The basic road map into any accounting system is the chart of accounts. It is this chart that helps establish the information that will be captured by your accounting system, and what information will subsequently be readily retrievable by the system. This tool, like the rest of the accounting systems, needs to be dynamic and should grow as the size and needs of your business changes.

To help establish a good working chart of accounts you need to answer some questions, in conjunction with your accountant, as to how your business will operate and what is important to you. Some of these considerations might be:

  1. Will your business have stock to account for? If so, will it be purchased in finished form or will there be production costs?
  2. Are fixed assets a significant portion of your business?
  3. Will you sell only one product or service, or will there be several types of business?
  4. Will you have accounts receivable from customers, which you will have to track?
  5. Are you going to sell in only one location, or will you do business in several places?
  6. Are the products you sell subject to value added tax?
  7. Do you need to track costs by department?
  8. What type of government controls or regulatory reporting are you subject to?

Each one of these questions can have several answers and will probably generate more questions. Each answer will have an impact on how the chart of accounts is structured. It may seem that developing a chart of accounts is not particularly high on your list of things to do as you start a new business. The amount of time and money a well organised accounting system may save you can be significant as the need to generate information for various purposes increases. An example of a basic chart of accounts follows this section.