A chart of accounts is a list of all the company’s accounts along with their account numbers. The chart of accounts is prepared when the business is first organized. We can update the chart of accounts as needed. When we record transactions, we use the account names exactly as they appear in our chart of accounts.
In this lesson, we will prepare a chart of accounts for MM TAX and continue to analyze transactions for MM TAX, showing how the results from the transactions are recorded in the journal and posted to the ledger (T-Accounts), as well as how a trial balance is prepared. In the following lesson, we will be adding additional steps between the trial balance and the preparation of financial statements.
MM TAX is a firm that provides tax services for clients. MM TAX will be organized as a corporation. M. McGruber is the only stockholder of the corporation.
MM TAX prepared the following chart of accounts prior to recording any transactions in the journal and ledger (T-Accounts):
| Account name | Account number |
|---|---|
| Assets | |
| Cash | 101 |
| Accounts receivable | 102 |
| Office supplies | 103 |
| Prepaid insurance (new to Lesson 2) | 104 |
| Computer | 121 |
| Liabilities | |
| Accounts payable | 201 |
| Unearned revenue (new to Lesson 2) | 202 |
| Owner's Equity | |
| Common stock | 301 |
| Retained earnings | 302 |
| Dividends | 303 |
| Revenue | |
| Fees earned | 401 |
| Expenses | |
| Salaries expense | 501 |