital accounts are listed within 300-399.
– For this company, only one revenue account is used. If there were
more, accounts would be listed in alphabetical order.
– Revenue is within 400-499.
– Expenses are listed in alphabetical order.
– Expenses are within 500-599.
– Account numbers are in ascending order but with spaces to
accommodate the addition of more accounts.
The Trial Balance
• Neither the preparation nor the purpose of the
trial balance changes with the induction of the
expanded equity section and the chart of
accounts; however, some companies choose to
include the account number, as well as the
account name, on the trial balance, but it is not
necessary.
• The trial balance remains the instrument used to
verify the balance of the ledger. The new equity
accounts are listed in the appropriate order with
their balances in the appropriate debit/credit
column.
The Trial Balance
The Trial Balance (Continued)
Checking Your Knowledge
• Please take a moment to check your
knowledge by going to ClassMarker.com
– Complete the following reviews:
• “The Electronic Income Statement” (Using yesterday’s
PPT)
• “Chart of Accounts” (Using today’s PPT)
• Once you have done this, please complete
Exercise #6 on page 117 of the textbook in
groups. Create a T-Accounts sheet and a trial
balance sheet. Open “Page 117, #6,TAccounts and Trial Balance.xls” off the