It is important you review your chart of accounts on a regular basis to insure it represents your organization's needs. The chart of accounts is an organizational tool that provides a digestible breakdown of all the financial transactions that an organization conducted during a specific accounting period, broken down into subcategories.
It is important that you understand the following terminology:
Dimensions-data elements that make up an account string
Members-elements of dimensions that make chart of accounts
Account String-dimensions to categorize a transaction
Hierarchy-the grouping of dimensions for reporting
Grouping-A group of accounts or other dimension members
Some of the common dimensions include the following:
Fund, Restriction, Funding Source, Program, Department, Project, Location, and Account
Your chart of accounts is important as it important the way your arrange your financial data to accomplish the following financial objectives:
- Financial Accountability
- Strategic Priorities
-
Decision-Making Processes
- Compliance and Risk Management
There are some best practices to maintaining chart of accounts including restricting access to changes, allow room for growth in numbering, create separate groupings for different reporting needs and label them, and regularly maintain hierarchies and groupings.
Please contact us for us to review your chart of accounts.
Please click the full article for more information on these chart of accounts considerations for your nonprofit.