What Exactly is a Chart of Accounts?

The first task you perform in setting up a bookkeeping system is to create a chart of accounts.  A chart of accounts is simply a list of categories you use to record and group your business transactions. [E.g., account 101- Cash in bank; account 400- Sales; etc.] If you use Quickbooks all you need to do is select the type of business you operate and they have a chart of accounts you can use without having to waste energy to think. No big deal.

Most business people have heard the axiom or truism "you manage what you measure".  Look at your chart of accounts again. Look at your chart of accounts as a simple management tool.  What accounts could you add to help you manage? Is all your payroll in one account?  How about separating the overtime premium from regular wages?  Has your supplies account become a catch-all for most expenditures?  Take time to think. What do you need to measure to help you manage your bottom line?