Information Sheet 1-3

The Chart of Accounts

Learning Objective

After reading this Information Sheet, you should be able to understand

and make use of a Chart of Accounts.

Chart of Accounts
 is a listing of the names of the accounts that a company has
identified and made available for recording transactions in its
General Ledger.
 A company has the flexibility to tailor its chart of accounts to best
suit its needs.

Example: Marvel Diner Chart of Accounts

Assets
No. Account Title To Description/Explanation of Account
Increase
001 Cash Debit Currency, coins, checks received
from customers but not yet
deposited
002 Cash in Bank Debit The sum of all coins, currency and
other unrestricted liquid funds that
have been placed on deposit with
a financial institution
003 Accounts Debit Amounts owed to the company for
Receivable services performed or products sold
but not yet paid for
004 Inventory Debit Cost of merchandise purchased
but has not yet been sold
005 Prepaid Rent Debit Cost of rent that is paid in advance
and includes a future accounting
period
006 Prepaid Debit Cost of insurance that is paid in
Insurance advance and includes a future
accounting period

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007 Land Debit Cost to acquire and prepare land
for use by the company
008 Buildings Debit Cost to purchase or construct
buildings for use by the company
009 Delivery Debit Cost to acquire and prepare
Equipment delivery equipment for use by the
company
010 Kitchen Debit Cost to acquire and prepare
Equipment kitchen equipment for use by the
company
011 Furniture, Fixtures Debit movable furniture, fixtures, or other
and Other equipment that have no
Equipment permanent connection to the
structure of a building or utilities.
012 Accumulated Credit Contra asset account. Amount of
Depreciation - the buildings' cost that has been
Building allocated to Depreciation Expense
since the time the building was
acquired
013 Accumulated Credit Contra asset account. Amount of
Depreciation - the equipment’s' cost that has
Equipment been allocated to Depreciation
Expense since the time the
equipment was acquired

LEGEND:

Current Assets

Property, Plant and Equipment

Contra Assets
 Is a type of asset account that has a credit
balance, as opposed to the debit balance of a
normal asset account.
 Credit to increase and Debit to decrease.
Remember:
 Debit assets to increase and credit to decrease; except contra
asset accounts…debit to decrease and credit to increase.

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Liabilities
No. Account Title To Description/Explanation of Account
Increase
030 Accounts Credit Amount owed to suppliers who
Payable provided goods and services to the
company but did not require
immediate payment in cash
031 Notes Payable Credit Amount of principal due on a
formal written promise to pay
032 Salaries and Credit Amount owed to employees for
Wages Payable hours worked but not yet paid
033 Interest Payable Credit Amount owed for interest on Notes
Payable up until the date of the
balance sheet
034 Unearned Credit Amounts received in advance for
Revenues delivering goods or providing
services. When the goods are
delivered or services are provided,
this liability amount decreases.
Aka Customer Deposit or Deferred
Income.
035 Mortgage Loan Credit A formal loan that involves a lien on
Payable a property until the loan is paid

Remember:
 Credit Liabilities to increase and Debit to decrease

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Owner's Equity
No. Account Title To Description/Explanation of Account
Increase
040 Capital Credit Amount the owner invested in the
company (through cash or other
assets) plus earnings of the
company not withdrawn by the
owner
041 Drawing Debit Amount the owner of the sole
proprietorship has withdrawn for
personal use during the current
accounting year.

Note:
 Drawing is a contra equity account…debit to increase and credit to
decrease

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Operating Revenue
Operating Revenues: are revenues resulting from the normal
operations of a business such as the revenues resulting from the
sale of products and services to your customers.
No. Account Title To Description/Explanation of Account
Increase
050 Sales Revenues Credit Amounts earned from providing
services to clients, either for cash or
credit.
051 Sales Discounts Debit Contra revenue account. Is a
reduction in the price of a product
or service that is offered by the
seller, in exchange for early
payment by the buyer.
052 Sales Returns Debit Contra revenue account.
and Allowances Represents the amounts of
merchandise that were returned to
suppliers and the amounts allowed
as deductions by suppliers for
goods not returned.

