Chart of Accounts is a list of accounts which should be designed by the accountant of the company taking into consideration of the nature of a business. It is very useful tool to categorize the accounting data in to different class of accounts and to generate financial reports and financial statements.
Standard categories include:
- Assets
- Liabilities
- Equity
- Revenues
- Expenses
The above classes have different sub categories which helps the stakeholders of the company to understand the health of the business. It is useful to organize finances and give stakeholders more insight to take managerial decisions by reviewing the financial statements which has been established by the arrangement of accounts which is known as Chart of Accounts.