Question

In Australian accounting environment, how can any organization construct its chart of account so that it can meet the accounting standard set out by AASB(Austrlalian Accounting Standard Board)?Discuss in 150 to 180 words (Please type up your answer)

Answer 1

COA lists the name of accounts in which the company records its various transactions in its general ledger. Generally, COA contains the name of the account, brief description of the name of the account and any corresponding identification code related to the account.

Its serves as the fundamental and the foundation for the company's financial record keeping system.

Within COA itself, accounts are listed in the order of their appearances in the financial statements. First of all the items relating to the balancesheet are mentioned which are further followed by the accounts relatable to the income statement accounts which is summarized in the below mentioned table :-

Balancesheet item accounts :-	Assets
	Liabilities
	Owners' equity
Income statement item accounts:-	Operating income
	Operating expenses
	Non-operating gains and income
	Non-operating losses and any relatable expenses

Main objective of COA is to segregate all the expenses, revenues, assets and liabilities so as to make them present in an arranged manner. Such a well arranged COA serves various purpose, it not only provides information to the management in a well arranged manner but also help an organization to comply with the financial reporting standards applicable to it.

Also an organization can customized its chart of accounts as per its business requirements for instance within operating revenue and operating expenses it may further organized its account as per the business function or as per its business divisions.

Chart of accounts vary as per the size and the complexity of the business. For instance an organization operating in a multinational model with varied varities of division will have thousands of accounts compared to a small retail business which will having only a handful of accounts.