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Non-Operating Revenue and Gains
Non-Operating Revenues and Gains: revenues or gains resulting
from something other than from normal business operations.
No. Account Title To Description/Explanation of Account
Increase
060 Interest Income Credit is the amount of interest that has
been earned during a specific time
period.
061 Gain on Sale of Credit item resulting from the sale of
Asset an asset, other than inventory, for
more than the amount shown in the
company's accounting records.
062 Commissions Credit fee paid to in exchange for services
in facilitating or completing a sale
transaction.

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Expenses
No. Account Title To Description/Explanation of Account
Increase
070 Cost of Goods Debit it represents the value of the items
and Services sold to customers before any mark-
up.
071 Salaries and Debit cost incurred by companies to pay
Wages Expense employees. This line item may also
include payroll taxes and benefits
paid to employees.
072 Office Supplies Debit is the amount of administrative
Expense supplies charged to expense in a
reporting period.
073 Utilities Expense Debit is the cost consumed in a reporting
period related to the following
types of expenditures: Electricity,
Water.
074 Repairs and Debit The costs incurred to bring an asset
Maintenance back to an earlier condition or to
Expense keep the asset operating at its
present condition (as opposed to
improving the asset).
075 Cleaning Debit is the amount of various cleaning
Supplies Expense supplies charged to expense in a
reporting period.
076 Rent Expense Debit an account that lists the cost of
occupying rental property during a
reporting period.
077 Delivery Expense Debit represents cost of gas, oil, courier
fees, and other costs incurred by
the business in transporting the
goods sold to the customers.
078 Telephone Debit Is the cost associated with all land
Expense lines, fax lines, and cell phones
during a usage period.
079 Professional Fees Debit are prices charged by individuals
specially trained in specific fields of
arts and sciences, such as doctors,
architects, lawyers, and
accountants.
080 Advertising Debit reports the cost amount of ads run
Expense during the period shown in the
income statement.

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081 Interest Expense Debit Is used to report the amount of
interest incurred on debt during a
period of time.
082 Taxes and Debit business taxes, registration, and
Licenses licensing fees paid to the
government
083 Depreciation Debit refers to the portion of the cost of
Expense fixed assets (property, plant, and
equipment) used for the operations
of the period reported

Remember:
 Almost all Expense transaction accounts are debited when incurred.
 Credit Expense only if adjusting, reducing or closing an expense
account.

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 Chart of Accounts
Marvel Diner

No. Account Title

001 Cash
002 Cash in bank
003 Accounts Receivable
004 Inventory
005 Prepaid Rent
006 Prepaid Insurance
007 Land
008 Building
009 Delivery Equipment
010 Kitchen Equipment
011 Furniture, Fixtures, and other Equipment
012 Accumulated Depreciation – Building
013 Accumulated Depreciation – Equipment
030 Accounts Payable
031 Notes Payable
032 Salaries and Wages Payable
034 Unearned Revenues
035 Mortgage Loan Payable
040 Capital
041 Drawing
050 Sales Revenues
051 Sales Discounts
052 Sales Returns and Allowance
060 Interest Income
061 Gain on Sale of Asset
062 Commissions
070 Cost of Goods and Services
071 Salaries and Wages Expense
072 Office Supplies Expense
073 Utilities Expense
074 Repairs and Maintenance Expense
075 Cleaning Supplies Expense
076 Rent Expense
077 Delivery Expense
078 Telephone Expense
079 Professional Fees
080 Advertising Expense
081 Interest Expense
082 Taxes and Licenses
083 Depreciation Expense

Note:
001 – 041 Balance Sheet Accounts

050 – 083 Income Statement Accounts

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References
Accounting Coach. (2020). Accounting Basics. Retrieved from Accounting Coach:
https://www.accountingcoach.com/
al, G. e. (1995). Basic Accounting. Quezon City: Monarch Books Corporation.
Liabilities - What are liabilities? (2020). Retrieved from debitoor:
https://debitoor.com/dictionary/liabilities
Why Must Accounting Equation Always Balance? (2020). Retrieved from
Accountinggo.org: https://accountingo.org/financial/accounting-equation/why-
always-balanced/

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