The Importance of the Chart of Accounts in Accounting
The term chart of accounts means the list of accounts that are used by the company. This list can be alphabetic, numeric or even alpha numeric. The accounts should have the header as well as the structure that is easy to understand in order to consistently post the transactions. In order the ledger to be easily identified, it is necessary that each nominal ledger should be unique. The arrangement in the chart of accounts is such that it corresponds to the appearance in the financial statements.
There are mainly six types of accounts that are:
The chart of accounts is one of the most powerful tools in the hands of the accountants as well as the companies. It has been observed that the properly maintained chart of accounts can be really helpful in keeping the financial health of the company in good stead. Another thing that needs to be taken into account is the fact that the chart of accounts is the collection of the individual nominal ledger accounts.
However, the executives are given stock options to compensate the loss in their salary but this was not expensed on the corporation’s books. Ultimately, the net income of corporation would increase to a large amount in comparison to the previous year. You can also consider it as almost free money, because the corporations still have to pay their executives but they don’t have to record the money as an expense to the business. So, take the help of accounting for stock options to assess and evaluate the profitability of such activities.