6 Importance of Chart of Accounts

Chart of accounts is the list of accounts and the account numbers that identify their location in the ledger. So, the chart of accounts has some importance. This importance of chart of accounts are as follows:

Importance of chart of accounts

Chart of accounts is made by an organization to prefix what accounts are used in the business.  It has the following facilities:

  1. All accounts are listed here to deal with the business.
  2. It ensures a definite number of account titles.
  3. It indicates the scope of accounts to deal with the business.
  4. It ensures the limits of transactions.
  5. It protects the problems of title fixation.
  6. It locates the position of each account easily.

To gist up, the chart of accounts is the controlling tool of account titles for every business.

Importance of chart of accounts

According to Wikipedia “It is applied to organize the finances of the object and to segregate investments, revenue, assets, and liabilities to give affected parties a better understanding of the economic health of the entity. Usually defined by an identifier and a subject describing text title and coded by account type.”

You May Like Also:

2 thoughts on “6 Importance of Chart of Accounts”

  1. Hello, I have read the article carefully and I found this article really helpful for me, it helps me on the chart of accounts.

Leave a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Scroll to Top
Scroll to Top