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Definition and Examples of

Chart of Accounts

Explanation: The chart of accounts is an organized list of all accounts in the general ledger, each with a unique identifier. It categorizes all transactions of a business into subcategories and helps in keeping the financial records organized and consistent.

Example: Your café’s chart of accounts includes categories like revenues (from different sources like beverages, food), expenses (like rent, utilities, wages), assets (equipment, furniture), and liabilities (loans).

Potential Issues: An inadequate or overly complex chart of accounts can lead to misclassification of transactions, making it difficult to generate accurate financial reports. This misclassification can affect financial analysis and decision-making.

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