Chart of Accounts
Want amazing video content? Check out our youtube channel!
What is the Chart of Accounts?
Your Chart of Accounts is simply the list of accounts that your organization uses to track its funds and financial activity. It's called a "Chart of Accounts" by accounting convention, but it isn't really a "chart" in the typical sense, so you might prefer to think of it as a "List of Accounts".
Different Account Types (and Subtypes)
In nonprofit accounting, you'll have 5 basic types of accounts:
ASSET - Things that you own that have quantifiable value, like cash, investments, real estate, or equipment. Assets also include less tangible things like money that people owe you (i.e. accounts receivable) and sometimes can even include wholly intangible things like intellectual property.
LIABILITY - Money that you owe to others, such as accounts payable (i.e. bills that haven't been paid yet) or a balance on a credit card.
NET ASSET - Net assets are what's leftover when you subtract your liabilities from your assets. They represent the "bottom line" of an organization's financial position. If you have $100 in assets and $75 in liabilities, then you have $25 in net assets.
INCOME - Income accounts track financial activity related to your organization's sources of revenue or income (such as donations or sales). Unlike the three types described above (which describe your financial position at a given moment in time), income accounts describe things that happen (i.e. financial transactions/events) that cause changes to your financial position.
EXPENSE - Expense accounts track financial activity related to your organization's spending and what it costs to do your work and deliver your programs and services.
Each account on your chart of accounts must belong to one of the above types, and must also have a "subtype" that describes it a bit more specifically.
For example, an income account will have either the "Contributed" subtype (for sources of contributed revenue like donations or grants), the "Earned" subtype (for sources of earned revenue like ticket sales or contract fees), or the "Other" subtype (for things like investment income and other non-operating sources).
How to Work With your Chart of Accounts
Your chart of accounts is a great entry point to doing a deeper dive into any of your individual accounts. Click on an account to view a register (list) of its associated transactions. Or, use the action dropdown next to an account to start a new monthly reconciliation. You can also merge accounts, if you find that you've accidentally created two accounts that should really be combined into one.