Hobbies Fine Arts & Crafts Sample Chart of Accounts for an Arts or Crafts Business Share PINTEREST Email Print Fine Arts & Crafts Arts & Crafts Painting Drawing & Sketching By Maire Loughran Maire Loughran is a certified public accountant (CPA), author, and business owner. She has over 15 years' experience assisting new businesses. our editorial process Maire Loughran Updated January 13, 2018 01 of 04 Sample Chart of Accounts Sample Chart of Accounts for a Web-Based Business. A chart of accounts is a listing of all the accounts your business uses to record transactions in your general ledger. And what's a general ledger? Well, a general ledger is the record of all financial transactions within your company during a particular accounting cycle. Picture a big book. Every page of the book has a title that corresponds with an account from the chart of accounts. For instance, page 1 might be titled 1001 Bank. On this page, you'd list the total of the funds you deposited in your company checking account as well as the total of all the withdrawals for a given period-say, a month. When you're "doing the books," as the saying goes, you record your normal business transactions using information you'll set up in the chart of accounts. Then your accounting software rearranges this info into financial and managerial reports. Each account in the chart of accounts has a unique number. The number of accounts you can set up in the chart of accounts is virtually unlimited, so you can customize it to fit your business perfectly. All small business accounting software allows you to set up your chart of accounts from scratch or select one from a list the software company has already set up for you with typical accounts. On this page, I show a list of sample business chart of accounts for my accounting software. I select the one for a web-based business since I sell arts and crafts through a website although the majority of accounts shown are used in any arts or crafts business. The next page shows the balance sheet portion of my sample chart of accounts for Metropolitan Arts and Crafts. 02 of 04 Chart of Accounts - Balance Sheet Accounts Balance Sheet Accounts in the Chart of Accounts. It's easier initially to use a chart of accounts suggested by the software. But, you'll notice that when you select a sample chart of accounts, a bunch of accounts show up that you might not have to use. The software is just trying to cover all the bases by suggesting any possible account you may need for your business. In some cases, you could end up deleting so many unneccesary accounts, it would be easier to just set your chart of accounts up from scratch. However, for a first-time business owner, seeing all the suggested accounts can be a great help. On this page, I took the balance sheet accounts suggested by the software and pared them down to the essentials. I discuss the numbering sequence in my article, Introduction to Entering Accounting Transactions - so check out that article to refresh your memory if need be. Basically, the rule is that assets are in the 100 or in this case 1000 series; liabilities in the 2000 series and equity 3000. Once I put transactions into Metropolitan's company file, the balances will no longer be zero. Wondering about the different types such as bank or equity? Go to the next page for a brief explanation of each. 03 of 04 Chart of Accounts - Definition of Balance Sheet Accounts Here's a definition of common balance sheet account types you'll find in most chart of accounts: Cash: The only true cash account you'll have will be petty cash which is paper money and coins you keep handy for insignificant daily expenses. For example, you make a run to the craft store to purchase craft glue. Bank: This account type reflects the money you deposit in your business checking or savings accounts. Accounts Receivable: Money that your customers owe you. Other current assets: This account type can be any of a number of things - for example, prepaids which are any expense you've paid in advance, such as rent, insurance, office supplies, postage, travel expense, or advances to employees. Inventory: This includes raw materials you purchase to make your arts or crafts. Other asset: Security deposits are a good example of other assets. Say you rent an office building, and as part of your lease, you pay a $1,000 security deposit. That $1,000 deposit will be reflected in the other assets account until the property owner reimburses you at the end of your lease. Fixed asset: This is any property, plant, and equipment owned by your arts or crafts business. It includes long-lived assets, such as cars, trucks, office equipment, and computers. Accounts Payable: This is money you owe your arts or crafts vendors. Credit Card/Line of Credit: This one is pretty self-explanatory. It's the amount you owe on company credit cards or other lines of credit, such as one you might have with your bank. Payroll liability: This account reflects the FICA, Medicare, and federal and state withholding tax taken out of your employees' payroll checks. It also shows the employer's share of FICA and Medicare. Long-term liabilities: This is any amount of money you owe that your company won't be paying back within one year. A good example of a long-term liability is your loan for your business vehicle. Equity: This account shows the owners' total investment in the business. On the next page, I discuss the income statement accounts section of my sample chart of accounts. 04 of 04 Chart of Accounts - Income Statement Accounts Income Statement Accounts Chart of Accounts. Revenue and expense accounts (income statement) come after balance sheet accounts in the chart of accounts. On this page, I show what my web-based arts and crafts business sample chart of accounts looks like after I've deleted all the accounts suggested by my software that I don't need. Revenue accounts generally are assigned chart of accounts numbers in the 400 or 4000 series and expenses in the 500/5000 and above series of numbers. Here's a brief explanation of the type of revenue and expenses accounts in your chart of accounts: * Income: This account reflects amounts earned from your company's arts or crafts activities. * Cost of goods sold: This account reflects all expenses directly tied to hand crafting or buying your arts or crafts product. * Expense: In this account, you record all costs you incur to produce your income - not including cost of goods sold. For example, rent, postage, and travel expense to craft shows. * Other income: Money brought in by means other than your arts and craft sales is considered other income. For example, if you earn interest on your checking or savings account, that income isn't the result of selling your crafts, so it's other income. * Other expense: If you lost money on a sale unrelated to your arts and crafts business, you'd record it in this account. For example, if you lost money when you sold an old piece of equipment, you'd reflect the loss (called a loss on disposal) as an other expense. The accounts I show in my sample chart of accounts for Metropolitan Arts and Crafts provide a good base for your own craft business chart of accounts. Some of my accounts you may find unnecessary and you'll probably have to add others specifically tailored to your type of arts or crafts business. Now that you understand the basics, open your accounting software and start setting up your own chart of accounts! Just remember to keep the numbering sequence for the accounts straight, don't co-mingle business and personal accounts and ask your accountant for help if need be.