[GNC] Standard chart of accounts?

[doncram]

Hi Ken Brown, I think that you need what you asked for, a good Chart of
Accounts example, which you will implement into a new GnuCash entity.  How
about the following Chart of Accounts, designed by me just now for a single
person in the United States with some regular salary income plus some
income from a part-time home business that is a sole proprietorship, so the
person just files regular individual taxes at the end of the year, but with
a schedule reporting their business income.  In the U.S. that would mean
they file an individual 1040 form with a Schedule C: "Profit or Loss from
Business".  The person doesn't need or have a separate bank account for the
business, but they do need to track expenses in a way that supports their
maximizing the allowable deductions (expenses accepted by the taxing
authority) in the business income schedule.  I further suppose the person
uses their personal vehicle sometimes for business purposes, and they track
or estimate their mileage that is business-related.  And they will claim
expenses for their business's use of the home, which occupies, say, 20
percent of the home's square footage.  This doesn't matter, but I am
supposing the part-time business is something craftsy like quilt-making,
with the finished product sold on Etsy or similar online marketplace, and
the business has some capital equipment, such as a quilting machine, and
has inventory of materials and supplies.

First, you must consult the tax forms that you will need to complete at the
end of the year.  The  Schedule C in the U.S. requires separate reporting
of various specific types of business expenses including Advertising, Car
and Truck expenses, Insurance, Interest, Legal and professional services,
Office expense, Rent, Supplies, Taxes and licenses, Travel, Deductible
meals, and some other types, in its Part II, so you will want to separately
track what you spend for those exact types of expenses directly, or
otherwise track what you need in order to fill out those lines of the tax
form.  Home office expense is a calculation based on square footage or
requiring a different tax form.

Note that in the U.S. only 50 percent of business-related Meals &
Entertainment expenses can be deducted, but you want to track all of that
type of expense so that you have documentation for what you will claim as
allowable.  (Save your receipts and keep records, perhaps annotated onto
the receipts or perhaps better written onto a traditional hard-copy
calendar, giving names of persons you met and what business topic was
discussed.) For business-related Travel, perhaps all of your airfares and
car rental and hotel costs for a business trip would be allowed, but there
are specific guidelines in the U.S. about an allowable per diem rate for
meals and there are differences for first and last day of travel vs. days
in-between. (Keep receipts and suitable records for this too.)  For
automotive expense, in the U.S. the person may choose between claiming
actual expenses of gas, car insurance, car repairs, etc., vs. claiming an
allowance based on their recorded business-related mileage times a standard
rate which in 2020 is 57.5 cents per mile.  I'm not positive, but I think
if you are claiming actual expenses, then you still need to track your
business vs. personal mileage so you can apply the business mileage
percentage times the actual car repairs, etc.  The chart of accounts should
help you track your actual car expenses, although that will be different
than what is allowable for you to charge in the business profit and loss
schedule.

Note Part I in the U.S. Schedule C requires you to report the business's
Gross Sales, and any Allowances and Returns, and Cost of Goods Sold
(COGS).  Part III calculates COGS based on beginning-of-year and
end-of-year inventory of Materials and Supplies for making the product,
Purchases of Materials and Supplies less cost of any items withdrawn for
personal use, and some other costs.

Finally, when you compose your Chart of Accounts you want it to be
organized sensibly for your purposes, so you must use account numbers to
control the order of items in the basic financial statements (Balance Sheet
and Income Statement in GnuCash, while unfortunately GnuCash does not
support reporting of the 3rd basic statement, the Statement of Cash
Flows).  Use a standard approach to numbering, with 1000's being for
Assets, 2000's for Liabilities, 3000's for Equity, 4000's for Revenues,
5000's for Expenses.

So here goes:
1000 Assets
1100 Cash on hand
1200 Checking account
1300 Savings account
1400 Accounts receivable (business)
1500 Inventory of materials and supplies (business)
1500 Equipment (business)
2000 Liabilities
2100 Accounts payable (business)
3000 Equity
3100 Owner's equity
4000 Revenues
4100 Salary (from a job not part of business)
4200 Sales of product (business)
4800 Interest income
5000 Expenses that are all or mostly business
5100 Advertising
5100 Contract labor (business, amount paid to independent contractors who
do work for the business)
5200 Cost of Goods Sold (business, calculated only at end of accounting
period and entered as a journal entry involving purchases and beginning and
end Inventory of supplies and materials)
5300 Insurance (business, if separate)
5400 Legal and professional services (business)
5450 Meals and entertainment (business)
5500 Office expense (business, e.g. expenses of paper, printer ink,
purchases of computers and office furniture)
5550 Sales tax (if applicable, business)
5600 Selling expenses (business, e.g. Etsy fees)
5650 Shipping & postage
5700 Travel (business)
5900 Depreciation (business, applying Equipment asset purchase cost over
years of its usage)
6000 Expenses that are all or mostly personal
6100 Automotive (both personal and business)
6110 Gas
6120 Auto insurance
6130 Registration and fees
6200 Cable and internet
6300 Dining
6400 Groceries
6450 Insurance-health
6460 Insurance-renter's
6500 Rent (part of which will be claimed within Home office expense)
6600 Telephone
6700 Utilities
6800 Taxes
6810 Federal income tax
6820 State & local income tax
6830 Social Security
6840 Medicare
6850 Unemployment insurance

Yikes, that is a lot of accounts!  Hey anyone who wants to say I've made
this too complicated, I personally don't think so.  The above accounts are
all either very much required in tax filing or very simple and clear.
Probably I have missed some things, too;  suggestions to improve the above
would be appreciated.  Ken, does this constructed example help?
--Don Cram

On Mon, Sep 21, 2020 at 10:41 AM John Ralls <jralls at ceridwen.us> wrote:

>
>
> > On Sep 21, 2020, at 8:42 AM, Jimmy R via gnucash-user <
> gnucash-user at gnucash.org> wrote:
> >
> > I believe there is a wizard to select personal or business chart of
> accounts
> > which you can edit or add/remove
> >
>
> Yup.
>
> File>New starts it. If you want to use templates to add to an existing
> book go to the Accounts page and use Actions>New Account Hierarchy. The
> third or fourth screen in allows you to select from various templates that
> add accounts to your CoA and the screen after that collects opening
> balances.
>
> More details at
> https://www.gnucash.org/docs/v4/C/gnucash-guide/basics-running-gnucash.html#basics-acct-hierarchy
> .
>
> Regards,
> John Ralls
>
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