Accounting Management tips

How can a chart of accounts improve the analysis of your financial activities?

Keeping your finances organized can seem like a real puzzle for your business. A chart of accounts is an attractive tool, but what is its purpose? Let’s shed some light on it.

What is the purpose of a chart of accounts?

Having a good chart of accounts is essential in order to ensure better financial management of your SMB. Basically, it’s a document that includes the financial accounts used in your business, such as expenses, revenues, assets, equity, etc.

A well-structured chart of accounts helps you to understand the financial information and therefore provides substantial support for the annual analysis of your financial statements, while favouring more accurate accounting entry.

The starting point: properly structure your chart of accounts

The primary goal of the chart of accounts is to facilitate the organization and interpretation of your financial information. Its structure will be influenced by your activity sector and your specific needs.

o simplify the classification of your activities, in a chart of accounts you will see financial situation accounts and result accounts.

Situation accounts (balance sheet)

  • Liquidity
  • Long-term investments
  • Tangible assets
  • Accounts payable
  • Long-term debt
  • Equity

Result accounts

  • Revenues
  • Operating expenses
  • Financial expenses
  • Tax expenses

01 Financial situation accounts (balance sheet)

Financial situation accounts, also known as the balance sheet, correspond to wealth, which is all the property belonging to your business, including debt. These accounts represent a reading of what your organization has and what it owes.

02 Result accounts

Result accounts are associated with the financial year that has just ended. In other words, accounts whose balances are reset to zero at the beginning of the next fiscal year. Their role is to provide information about the business’s performance, i.e. the revenues and expenses generated by your business.

The chart of accounts also contains subcategories in order to adapt to your organization’s needs according to its various activity sectors.

Use a chart of accounts to make better decisions

The chart of accounts is a tool which not only allows you to analyze your financial activities over time, but also provides you with quick and concrete access to the information required when making decisions concerning your business goals.

To make things easier for you, there are accounting software applications, such as Acomba, which offer charts of accounts adapted to your activity sector. For more information, contact one of our agents.

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