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Chart of Accounts and General Ledger


The Chart of Accounts (COA) is an index of the accounts used by a firm to design an accounting system and the way it should work. It should be both functional and flexible.

Some accounts are used by every business and are therefore always included in all Chart of Accounts. Other accounts may or not be used depending on the type of business that is being operated. As an example a pharmacy carries a stock of medicines thus an inventory account must be used. On the other hand an architectural firm sells intellectual services so an inventory account is not needed.

The Chart of Accounts is customised to the needs of the firm or individual that will use the accounting system. After the Chart of Accounts is defined the set of accounts become the General Ledger. All transactions are recorded in the accounts that form the General Ledger following the dual entry principle of accounting. The General Ledger becomes the core of the Accounting System.



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