The general ledger is a book that contains all of the accounts where business transactions are recorded. The list of all the accounts contained in the general ledger is called the chart of accounts and they appear in the order that they occur on the financial reports as follows:
Non-Operating Revenues and Gains
Non-Operating Expenses and Losses
When you set up your accounting program, create your chart of accounts and make as few changes to it as possible so that you can compare the results in the same account over the course of multiple years. Law firms, which are not as complex as other organizations, will require a less-complex a chart of accounts. It is smart to adopt “account names and account groupings and an overall format” that is based on the company’s tax return format.
For example if your firm is a LLC or PLLC, you will want to set up your expense accounts so that they mirror the expenses you are required to report on your Schedule C as follows:
Car and Truck Expense
Commissions and Fees
Employee benefit programs
Insurance (other than health)
Legal and professional services
Pension and profit-sharing plans
Rent or lease
Other business property
Repairs and maintenance
Taxes and licenses
Travel and meals
Most charts of accounts assign a number to each account using the following system:
Assets (100-199 or 1000-1999)
Liabilities (200-299 or 2000-2999)
Owner’s Equity (300-399 or 3000-3999)
Revenues (400-499 or 4000-4999)
Cost of Goods Sold (500-599 or 5000-5999)
Expenses (600-699 or 6000-6999)
Other Revenue (700-799 or 7000-7999)
Other Expenses (800-899 or 8000-8999)
The Cost of Goods Sold applies to manufacturers only, so law firms shouldn’t have any account numbers that begin with a 5.
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