Problems in Chart of Account Design
Standard Chart of Accounts
Example Chart of Accounts for Selling, General, and Administrative Expenses
Generally Accepted Accounting Principles
Financial Accounting Standards Board
Once the major class codes have been assigned (i.e. 6NNNNN..NN = Manufacturing Overhead) the nominal accounts such as labor, fringe benefits, consulting fees, supplies, telephone, etc. that have been identified as required accounts during the NAP, should be grouped into natural groupings (1–9) that can be rolled up to facilitate management planning and decision making.
For example in the retail industry, the relationship of total wages and employee benefits (expenses impacted by adding employees) to sales by retail unit, or region, or total facility costs (rent, utilities, property taxes) to sales, provide management important barometers of store managers’ operating efficiencies and expense controls. Grouping the nominal expense accounts (which may total 50 -100 accounts) into the appropriate series, rather than numbering them alphabetically, for example, facilitates the comparison/analysis process.
6NNNNN, 7NNNNN, and 8NNNNN – Operating Overhead, Research, Selling, and General & Administrative Expenses – These divisions facilitate analysis, as in the homebuilding industry, where management may want to compare Construction Overhead and/or Marketing Expenses per unit by subdivision, product line, or geographical area.
Therefore, the 100 series may capture salary expense data as follows:
The 200 series may include fringe benefits data as follows:
Thus, the 100s and 200s represent the employee expenses that are directly impacted by changes in headcounts. As a result, they can be rolled up into reports by department, state, division, or other management designated requirement.
The remaining groups may be compiled as follows:
300s = Travel & Entertainment, such as:
400s = Office & Other Miscellaneous Expenses, such as:
500s = Outside Services, such as:
600s = Rentals & Leases, such as:
700s = Utilities, such as:
So for example, a homebuilder may have the following accounts:
7 120 24 11- Marketing; Non-Exempt Salaries; Subdivision 24; State 11
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