Organizing financial transactions from an accounting perspective is crucial for business entities as this ensures the accuracy and integrity of the accounting recording based on which financial reports are prepared and issued. The Chart of Accounts (COA) is at the core of these processes and should be consistent with the entity’s business model, vision, and strategy, as well as the applicable statutory and regulatory requirements and international best practices.
What is the Chart of Accounts (COA)?
In the accounting context, a Chart of Accounts or COA is a tool of an organization that provides an index or a list comprising all financial accounts of a business entity through which such accounts are posted to the General Lodger (GL). It is also a tool that details all financial transactions the business entity makes within a specific financial period. In addition, COA can be divided into primary accounts and sub-accounts.
Moreover, COA lists all kinds of assets, liabilities, equity, revenues, and expenses, which are all separate primary accounts under which other sub-accounts fall.
What is the purpose of the Chart of Accounts?
From a practical point of view, the COA is the basis on which a business entity keeps its accounting records and books. Hence, it is the logical structure that facilitates a business entity adding new accounts or removing accounts that are no longer required.
Furthermore, the COA resembles the mirror that reflects a clear picture of the business entity’s financial position to investors and shareholders.
Why designing a Chart of Accounts is that important?
Designing a COA is crucial to facilitate recording the accounting entries of business entities that could help them present assets, liabilities, cash flows, and profit and loss to ensure that their financial statements are compliant with the IFRS requirements and fairly presented in accordance with the IAS (1) Presentation of Financial Statements.
What is the added value to business entities from designing the Chart of Accounts?
- Ensure that COA is in line with the business model and new accounting systems adopted by business entities.
- Facilitate the process of bookkeeping by easily adding or removing accounts.
- Ensure fair presentation of financial statements.
What are the services that Baker Tilly Kuwait provides?
Creating and designing a Chart of Accounts that is compatible with the business activity and issuing real-time accounting reports to the executive management and Board of Directors without any prior settings.