Common Problems in Charts of Account

Accountants are often great at, well, accounting, but tend to get lost in the detail, preferring to count expenses down to the paper clip level instead of focusing on what truly matters for a company's profitability. Nowhere is that more evident than in the chart of accounts they create.

Here's a look at the common problems in charts of account and some recommendations for improvement:

"Problems in Chart of Accounts Design

Too many general ledger accounts
Often when using QuickBooks or Peachtree accounting software the number of general ledger accounts grow over time. Usually the person entering the data is not a trained accountant. When faced with an accounting entry that is not specifically described by an existing general ledger account they will often set up a new account. It is especially easy to do in QuickBooks.

Too much detail in Selling General and Administrative Expenses
Similar to the problem mentioned above, often the person maintaining the general ledger is a detail oriented employee. This trait is both a blessing and a curse. The theory goes as follows: If a little detail is good then a lot is better! In order to get more and more detail on the general ledger they set up new general ledger accounts. In the end they are counting paperclips with numerous accounts with less than a thousand dollars charged to them...."

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