Which Of The Following Statements Is The Best Definition Of The Chart Of Accounts?
The correct option of this multiple choice question is (D), a Chart of Accounts (CoA) shows a list of all ledger’s accounts (whether assets, liabilities, equity, revenues or expenses) with a unique identification number for easy locating the accounts and for references in an accounting system. For example, we assign 1000 as identification number to cash account for easily locating it in the list of all ledger accounts balances. Basically, a CoA shows a list of two types accounts i.e., Balance Sheet Accounts and Income Statement Accounts . The CoA does not provide the data about the debit and credit of accounts and their balance included in Financial Statements but it provides a list of all accounts shown on financial statements for viewing about account lists at a glance and to know about the financial health of the business. It helps us in analyzing, reporting the accounting data and the preparation of financial statements. By assigning unique identification number to each acc...