Record keeping is the key to success of any business, be it big or small. The foundation to success in a business depends with how you organize yourself in dealing with challenges and leveraging on the strengths of your business. Without a well-developed system of bookkeeping, your business is likely to record losses through unchecked loopholes. Keeping standard charts of accounts works in a big way in helping the business evade possible losses by accounting for every transaction. Here are some of the basic things that are recorded in a chart of accounts and their number range.
Assets
Assets are things that your business or company owns. There are fixed and current assets. Fixed assets are the equipment or materials that can be sold and have a minimum cost. They include things like premises, vehicles, machines, and land. The number range for fixed assets is from 1500-1999. Current assets, on the other hand, are numbered from 1000 to 1499 in common standard charts of accounts.
Liabilities
It is what your business or company owes other companies or individuals, which may be regarded as a liability. It can include loans or goods bought on credit. It is important to keep records of what you owe others in a bid to establish whether your business is operating at a loss or profits.
Capital
Capital is the amount of money that is used to start a business and all other additional funds that come onboard during the time the business is in operation. Having records of capital in a standard charts of account helps in updating books of account.
Expenses
Expenses are costs your business incurs during its operations. They include things like rent and insurance rates. These expenses may have a significant impact on your business if they are not closely monitored.
Cost of production
The cost of goods sold should not be lower than the cost of production. For your business to record profits, attention should be paid on all costs incurred during the production of goods until when they are ready for sale. Things like cost of raw materials, cost of labor, transport cost and other relevant costs must be accounted for in order to easily realize the path your business is following.
Record keeping in a business is an essential factor that should not be overlooked. Without a sound system of record keeping, your business may turn into a perennial loss-maker without your knowledge. Standard charts of accounts form a vital role in the accounting system for your business. It is one simple step that you can use to keep losses at bay and operate your business in the right direction.
