Do You Know What a "Chart of Accounts" Is?

Most freight brokers understand that they will have to get involved to some extent with the bookkeeping and accounting requirements of their business. The first place to start is a Chart of Accounts.

This Chart is a listing of all the potential accounting transactions that a freight broker might be dealing with. The Chart starts with the Assets like Cash in Bank, Accts Receivable, and then it goes into the liabilities like Accts Payable, and then on into the Income and Expense accounts like Revenue from Shippers, Reimbursement for Unloading Fees, and for Expenses, Loading Board Fees, Telephone Expense, Office Supplies, and so on.

When I was providing accounting services many years ago, I created a Chart of Accounts for each client and each account had a number. The 100s were the Assets, the 200s were the Liabilities, the 300s were the Income accounts, the 400s were the Cost of Sales and the 500s were the Expenses.

So at the end of each month, the client would bring in their check register and they would have each check coded based upon the Chart of Accounts. For example, Telephone expense was coded 520, Office Supplies, 511 and so on. The income would be coded like Revenue from Shippers, 301, payments to the truck would be 401 and so on.

What you are doing is assigning a code number to each and every transaction that you incur. From there, the accountant can plug these into the accounting software and generate your financial statements.

And, yes, a good accountant should review your codings to see if maybe their should be some revisions. For example, a loan payment would be made with one check, but the payment may include a  payment on a liability AND the interest portion. The accountant can help you with some of the more complicated transactions.

I hope this is helpful. Let me know if you have comments.

Comments

[Darcy Grubaugh]

Indeed, an efficient system of accounting and bookkeeping is the core of a smooth business flow. It is very important for accountants and entrepreneurs to know what the Chart of Accounts is. This is such a comprehensive post on the matter. Great job, buddy!

[Soren Duus]

People who are interested in accounting can really benefit from this. It's important to know the basics to completely understand what "Chart of Accounts" is. Many people say that everything about Accounting is complicated. Well, it's just about handling the complexities in a simplier way. It's kinda ironic, but that's the way life goes on. ;)