Charts of Accounts Vs. Operating Reports
To best understand the question what are operating reports and charts of accounts, it’s best to understand each of them in detail.
Chart of Accounts – This is a list of all the accounts your business uses to track financial transactions. Within your accounting software, you probably have an option to run a report that will reveal every account by number and name. For example, a chart of account report may look like this:
ABC Company - Chart of Accounts
- 101 – Cash in Bank
- 102 – Accounts Receivable
- 103 – Notes Receivable
- 107 – Inventory
- 110 – Prepaid Expenses
- 117 – Furniture & Fixtures
- 118 – Land & Buildings
- 202 – Accounts Payable
- 203 – Sales Tax Payable
- 204 – Accrued Payroll
- 207 – Notes Payable
- 211 – Common Stock
- 212 – Officer Accounts
Note that when you run a chart of accounts report, it does not show any financial transaction information, only a list of every account you utilize within your business. Charts of accounts are usually set up during the start-up of your business and often gaps in numbers used are present in the event new accounts must be added.
Operating Reports – Think of your operating reports as a list of your chart of accounts that shows the transactions within each account. Most operating reports can be run as a summary report or a detailed report. Here’s a look at what a summary operating report would look like:
ABC Company – General Ledger Summary Report
- 101 – Cash in Bank - $10,000
- 102 – Accounts Receivable - $5,000
- 103 – Notes Receivable - $15,000
- 107 – Inventory - $50,000
- 110 – Prepaid Expenses - $3,000
- 117 – Furniture & Fixtures - $25,000
- 118 – Land & Buildings - $100,000
- 202 – Accounts Payable - $25,000
- 203 – Sales Tax Payable - $2,000
- 204 – Accrued Payroll - $4,000
- 207 – Notes Payable - $50,000
- 211 – Common Stock - $200,000
- 212 – Officer Accounts - $100,000
As you can see, this operating report for a general ledger summary shows the account number, the name of the account, and the amount that is in the account at the time the report is run.
Both a chart of accounts and summary operating reports can be beneficial in two ways:
Chart of Accounts – This is often printed to keep on hand so the bookkeeper or accounting professional has access to a list of all your accounts to determine where transactions should be posted in the general ledger or journal.
Summary Operating Reports – This is usually utilized as a summary or snapshot of what is in each account at the end of a reporting period. It does not show the detail of where these summary totals came from, however.
Image Credit: ABC Chart of Accounts (http://webpages.charter.net/linuxledgers/images/scrnshts/shortcoa.png)