Chart of Accounts for a Merchandising Business In accounting 10 you were introduced to charts of accounts.

A chart of accounts is a list of all of the different accounts that a business has in their accounting system and their account numbers, simply put it describe the accounts place in a ledger.. For a service based business it looked like below.

The basic accounts for a service firm include Assets, Liabilities, Owners Equity, Revenue and Expenses. Each of them are numbered from 1 5. You will notice that accounts 100-300 are specific to the balance sheet and account 400 and 500 are specific to the income statement. For a merchandising firm however we have to add accounts in order to make room for inventory that is purchased and for inventory that is sold. A chart of accounts for a merchandising business looks like the one below.

You will notice the large difference between the two. You will notice the merchandising businesses chart of accounts is divided into many parts. The balance sheet accounts are labeled and broken up into the classified balance sheet format. There are current assets and plant (fixed) assets. Each category of assets is bumped up a hundred. For example all current assets will be numbered from 1101-1199. Plant (fixed) assets then will be labelled from 12011299. The numbers can fluctuate based on the number of accounts that you have. The income statement accounts also change . You revenue portion of the accounts now have room for sales, sales discounts and sales returns and allowances. Also, your expense accounts turn into two parts. Cost of Merchandise and Operating Expenses. The cost of merchandise is

only related to the cost of goods sold, it looks at your purchase amounts, how much you save by buying with discounts and how much you return. In addition to this are all of you operating expenses which we are used to seeing mixed together.