RepairDesk aims to give you one software powered to cater all your needs. A repair shop is not just about inventory, services, employees and suppliers. One has to manage shop’s accounts efficiently as well to see the growth, realize roadblocks on the path of success, and predict strategies to increase profit. RepairDesk has introduced a new module that is capable of handling the finances of your repair shop in an effective manner and project the learnings for future decisions.
RepairDesk’s Chart of Accounts
Before we begin with the setup of RepairDesk’s chart of accounts, let’s get into some of the important definitions and rules. Every organization defines some accounts to keep the data of their finances. All of these accounts when combined, a general ledger is formed. A chart of accounts or COA is a listing of all the accounts present in the company’s general ledger. These accounts are usually broken down into subcategories for easier management.
COA can be sorted with multiple filters, however, the most commonly used is the `account number`. Using COA makes it easier for the businesses to organize their finances and have a clearer insight into the financial health of the company. Here are some terms you must be aware of:
Equity: Value to be returned to the shareholders of the company.
Liability: Amount that a company owes, usually in terms of money.
Revenue: It represents the total amount of income made by the company either through its services, good sold or both combined.
Cost of Sales (COS): It represents the sum of all expenses used in creating a product or service, that has been sold.
Expense: Money and resources spent while generating revenues, i.e. utilities, wages and rent.
Accrual Accounting: It is a method of accounting in which the revenue and expenses are recorded at the time of transaction instead when the payment is received or sent.
Credit & Debit
Credit and Debit are more like tools that are used in finance and accounting in every transaction. Together, they show the affect of a transaction and help understand finance and accounts in a better way. You would see them being used in our Chart of Accounts as well.
The finance and accounting industry operate on a simple concept – every monetary transaction has to be broken down in terms of credit and debit. This concept is applied on every single penny flowing in or out of the company’s account. This activity is performed to satisfy the given equation of accounting:
Assets= Equity + Liabilities
This activity of double entry ensures that credits are balanced by debits in the company’s general ledger.
Types of Financial Statements
There are primarily two types of financial statements that are dealt in chart of accounts. One is known as Balance Sheet Type that deals in financial statement related to balance while other is known as Profit and Loss (P&L) Type that deals in profit and loss statements. These types have further sub-types. P&L Type covers income, COGs (Cost of Goods Sold), Expenses, Other Income and Other Expenses. Similarly, Balance Sheet Type covers Assets, Liabilities, Equity, Cash, Bank, Current Assets and Liabilities.