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Finance for Non-Financial Managers
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probably couldn’t produce the reports without their help,
because you don’t have an ATR.
The Chart of Accounts—A Collection of Buckets
If you’ve seen a chart of accounts, you probably wondered why
the accountants hold this list in such high regard. You might
hear phrases like “It’s not in the chart of accounts. We don’t
know where to put it” or “We can’t process your invoice without
an account number.” While to many non-financial managers,
these phrases might seem intended primarily to retard the
progress of commerce, that’s not really their purpose—honest!
The entire recording process of any accounting system
requires a basic organization of data so that the payment of
vendor invoices, for example, can be later summarized and
reported with some clarity as to what was done, why it was
done, and what organization(s) benefited from those expendi-
tures. That basic organization is called a chart of accounts.
You might think of the organizing system for your company’s
accounting data as a collection of buckets, or accounts, each with
a particular kind of data inside. There might be a bucket for each
individual asset the compa-
ny owns and a bucket for
Chart of accounts A each individual debt the
systematic listing of all
ledger account names and company owes. There will
associated numbers used by a compa- also be a bucket for each
ny, arranged in the order in which product or service the com-
they normally appear in financial state- pany sells and one for each
ments—customarily Assets, Liabilities, type of expense the com-
Owners’ Equity or Stockholders’ pany might incur as it sells
Equity, Revenue, and Expenses.
its products or services. A
company might have 200
or more buckets to hold all the transaction data about each of its
assets and liabilities and each of its income and expense cate-
gories. Some companies might go a bit overboard in their desire
to capture data ever more precisely. They might have ever-smaller
buckets and sub-buckets to collect and sort data about the tiniest